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Analysts explain how China EV sector can navigate protectionist backlash, subsidy rollback

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China’s world-dominating EV sector hit two major milestones last year. First, China overtook Japan as the world’s largest car exporter, thanks in part to affordable Chinese EVs. And second, EV giant BYD briefly overtook Tesla as the world’s largest seller of battery electric cars in the final quarter of 2023. (Tesla has since retaken first place.)

But the threat of a flood of cheap EVs is spooking foreign governments. The European Union launched an anti-subsidy probe against Chinese EV companies last year, which could result in higher tariffs for Chinese EVs. The U.S.—which deems Chinese cars a national security threat—is warning that “excess capacity” in China could overwhelm world markets.

But at the Fortune Innovation Forum in Hong Kong last week, Roger Atkins, founder of Electric Vehicles Outlook, an EV consultancy, noted that previous car exporters found a way to manage protectionist backlash.

“We’ve been here before,” Atkins said. “Japan had its export onslaught in the U.S. and Europe back in the 1970s and 1980s. The Europeans and Americans imposed tariffs, and then the way the Japanese got around that was to embed production plants in those locations.” 

Atkins then pointed to BYD’s new plant in Hungary as an example of how the Chinese carmaker is now expanding its global manufacturing footprint. (BYD is also building factories in Thailand and Brazil, and is considering new manufacturing facilities in Indonesia and Mexico.) 

Christopher Beddor, deputy China research director at Gavekal, saw parallels to earlier Beijing-led campaigns to encourage the solar and wind power industries. “China is essentially doubling down on industrial policy,” he said.

“The central leadership will say: We want to target a certain industry. Everyone focuses on that, it’s conducted in a campaign style,” he later explained.

Beijing is now starting to worry about overcapacity in the system, with one official in early January promising to take “forceful measures” to address new EV projects that weren’t supported by demand. 

This push-and-pull is part of China’s industrial playbook, Beddor said. “[Officials] go forward, [then] at some point, there’s a recognition [they’ve] gone too far. They pull it back,” he said.

Beijing started offering tax and infrastructure incentives in the early 2010s, helping to foster as many as 500 EV companies at one point. That number has since come down to about 100 companies.

China is now rolling back its support for the sector, which could lead to further consolidation in the sector as EV companies, many of which have yet to make a profit, exit the market.

Yet Paul Gong, executive director of autos research at UBS, said at the Forum last week that the “fierce competition” in the sector—between startups, legacy automakers, and even tech giants—has been good for the industry. 

Thanks to market competition, China’s “carmakers have really brought down the EV cost on par versus [internal combustion engines],” he said. “It is this market force that has brought the innovation [and] efficiency game.”

BYD and Tesla

Gong, at the Forum last week, also discussed the differences between BYD and Tesla, both battling for the position of the world’s top EV seller.

After a teardown of the Tesla Model 3 five years ago, Gong said the UBS team was “shocked how much Tesla was ahead in terms of technology leadership.” Yet a similar teardown of a BYD car, just a few years later, revealed the company’s level of technological sophistication was approaching Tesla’s.

“There is little gap [in] technology, but just different priorities,” he said. Tesla prioritized top speed and autonomous driving, while BYD focused on space and 5G connectivity, he continued. 

Yet Gong noted one critical difference: a BYD car, comparable to the Model 3, cost 15% less than production in Tesla’s Shanghai Gigafactory.

Unlike Tesla, BYD makes its own proprietary battery, the Blade Battery, and so does not have to rely on an external supplier like CATL or LG Energy Solutions. (The battery can make up as much as 40% of an EV’s cost.)

“We were shocked at how fast BYD has caught up,” Gong said. 



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Ex-Post Office boss regrets ‘missed opportunity’ to halt Horizon scandal

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“On reflection, and I have reflected on this very hard, when I finished being the Horizon programme director [in early 2000] it would have been very beneficial if I had notified both the lawyers and the [investigations team] that Horizon was a new system coming in, and that they should be very cautious about evidence coming out of that system,” he said.



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Sri Lanka’s economic crisis and debt restructuring efforts By Reuters

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COLOMBO (Reuters) – Sri Lanka’s government rejected a proposal from its international bondholders on Tuesday on restructuring the more than $12 billion the country owes to them.

