Day: November 22, 2024

Unprofitable Chinese electric vehicle (EV) makers, ravaged by a discount war at home and higher tariffs abroad, are stepping up cost-cutting measures and new model launches as they strive to survive in the cutthroat market.

Only those that can sustain their operations without resorting to external funding will stay in the country’s EV race as overcapacity woes loom, analysts said.

“As the domestic market becomes saturated and overseas sales in developed economies are hampered by punitive tariffs, the key players will have to be very efficient in cost control and refrain from splashy spending to save powder for the tough business environment ahead,” said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, an industry consultancy.

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“The market has entered a new phase, with all companies expected to face a do-or-die moment soon.”

Among the four unprofitable, publicly traded Chinese premium EV builders – Nio, Xpeng, Geely unit Zeekr and Stellantis-backed Leapmotor – only Nio reported a wider net loss in the three months ending September, year on year. All of them have made plans to stem their losses.

The mismatch between capacity and actual demand is stark. By the end of 2023, EV assemblers in mainland China were capable of producing 17 million electric cars annually, and the overall factory utilisation rate stood at 54 per cent, according to Goldman Sachs.

The US bank predicted that additional capacity of 3.2 million units would be added this year, less than the 5.2 million units of capacity added in 2023.

The China Association of Automobile Manufacturers forecast full-year deliveries of more than 11 million units in 2024, which would represent 54.5 per cent of that total capacity of 20.2 million – nearly unchanged from a year earlier.

The mainland is home to about 50 EV assemblers, but He Xiaopeng, CEO of Xpeng, said last year that only eight players would remain by 2027, because smaller players will not be able to survive the fierce competition in the fast-growing industry.

To date, only BYD, the world’s largest EV builder, Li Auto, Tesla‘s nearest rival on the mainland, and Aito, backed by telecoms equipment giant Huawei Technologies, have eked out profits, while the bruising price war is ensnaring most of their domestic competitors.

Manufacturers hoping that international markets would help improve their bottom lines hit a speed bump this year after the US and the European Union decided to slap additional tariffs on Chinese-made electric cars.

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“The US and EU are two of the biggest automotive markets in the world,” said Gao Shen, an independent analyst in Shanghai. “Carmakers that are unable to take a considerable share in the two markets cannot be defined as powerful international marques. If demand is not enough, existing production facilities will be redundant.”

To survive, some companies are betting on new models to increase market share.

Xpeng president Brian Gu told Reuters on Wednesday that the carmaker, which counts Volkswagen as a minority shareholder, would break even next year, buoyed by strong demand for its new models.

The company posted a net loss of 1.81 billion yuan (US$249 million) for the quarter ending September, narrowing 53.5 per cent from the same period in 2023.

Leapmotor and Zeekr said early this year that they expected to break even in 2025.

A Nio ET5 sedan and EP9 sports car are pictured at a showroom in Berlin on August 17, 2023. Photo: Reuters alt=A Nio ET5 sedan and EP9 sports car are pictured at a showroom in Berlin on August 17, 2023. Photo: Reuters>

Nio, fresh off a US$471 million funding injection, expects to make a profit in 2026 after it debuts new models and a budget brand called Firefly, CEO William Li said during a results briefing on Tuesday.

China is the world’s largest automotive and EV market. The top players are at the global vanguard of the supply chain because they have capitalised on core technologies for batteries, self-driving technology and in-car entertainment, according to David Xu Daquan, China president of Bosch, the world’s largest car-parts supplier.

“Chinese electric-car makers will still look for opportunities abroad amid the goal of achieving carbon neutrality globally,” said David Zhang, general secretary of the International Intelligent Vehicle Engineering Association. “They need to be patient until some common ground can be achieved between Beijing and the foreign governments to avert trade friction.”

Last month, the EU voted to impose tariffs of up to 35.3 per cent on pure-electric cars made on the mainland. The new duties, which are on top of a standard 10 per cent tariff, will be in effect for five years.

The White House raised the tariff on Chinese-made EVs to 100 per cent from 25 per cent in August.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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Nvidia (NASDAQ: NVDA) is one of the most-watched companies on the planet right now, thanks to its dominance in the hot growth area of artificial intelligence (AI). The tech giant holds an 80% share of the AI chip market, and this has translated into triple-digit revenue growth for its data center business quarter after quarter. That’s why all eyes were on Nvidia this week when the company reported fiscal 2025 third-quarter figures.

This market powerhouse once again surpassed analysts’ estimates for revenue and earnings per share, delivered record revenue, and maintained gross margin of more than 74%. Importantly, Nvidia also was optimistic about the future, predicting a 70% increase in fourth-quarter revenue year over year. But what really stood out were words from chief executive officer Jensen Huang. In fact, he delivered fantastic news for Nvidia investors.

