Carmakers fret over Trump threat to EV subsidies

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Today’s top stories

• More than 100 people have been killed in Iran after two “terrorist attacks” at a ceremony to mark the death of a military commander, the country’s state media reported.

• US companies have been piling into convertible bonds as they search for ways to keep interest costs down, in a rare flurry of activity in otherwise subdued fundraising markets.

• More than two-thirds of a UK government £4.2bn fund for new homes in England remains unspent more than six years after its launch, despite the chronic shortage of housing.

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Good evening.

Does Donald Trump really want to be responsible for the downfall of the US auto industry?

That’s the question posed by some analysts in our report today highlighting fears among carmakers that Trump’s intention to gut Joe Biden’s cornerstone green energy legislation — the Inflation Reduction Act — could undermine electric vehicle sales and investment should he reascend to the presidency in November.

The IRA aims to drive domestic EV manufacturing by offering American consumers incentives if they buy battery cars with parts supplied from the US or its trading partners, rather than turning to Chinese competitors — a threat underlined by new data showing China’s BYD has overtaken Tesla as the world’s biggest EV maker.  

But with Chinese battery makers accounting for more than two-thirds of the world’s supply and China controlling two-thirds of lithium refining capacity, government restrictions come at a cost to American carmakers, which face an expensive shift to South Korean and Japanese suppliers. The new rules introduced on Monday could also hit EV take-up: the number of car models eligible for US tax credits is now down from 43 to 19.

EV sales are still rising across the world, mainly in areas that have generous incentives, although growth is slowing in large markets such as the US over concerns about prices and charging.

In the meantime, BYD and other Chinese manufacturers have been leveraging their country’s control over the production of almost all the necessary resources, material and components needed for EVs. BYD for example controls mines as well as producing batteries and chips.

EV progress among legacy carmakers is patchy. The most promising recent development has been the announcement from Toyota — still the world’s top selling carmaker — that the mass production of solid-state batteries is within reach.

At policy level, the EU is still working out ways to rival the US subsidies, which are drawing battery companies across the Atlantic and slowing progress towards China-free supply chains, despite hopes that €3bn in financial support would help jump start a domestic industry.

Back in the US, some believe Trump is unlikely to follow up on his threat to withdraw incentives for one simple reason: Republican-voting states have been the biggest beneficiaries of investment.

Need to know: UK and Europe economy

The UK economy is set for a period of “grey gloom” with little perceptible improvement to living standards as growth stagnates, at least according to economists polled in the Financial Times annual survey. One theme stands out above all others: the need for investment.

Still, there are some nuggets of good news to be had. New data today showed UK grocery price inflation falling at the fastest rate ever, helping to boost Christmas spending. The FT editorial board outlines some other positive developments to counter the economists’ pessimism.

EU regulators are to probe the links between banks and other financial firms such as hedge funds. Non-bank financial institutions or NBFIs, sometimes known as shadow banks, hold almost half of the world’s financial assets, worth around $218tn.

Chinese shipments to Russia of an important type of advanced machine tool have increased tenfold since the full-scale invasion of Ukraine. The high-precision “computer numerical control” devices are vital to Moscow’s military industries. The EU today added Russia’s largest diamond-mining company and its CEO to its sanctions list, complementing the ban on imports of Russian diamonds that came into effect on January 1.

Ukraine, which has more gas storage capacity than any country in the EU, is playing a key role in helping Europe avert further energy crises.

Need to know: Global economy

Three-quarters of the world’s industrial fishing vessels are not publicly tracked, according to a new study, hindering global efforts to protect depleted fish stocks and marine environments.

The legacy of the inflation crisis will not end once prices start rising at normal rates again, writes economics commentator Chris Giles. Above all, central bankers will need to show “flexibility in the face of inevitable forecast errors and an ability to communicate the need for policy to adapt to changing circumstances,” he argues.

New data security laws in China are adding to the travails of the country’s businesses struggling to navigate the twin troubles of a slowing economy and increased tensions with the US.

Some 2bn people — about half the world’s adult population — will have the chance to vote in 2024, far more in one year than ever before. Eight of the 10 most populous countries are among the more than 70 states holding elections, prompting our new Big Read: can 2024 revive the world’s democratic spirit?

Need to know: business

Private equity groups are flush with record amounts of unspent investor cash and a pile of ageing investments that need to be sold down, against a backdrop of slowing dealmaking and a lukewarm IPO market.

More than a billion dollars worth of Pfizer’s Covid-19 antiviral drugs procured in Europe have been wasted as tight controls over who can receive the medication left millions of doses unused before their expiry date.

Alibaba, China’s best-known tech group and once Asia’s most valuable company, is in crisis. Here’s our deep dive on what happened.

Israel pledged to protect its tech start-ups from the effects of its war with Hamas, setting aside financial aid and urging private investors to join in. High tech plays a key role in the country’s economy, accounting for 18 per cent of output, 12 per cent of jobs and about half of exports.

Warehouse operators are luring workers to the gruelling business of loading and unloading packages with novel benefits including football pitches, ice cream vans and beehives.

If you’re just re-engaging after an elongated festive break, get up to speed quickly on the key issues for 2024 with our sector-by-sector industry guide and our writers’ predictions for the year ahead, from the winner of the US election to whether Elon Musk’s X will go bankrupt.

The World of Work

From the impact of AI to employer-employee relationships, the Working It podcast discusses what work might look like in 2024.

Tired of compiling and failing to complete endless to-do lists? Read our interview with writer Oliver Burkeman on the best way to manage your time. The first step? Realise you can’t do everything.

US child care centres are closing even as their prices are soaring. Columnist Rana Foroohar says the end of pandemic-era subsidies underlines the need for a complete overhaul of the system.

Some good news

Despite the myriad problems documented by Disrupted Times, there are still reasons to be cheerful about the global economy, says the FT editorial board. The resilience, falling inflation and technological progress that marked 2023 are likely to carry over into the new year, it argues.