"BYD’s shares sharply lower after China EV maker’s earnings miss"

Making and selling electric vehicles is a tough business. 

Dow Jones Newswires via MarketWatch, Aug 31/Sept 1: 

BYD’s shares were sharply lower after the Chinese electric-vehicle maker reported weaker than expected earnings as well as a narrower profit margin.

Its Hong Kong-listed shares fell 5.6% to 108.00 Hong Kong dollars early Monday, equivalent to $13.85, in early trade Monday, even while the benchmark Hang Seng Index rose 2.0%. BYD’s Shenzhen-listed shares were down 4.0%.

The losses came in the wake of the EV company’s first-half earnings report late Friday with both net profit and revenue in the second quarter missing market expectations.

The results added to concerns that it wouldn’t hit its full-year sales goal. Softening domestic demand in July coincided with Beijing’s campaign to reduce what it considered unhealthy price competition , making it difficult for Chinese automakers to entice buyers.

Already, margins have narrowed. The world’s top EV seller said its first-half gross margin slipped to 18.01% from 18.78%, weighed by its EV businesses....

....MUCH MORE 

As noted exiting May 29's Whoa!—Chinese Electric Vehicles: "The Evergrande of the automotive industry already exists; it just hasn't collapsed yet.": 

Our out-the-door comment on October 2024's "Chartology — Breakout or Breakdown: Tesla (deliveries reported tomorrow, robotaxi etc.) TSLA":

One quibble. The line "Tesla has relied on price cuts since late 2022..." reads like a bad thing but the fact of the matter is that the entire industry has been cutting prices and Tesla getting out in front of that reality has kept them competitive in the battery-electric-vehicle business.

As we've been saying for quite a while now, Mr. Musk saw something a couple years ago that led him to a) the price cuts and production efficiencies that are proving crucial to survival in not just EV's but in the wider automobile market as well. Volkswagen talking about possibly laying off 30,000 of their German employees was inconceivable five years ago. And b) whatever it was he saw also led to the emphasizing of things they been working on for a decade: robotaxis and AI and supercomputers and robots.

So, for patient reader, having read this far, here's my two cents worth: 

Deliveries will be in-line this month and the next few months and the robotaxi unveil will be written up as a bust. The people who write the headlines hate Elon Musk and nothing he does will ever, ever change that. The financial question is: will the self-driving taxis be contributing to sales and earnings in two years?

Based on the fact that Waymo is now booking 100,000 rides per week I think the answer is yes but your mileage may vary. To repeat the comment on the April earnings call transcript:

Personally I think Musk is going to pull it off, but that's just me—perhaps informed by posting on the company and its stock since before the June 2010 share flotation (which, adjusted for the 5:1 and 3:1 stock splits gives a $1.133 IPO price)—however, there are plenty of other opinions to choose from if one doesn't care for that one....

Earlier in 2024:
"Biden slaps tariffs on nonexistent Chinese EV imports"
*****

....And that is why Elon Musk was so focused on the cost-cutting that allowed the price-cutting that kept Tesla competitive for the last eighteen months.

In January 2023 this bit of nonsense was making the rounds:

Tesla is about to experience the seven perils of discounting

It went in the same folder as 2015's:

Tesla's Battery: No Thanks

 One more, also 2024:

"Tesla’s in China – It’s just a question of how long" (TSLA)

The writer appears to think Mr. Musk is a naïf or even a Candide, blissfully unaware that all may not be for the best in this best of all possible worlds.

Wrongo, Bucko. Musk has a minor depression, possibly akin to Churchill's “Black Dog” that leads him to catastrophize worst case scenarios without succumbing to the debilitating effects (learned helplessness, hopelessness, suicide) you'd look for in a victim of a major depression.

He would be a good risk manager. The ketamine probably helps.....

and the outro:

As Intel's Andy Grove famously said:

“Business success contains the seeds of its own destruction. 

Success breeds complacency. Complacency breeds failure. 

Only the paranoid survive.”

Mr. Musk has his blind spots but China sneaking up on Tesla probably isn't one of them. He knows that Western companies will eventually lose the battle for electric vehicle dominance and something that he saw sometime in the last couple years seems to have scared him into action on the fronts where Tesla has a competitive advantage: access to some truly brilliant people; artificial intelligence facilitated by a long history with Nvidia and autonomous vehicles.