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First, though, a bit of background on Nvidia’s path so far. As mentioned, Nvidia is a major player in the world of AI, a market that’s worth about $200 billion today and is forecast to reach $1 trillion by the end of the decade. The company is well-positioned to benefit as it sells not only the best-performing chips around, but also related products and services — such as networking tools and enterprise software. The company offers a full stack of AI, so customers can turn to Nvidia for any of their AI needs.

This has translated into soaring earnings and share-price performance, as well as major gains in free cash flow and return on invested capital over time.

Today, Nvidia has reached a particularly key moment. It’s in the process of launching its Blackwell architecture and best-performing chip yet. The company already has shipped 13,000 sample Blackwell chips to customers, and the Blackwell platform is in full production.

What about the fantastic news delivered by Nvidia’s chief? “Blackwell production is in full steam,” Jensen Huang said during the company’s earnings call. “We will deliver this quarter more Blackwells than we had previously estimated.”

This comment is key because it may eliminate one of the company’s biggest risks: potential supply chain or production snags early in the launch that could threaten delivery volume. Of course, demand still exceeds supply, and Nvidia expects this to continue. But this isn’t due to a problem with Nvidia’s processes. Instead, it’s because we’re in the early days of this AI revolution, and everyone aims to get on board with the best possible products — and Blackwell is at the top of the list.

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(Bloomberg) — A selloff in Chinese stocks deepened on Friday afternoon, as disappointing tech earnings hurt sentiment already weakened by concerns over Donald Trump’s imminent return.

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The mainland benchmark CSI 300 Index slumped 3.1%, the most since Oct. 9. The Hang Seng China Enterprises Index of Chinese stocks traded in Hong Kong lost 2.1%, capping a second straight week of losses. A gauge of Chinese tech stocks in Hong Kong tumbled into a technical bear market.

The retreat extends the market’s slide since an October peak, underscoring growing frustration over the pace of Beijing’s fiscal stimulus rollout and jitters over a potential escalation in US-China tensions. The disappointing earnings from consumption bellwether PDD Holdings Inc. and online search company Baidu Inc. have further dented confidence, with the latter’s shares briefly plunging 10% in Hong Kong following a decline in revenue.

Traders also pointed to statement by Texas Governor Greg Abbott dated Nov. 21, which prohibited state agencies from putting new money into investments originating from China and urged a divestment of previous holdings. That worsened fears that some of the largest US funds may avoid investing in China as part of political considerations.

The statement from Texas has affected “sentiment especially when the market is lacking momentum,” said Steven Leung, an executive director at UOB Kay Hian Hong Kong. Investors have also “found nothing has improved from property and equity to consumption — also no positive surprise from corporate earnings.’

Traders have looked to Chinese tech earnings to regain confidence over the economy’s trajectory, only to face the harsh reality of anemic consumer spending. Baidu Inc. recorded its biggest revenue drop in more than two years. PDD warned that its profitability will trend downward over time because of intensifying competition in its home market of China.

The Hang Seng Tech Index fell 2.6% on Friday, taking its decline from an October high to over 20%.

The market’s outlook has been under debate after a massive rally in late September, driven by monetary easing, lost momentum. Wall Street analysts including those at Morgan Stanley and CLSA have recently trimmed their recommendation on Chinese stocks. Some, however, have said a selloff will be an opportunity to add positions as Beijing likely has enough policy tools to counter US president-elect’s tariff proposals.

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Archer Aviation (NYSE: ACHR) has disappointed a lot of investors since its public debut three years ago. The developer of electric vertical take-off and landing (eVTOL) aircraft went public by merging with a special purpose acquisition company (SPAC), and it started trading at $9.90 and soared to a record high of $17.14 in February 2021. But today, Archer’s stock trades at about $4.

It crashed and burned as it missed its own pre-merger expectations, racked up steep losses, and issued a lot more shares to raise fresh cash. Rising interest rates also rattled investors and drove them away from its speculative pre-revenue business. However, analysts still have an average price target of $9.06 for Archer’s beaten-down stock. Should investors buy it today as it languishes more than 50% below that price?

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Archer’s Midnight eVTOL aircraft has a maximum speed of 150 miles per hour, a max range of 100 miles, and can carry a single pilot and four passengers. These electric aircraft are cheaper, cleaner, quieter, and easier to land in urban areas than helicopters, so they’re well suited for short-range air taxi services.

In early 2021, United Airlines placed a long-term $1 billion order for 200 of its Midnight aircraft. In 2022, it paid Archer a $10 million deposit for the first 100 aircraft. In 2023, automaker Stellantis invested in Archer and selected it as the exclusive contract manufacturer for its own eVTOL aircraft. Archer also secured additional deals with the U.S. Air Force and Future Flight Global.

Earlier this year, Soracle — a new joint venture formed by Japan Airlines and Sumimoto — followed United’s lead and placed a $500 million order for 100 Midnight aircraft. All of those deals could help Archer outlast its other competitors in the fragmented eVTOL market.