It means a near two-year spell in default will drag on for Sri Lanka and that the country’s next tranche of vital IMF support money could potentially get delayed.

Below is a timeline of the key events in the crisis and the efforts to resolve it:

2021-2022: Sri Lanka’s economy crumbles after years of overspending leaves its foreign exchange reserves critically low and the government unable to pay for essentials, such as fuel and medicine.

The country’s bonds suffer from multiple downgrades by credit rating agencies warning of the increasing risk of default. At the start of 2022 it manages to make a $500 million bond payment but it leaves its foreign exchange reserves precariously low.

MAY, 2022 – Sri Lanka is declared in default after it fails to make a smaller $78 million bond coupon payment.

JULY, 2022 – Public anger drives protesters to storm then-President Gotabaya Rajapaksa’s office and residence. Rajapaksa flees to the Maldives, before moving on to Singapore.

Current President Ranil Wickremesinghe is voted into power by Sri Lankan lawmakers.

MARCH, 2023 – The International Monetary Fund approves a near $3 billion bailout for Sri Lanka after talks with Wickremesinghe’s government and assurances about its plans to repair the country’s finances.

OCTOBER, 2023

Sri Lanka announces an agreement with China’s EXIM (export/import) Bank to delay payments on about $4.2 billion worth of loans the Chinese lender it has extended to the country.

NOVEMBER, 2023

Other creditor nations including India, Japan and France agree to restructure about $5.9 billion in debt.

MARCH, 2024

A group of Sri Lankan officials arrives in London to meet with a number of investment funds that hold its more than $12 billion worth of government bonds. Talks advance to the key “restricted” phase where proposals are discussed privately and those involved agree not to buy or sell any of the debt on the open market.

© Reuters. FILE PHOTO: A general view of the main business district as rain clouds gather above in Colombo, Sri Lanka, November 17, 2020. REUTERS/Dinuka Liyanawatte/File Photo

APRIL, 2024

The government rejects a proposal tabled by the bondholders. The main stumbling blocks are that some the “baseline” assumptions used differ to those of the IMF and that the plan did not include a contingency option for the government in case the economy fails to recover as expected.





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AI could gobble up a quarter of all electricity in the U.S. by 2030 if it doesn’t break its addiction

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Before artificial intelligence can transform society, the technology will first have to learn how to live within its means.

Right now generative AI have an “insatiable demand” for electricity to power the tens of thousands of compute clusters needed to operate large language models like OpenAI’s GPT-4, warned chief marketing officer Ami Badani from chip design company Arm Holdings. 

If generative AI is ever going to be able to run on every mobile device from a laptop and tablet to a smartphone, it will have to be able to scale without overwhelming the electricity grid at the same time.

“We won’t be able to continue the advancements of AI without addressing power,” Badani told Fortune’s Brainstorm AI conference in London on Monday. “ChatGPT requires 15 times more energy than a traditional web search.” 

Not only are more businesses using generative AI, but the tech industry is in a race to develop new and more powerful tools that will mean compute demand is only going to grow—and power consumption with it, unless something can be done. 

The latest breakthrough from OpenAI, the company behind ChatGPT, is Sora. It can create super realistic or stylized clips of video footage up to 60 seconds in length purely based on user text prompts. 

The marvel of GenAI comes at a steep cost

“It takes a 100,000 AI chips working at full compute capacity and full power consumption in order to train Sora,” Badani said. “That’s a huge amount.” 

Data centers, where most AI models are trained, currently account for 2% of global electricity consumption, according to Badani. But with generative AI expected to go mainstream, she predicts it could end up devouring a quarter of all power in the United States in 2030.

The solution to this conundrum is to develop semiconductor chips that are optimized to run on a minimum of energy.

That’s where Arm comes in: its RISC processor designs currently run on 99% of all smartphones, as opposed to the rival x86 architecture developed by Intel. The latter has been a standard for desktop PCs, but proved too inefficient to run battery-powered handheld devices like smartphones and tablets. 

Arm is adopting that same design philosophy for AI.

“If you think about AI, it comes with a cost,” Badani said, “and that cost is unfortunately power.”  

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