So again, we wish him luck, and think he'll succeed but this stuff is serious business.  

Again, we wish him luck.

Also August 2024'a "Robots: "Powered by Nvidia and AI, humanoid ambitions take shape" (NVDA; TSLA)":

Part of our pitch on Tesla over the last couple years is the supposition that Elon Musk is privy to information about the electric vehicle business that scared him.... 

"How The European Central Bank Engineered The French Debt-Crisis... And The Next"

Via ZeroHedge, September 1: 

The French debt crisis reminds us that gradualism never works, that statism always ends in ruin and that those countries that bet on more government and higher taxes always end in stagnation, risk of default and social unrest.

France’s government debt-to-GDP exceeds 114%. However, unfunded committed pension liabilities reach 400% of GDP, according to Eurostat. The fiscal deficit announced for this year is 5.4%, but market consensus maintains an expectation of 5.8%. The five-year credit default risk has risen by 20% in twelve months. The yield on French two-year debt exceeds that of Spain, Italy, and Greece, and its risk premium to Germany has reached 80 basis points—20 above that of Spain.

The problem in the euro area is that all the mainstream claps when a government inflates GDP with massive government spending and public sector jobs as well as immigration, disguising persistent fiscal imbalances and declining productivity growth. Furthermore, Keynesian analysts ignore the crowding out of the private sector and the harmful impact of high taxes on long-term public accounts’ sustainability.

I am old enough to remember when the mainstream media hailed Greece as the engine of growth in the eurozone when it was bloating GDP with massive government spending and public sector jobs. Greece was hailed as “safeguarding high economic growth” and “leading the euro area recovery” in 2005 and 2006 by the IMF and the European Commission publications. Headlines and policy reports widely acknowledged Greece’s economic achievements as an example of strong leadership within the euro area. We all know what happened in 2008.

We cannot forget that the European Central Bank has been instrumental in creating the perverse incentives for politicians to maintain and increase elevated spending and fiscal imbalances.

The European Central Bank (ECB) has, over the past decade, deployed a policy toolkit of unprecedented scale—including repeated rate cuts, negative nominal rates, the controversial anti-fragmentation tool, and de facto debt monetisation—designed to safeguard the eurozone’s stability. Yet, for all the rhetoric of stability and independence, these measures have created powerful incentives for fiscal recklessness, eroding the very foundations of European monetary credibility and planting the seeds of today’s sovereign debt crises, including the current French debt debacle.

ECB policy rates, once anchored to discipline both sovereign and private borrowing, have plummeted from above 4% in 2008 to negative territory and have remained in negative real territory for years. Furthermore, the ECB’s asset purchase programmes, expanded during crises under initiatives like the Pandemic Emergency Purchase Programme (PEPP) and the Outright Monetary Transactions (OMT), have saturated bond markets with central bank money and generated an enormous crowding-out effect that penalises credit to families and businesses and disguises solvency issues of public sector issuers.

The anti-fragmentation tool, designed to contain the “spread” between the core and periphery country bonds, takes this issue further: by promising open-ended intervention, the ECB reassures markets that it will backstop sovereign debt at virtually any price, diluting the discipline that risk premia once imposed on profligate governments. In fact, it could be considered a pro-squandering tool, as it benefits those countries with poor fiscal compliance and penalises those who reign in debt and deficits.

While these interventions immediately calm markets, they foster a mindset of indifference in governments, leading them to consistently increase their spending. Thus, many governments, like Spain’s, brag about the low interest rates and spread of their debt despite rising imbalances and worsening public accounts. The anti-fragmentation tool and negative nominal rates destroy the market mechanism that should serve as an essential warning for reckless fiscal policy. Member states, assured of cheap funding and endless ECB support, have little incentive to reform bloated budgets or contain deficits, especially when electorally costly. The persistent threat warned by German policymakers, that ECB actions are subsidising “fiscal freeloading” in high-debt member states, is becoming a reality.