But for 2024, analysts expect Archer Aviation to generate less than $1 million in revenue as it racks up a net loss of $467 million. With an enterprise value of $1.43 billion, Archer trades at more than 2,000 times that sales estimate.

Prior to going public, Archer claimed it could produce its first 10 aircraft in 2024. But it only delivered its first Midnight aircraft to the U.S. Air Force this August, and it’s aiming to ramp up its annual production to 10 aircraft in 2025.

But looking further ahead, Archer plans to produce 48 aircraft in 2026, 252 aircraft in 2027, and 650 aircraft in 2028. It’s also establishing dedicated air taxi routes with its partners, and it expects to launch its first air taxi services in the UAE as early as the fourth quarter of 2025.

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Investing in exchange-traded funds (ETFs) is one of the simplest and most straightforward ways to buy into the stock market. By owning just one share of an ETF, you can gain exposure to dozens or hundreds of stocks at once.

While some ETFs aim to track major indexes, like the S&P 500 (SNPINDEX: ^GSPC), others are more niche. Growth ETFs, for example, are designed to beat the market and earn above-average returns over time.

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These investments can carry more risk than broad-market funds, but they could also help supercharge your savings. This one growth ETF has nearly doubled the S&P 500’s performance over the last 15 years, and it could potentially turn just $200 per month into more than $1 million. Here’s how.

If you’re looking for a growth ETF with a proven track record, the Schwab U.S. Large-Cap Growth ETF (NYSEMKT: SCHG) could be a smart option. This fund includes 231 stocks (nearly half of which come from the tech sector), with a weighted average market capitalization of around $1.4 billion.

The five largest holdings in this ETF are Nvidia, Apple, Microsoft, Amazon, and Meta Platforms, respectively, and those stocks alone make up nearly 40% of the entire fund. The rest of the ETF, then, is made up of dozens of smaller stocks.

While all of the holdings in this fund are large-cap stocks (meaning they have a market cap of at least $10 billion), the inclusion of “mega-cap” stocks (generally defined as having a market cap of at least $200 billion) can help mitigate some risk. These industry titans may not have quite as much room for explosive growth as up-and-coming companies, but they’re also more likely to survive market volatility.

Growth ETFs are designed to outperform the market over time, and this fund is no exception. Since its inception in December 2009, it’s earned total returns of around 755%, as of this writing — almost double the S&P 500’s returns of 435% in that time.

Keep in mind that there are no guarantees this ETF will continue performing at this rate, and growth ETFs, in general, tend to be riskier than many other types of investments. They are also often hit harder during downturns, so be prepared for more severe fluctuations if the market takes a turn for the worse.

Again, there’s no way to know for certain how any investment will fare going forward, as past performance doesn’t predict future returns. But it can still be helpful to look at those past returns to get a rough idea of how much you might be able to earn.

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By Melanie Burton

MELBOURNE (Reuters) – India’s Adani Group, whose billionaire chairman has been indicted for fraud by U.S. prosecutors, is facing accusations of racism at its Australian coal unit after an Aboriginal group filed a complaint with the country’s Human Rights Commission.

The Nagana Yarrbayn Wangan & Jagalingou Cultural Custodians in Queensland state said it filed a complaint alleging serious racial discrimination by the unit, Bravus Mining and Resources, earlier this week.

The complaint details how Adani employees sought to “verbally and physically obstruct and prevent” members of the Aboriginal group from accessing springs near Adani’s Carmichael coal mine “in order to perform cultural rites and share cultural knowledge”, the group said in a statement.

“We have endured years of discrimination and vilification from Adani, and we’re not putting up with this anymore,” Nagana Yarrbayn Senior Cultural Custodian, Adrian Burragubba said in the statement.

“Adani has been on notice about their conduct since our lawyers sent a concerns notice last year, and they refused to take action. Legal recourse is the only answer,” he added.

A Bravus spokesperson “wholly rejected” the group’s allegations, saying it was an attempt to stop Bravus from telling its side of the story and “sharing facts with the public about our interactions with him and members of his ‘Family Council’.”

It said the mine had been operating safely and responsibly in line with Queensland and Australian law and in partnership with the majority Traditional Owner group for the mining area under the terms of ratified Indigenous Land Use Agreements and Cultural Heritage Management Plans for more than two years.

It has not received any notification from the Australian Human Rights Commission of a complaint, it added.

A spokesperson said the Commission was unable to confirm if a complaint has been received until it had been publicly acknowledged by both the complainant and the respondent.

The Aboriginal group said it was seeking compensation, an apology, the removal of offending social media, a retraction of media statements, and anti-racism and cultural awareness training for Adani’s directors, managers and employees.

The Carmichael coal mine battled a seven-year campaign from climate activists and some Aboriginal groups before shipping its first cargo in December 2021.

Adani Group companies’ shares fell for a second straight day on Friday after U.S. prosecutors charged chairman Gautam Adani in an alleged bribery and fraud scheme.

(Reporting by Melanie Burton; Editing by Lincoln Feast.)