The most dramatic case is France. The French government’s debt has soared above 114% of GDP in 2025, driven in part by persistent large deficits covered cheaply under the ECB’s umbrella. Attempts at fiscal consolidation have always been timid and thus have failed to achieve lasting discipline, with ECB support always in the background as a failsafe. The result is a mounting sovereign risk premium: French bonds, for the first time in modern euro history, now yield more than comparably rated Spanish, Greek, or Italian bonds, signalling the market’s discomfort with France’s debt trajectory even in the age of ECB backstops. The fact that this rise in spreads happens in the middle of a large stimulus plan (Next Generation EU) and rate cuts is even more alarming....

....MUCH MORE 

Related/recent:

• "French Market Stress Enters Second Day as Political Fears Mount"
• "Europe's Next Financial Crisis Could Be the Big One" 

"What Are Trump’s Options If His Tariffs Are Ruled Unlawful?"

From Bloomberg, September 1:

In rolling out the most aggressive tariff regime in the US in nearly a century, President Donald Trump has leaned heavily on emergency powers that had never been used before to impose import taxes.

Two federal courts ruled in May that he wrongfully invoked the International Emergency Economic Powers Act to justify sweeping “reciprocal” duties targeting America’s trading partners, as well as separate levies aimed at China, Canada and Mexico. The Trump administration appealed both decisions.

Its appeal in the case brought by Democratic-led states and a group of small businesses went before the US Court of Appeals for the Federal Circuit, which upheld in August that Trump exceeded his authority by using IEEPA to impose tariffs. The duties remain in effect for now and the appeals process could go all the way to the Supreme Court.

If the IEEPA tariffs are ultimately deemed unlawful, the vast majority of the levies Trump has imposed so far in his second term could come undone. But there are other means by which his tariffs campaign could continue. While the Constitution gives Congress the power to levy taxes and duties, lawmakers have delegated some of their authority to the executive branch through a number of statutes. These laws give Trump at least five fallback options to try to justify his tariffs.

In general, these alternatives come with more limits and procedural restrictions, meaning there’s less leeway for Trump to impose tariffs virtually immediately and set the rates as high as he chooses.

“The difference between them is how much process they require,” said Ted Murphy, co-leader of the global arbitration, trade and advocacy practice at law firm Sidley Austin. “Why they chose IEEPA, I think in part, was because it comes with no required process. It’s a determination that the president can make on his or her own initiative: There’s no hearing, there’s no report, there’s no nothing.”

Section 232 of the Trade Expansion Act of 1962

What it permits: 
Section 232 gives the president power to use tariffs to regulate the import of goods on national security grounds.

Limitations: 
These tariffs can’t be imposed instantly — the president can only act after an investigation by the Commerce Department determines that importing these products threatens to impair national security. After a probe is initiated, the Commerce Secretary must report the conclusions to the president within 270 days.

Unlike the blanket tariffs Trump imposed using IEEPA, Section 232 is designed to be applied to imports in individual sectors, rather than from entire countries. There’s no cap on the level of the duties or their duration.

Current uses: 
Trump used Section 232 to set tariffs on steel and aluminum imports in 2018 during his first term in office. He resumed his focus on these two industrial metals upon returning to the White House, leaning on the findings of the 2018 investigations to impose 50% tariffs. He also introduced levies on imports of automobiles and auto parts based on the conclusions of a Section 232 investigation completed in 2019.

Trump directed the Commerce Department in February to open a Section 232 investigation into copper imports, and after receiving the findings announced that a 50% tax would be charged on deliveries of semi-finished and so-called derivative copper products from Aug. 1.

There could be more Section 232 tariffs on the way. The Commerce Department has open investigations into the national security effects of imports of timber and lumber, semiconductors, pharmaceuticals, trucks, critical minerals, commercial aircraft and jet engines, unmanned aircraft systems, polysilicon (a key raw material for solar panels), and wind turbines.

Section 201 of the Trade Act of 1974

What it permits: 
Section 201 authorizes the president to impose tariffs if an increase in imports is causing or threatening serious injury to American manufacturers.

Limitations: 
Section 201 tariffs can’t be rolled out immediately either. The US International Trade Commission must first conduct an investigation and has 180 days after a petition is filed to deliver its report to the president. Unlike the Section 232 probes, the ITC is required to hold public hearings and solicit public comments. Section 201 is also focused at the industry level rather than broad taxes on all imports from trading partners.

The tariffs are capped at 50% above the rate of any existing duties. They can be imposed for an initial period of four years and extended to a maximum of eight years. If the levies are in place for more than a year, they must be phased down at regular intervals.

Current uses: 
Trump used Section 201 to place tariffs on imports of solar cells and modules, as well as residential washing machines in 2018. The solar tariffs were extended and modified by President Joe Biden; the washing machine tariffs expired in 2023.

Section 301 of the Trade Act of 1974

What it permits: 
Section 301 allows the US Trade Representative, under the direction of the president, to impose tariffs in response to other nations’ trade measures it deems discriminatory to American businesses or in violation of US rights under international trade agreements. 

Limitations: 
Again, this avenue doesn’t enable an instant rollout of tariffs as the USTR must first conduct an investigation. The agency is required to request consultation with the foreign government whose trade practices are being probed, and solicit public comments, which can result in public hearings.

There’s no limit on the tariff rate that can be introduced. The duties automatically terminate after four years unless USTR receives a request for continuation, in which case the levies can be extended.

Section 301 investigations focus on one country, but USTR can conduct parallel reviews of a common concern that relates to multiple countries. It did so during Trump’s first term, looking at the digital services taxes of 11 jurisdictions, including France and the UK.

Current uses: 
The first Trump administration used Section 301 to impose tariffs on hundreds of billions of dollars of imports from China in 2018, following an investigation into China’s policies on technology transfer, intellectual property and innovation. The duties on China are still in effect — though some are the subject of ongoing legal challenges — and during his term Biden increased tariffs on certain products from China including electric vehicles.

In July of this year, USTR initiated a Section 301 investigation into Brazil, looking at the country’s trade and IP policies, deforestation practices, and ethanol market access. As that probe proceeds, Trump announced that 50% tariffs on many imports from Brazil would commence on Aug. 6 and these duties were imposed using IEEPA....

....MUCH MORE 

If interested see also:

• Trump Warns of Economic Disaster if Court Strikes Down Tariffs

Nordic Solidarity: "Equinor to Subscribe for Orsted Shares Worth Up to $939 Million in Rights Issue"

From the Wall Street Journal, September 1:

Equinor said its support reflects the competitiveness of offshore wind in the future energy mix 

Equinor pledged to support Orsted’s rights issue by subscribing for up to $939 million of new shares.

The Danish wind-farm developer last month announced plans to raise $9.4 billion through a rights issue as it seeks new funds to shore up its balance sheet in response to industry challenges.

Orsted’s capital-raise plan comes as developments in the U.S. wind market disrupted the Danish renewable-energy company’s asset sale plans. Supply chain and construction challenges have previously hit U.S. projects, while the industry is also facing headwinds from a Trump administration that is opposed to wind energy. The U.S. government recently ordered Orsted to halt work on the Revolution Wind project, a key offshore wind farm off Rhode Island.

“As a long-term industrial shareholder, Equinor intends to participate in the rights issue and maintain its 10% ownership share in Orsted,” the Norwegian energy company said in a statement. “Ahead of the next annual general meeting, Equinor will also nominate a candidate to Orsted’s board of directors.”

Equinor said its support reflects confidence in Orsted’s underlying business, and the competitiveness of offshore wind in the future energy mix in selected geographies. It also said a closer industrial and strategic collaboration with Orsted can create value for all shareholders in both companies.

Equinor was itself subject to a stop-work order on an offshore wind project from the U.S. administration earlier this year. It was forced to halt construction of the Empire Wind project off the New York coast after officials suggested the Biden administration had rushed the project’s approval without sufficient analysis....

....MORE 

"The geo-economics of Russia’s bad harvest"

Worth paying attention to, though I'm not sure either the characterization or the purported causation is correct. 

From the International Institute for Strategic Studies, August 14:

Russia’s harvest for 2025 is shaping up to be the worst in over 17 years. This is likely to expose weaknesses in Russia’s wartime economy and its status as a global power. 

Russia’s ability to export grain and fertiliser has remained one of its few sources of economic strength and international leverage since its invasion of Ukraine. Unlike hydrocarbons, these exports have been spared Western sanctions, providing the Kremlin with critical revenue and soft power reach. But an increasingly erratic climate is now threatening this advantage. Russia’s bad 2025 harvest is more than a weather event: it reveals the structural fragility of Russia’s war economy and the growing risks to a system built on fiscal buffers and fossil fuels. 

Strength in decline

During the Cold War, the Soviet Union could not feed itself. It depended on grain imports, primarily from the United States. This gave Washington a lever of geopolitical influence during the era of detente by offering access to food on the condition of restraint in foreign policy. 

A Soviet weakness became a Russian strength. The post-Soviet transition to private land ownership and heavy state investment transformed Russia into an agricultural powerhouse. This gave it the confidence to ban Western food imports in 2014 in retaliation against sanctions imposed after Russia annexed Crimea and parts of Donbas. By 2016, Russia had become the world’s largest exporter of wheat and a leading exporter of fertiliser. These exports brought not just foreign currency, but influence – especially among buyers in Africa and the Middle East. 

Following Russia’s full-scale invasion of Ukraine in 2022, Western sanctions have sought to isolate the Russian economy. These have largely exempted agricultural exports to protect global food security, particularly in developing countries. For the Kremlin, this omission has become a secure stream of foreign earnings and influence that have helped stabilise the economy and support the war effort. But nature, indifferent to political constraints, may now be doing what Western policymakers have declined to do. 

The 2025 harvest is shaping up to be Russia’s worst in years. July saw the country’s lowest grain exports for that month since 2008. This is a result of intensifying climate volatility. Unseasonable spring frosts damaged over 240,000 hectares of crops, with 100,000 hectares lost outright. These were followed by record summer heat, with temperatures above 40°C in key southern regions. Drought conditions this summer have been devastating, with nearly 500,000 hectares destroyed. The authorities in Rostov oblast, a major grain-producing region, declared a state of emergency. Fields once golden with wheat were left parched and cracked. Wheat production forecasts were revised downward from 90 million tonnes to 82m–84m tonnes. Total grain output, which peaked at 158m tonnes in 2022, is now expected to fall to around 130m tonnes. 

This comes as pressure mounts on Russia’s once primary source of foreign earnings: hydrocarbon exports. In July, the European Union and the United Kingdom lowered their price cap on Russian crude from US$60 to US$47 per barrel and escalated sanctions on Russia’s shadow fleet of oil tankers. US President Donald Trump’s second administration has imposed tariffs on some buyers of Russian oil – most notably India. Crude oil and refined petroleum products now account for less than half of Russia’s export revenues, placing growing importance on alternative sources, including agricultural exports.

Climate change and consequences 

As I explore in The Earth Transformed, one of the defining challenges for modern states is how they manage and adapt to environmental stress: even modest shocks can have significant implications. Russia, vast and climatically diverse, is particularly exposed – as shown by events in 1916, when food shortages and price rises triggered uprisings, first in tsarist Central Asia and then in Petrograd.

Yet Russian President Vladimir Putin has long dismissed climate change, even suggesting that global warming might benefit Russia by rendering its northern lands arable. This wager appears increasingly short-sighted. While Western economies are investing heavily in adaptation and mitigation, Russia remains wedded to a carbon-intensive model of growth. As one of the world’s largest petrostates by area, it has effectively staked its future on the delay, or failure, of a post-carbon transition....

....MUCH MORE   

Possibly also of interest, September 2021 - That Time The CIA Completely Missed A Soviet Crop Failure And Allowed The Sovs To Buy American Wheat On The Cheap

Over the years I've mentioned some of the major failings of the U.S. intelligence community, from the failure to foresee the rapidity of the collapse of the communist governments in Eastern Europe to the round-up, torture, and murder of virtually all the human assets the CIA was running in China.

And the Chinese hack of the U.S. Office of Personnel Management starting in 2013, exposing the personal information of 20 million current and former employees, including those with highest level security clearances. That was actually a joint CIA/FBI failure. As was the Soviet development of the H-bomb.

And....well, it is a very long list.

Here's one more instance. the memory of which was triggered by wheat trading decisively over $8.00 this morning (821-2  +18-2)....

***** 

....Not only did the Americans supply the wheat the Soviets desperately needed but they paid the grain companies a $300 million subsidy and extended $750 million in credit for the purchases.

And because the Kremlin was able to keep the magnitude of the disaster from becoming common knowledge they were able to make the purchases in a market that did not have access to all the relevant information needed to establish a clearing price.

Next up, the St. Louis Fed paper referenced above....