Philippa Kaur

Swedish steel is considered the world’s toughest. It may soon become its greenest. In Boden, a town near the Arctic Circle, a startup called h2 Green Steel (h2gs) is erecting a €4bn ($4bn) new mill, Europe’s first in nearly half a century. It will be powered not by the usual coal or natural gas but by green hydrogen, produced on site by the region’s abundant wind and hydropower. When fully built in a few years, it will employ up to 1,800 people and churn out 5m tonnes of steel annually.The project matters far beyond sparsely populated northern Sweden. The consequences could be momentous for the continent’s producers of steel and other basic materials, such as cement and chemicals, which between the three of them directly contribute around 1% of the eu’s gdp. It would ripple through the supply chains of firms, from carmakers to builders, which account for another 14% of eu output, according to Material Economics, a think-tank. It would boost Europe’s energy independence, the importance of which has been laid bare by Russia’s energy blackmail in response to Western sanctions against its war in Ukraine. And it would be a boon for the climate, since basic-materials industries spew out about a fifth of Europe’s greenhouse-gas emissions. It could in short, thinks Ann Mettler of Breakthrough Energy, a venture-capital fund backed by Bill Gates, mark the rebirth of Europe’s heavy industry for the post-fossil-fuel era. Heavy industry has long seemed irredeemably carbon-intensive. Reducing iron ore to make steel, heating limestone to produce cement and using steam to crack hydrocarbons into their component molecules requires a lot of energy. On top of that, the chemical processes involved give off lots of additional carbon dioxide. Cutting all those emissions, experts believed, was either technically unfeasible or prohibitively expensive. Both the economics and the technology are at last starting to look more favourable. Europe is introducing tougher emissions targets, carbon prices are rising and consumers are showing a greater willingness to pay more for greener products. Several European countries have crafted strategies for hydrogen, the most promising replacement for fossil fuels in many industrial processes. Germany is launching the Hydrogen Intermediary Network Company (hint.co for short), a global trading hub for hydrogen and hydrogen-derived products. Most important, low-carbon technologies are finally coming of age. The need for many companies to replenish their ageing assets offers a “fast-forward mechanism”, says Per-Anders Enkvist of Material Economics. Taken together, these developments are allowing European industrial firms that have vowed to become carbon-neutral by 2050, which is to say many of them, to start putting money where their mouth is. Material Economics has identified 70 projects in Europe that are commercialising technology to reduce carbon emissions in basic-materials industries. Scarcely a week goes by without the unveiling of a new venture. Decarbonising industry has turned from mission impossible to “mission possible”, says Adair Turner of the Energy Transitions Commission, a think-tank.The steel industry is the furthest along. h2gs’s mill in Boden is cleverly combining proven technologies at a big scale. The firm is building one of the world’s largest electrolysis plants to produce hydrogen. The gas is then pumped into a reactor, where it powers a process called “direct reduction”: under great heat, it snatches oxygen from iron ore, producing nothing but water and sponge iron. This material, so called because its surface is riddled with holes, is then refined into steel using an electric-arc furnace, which dispenses with coking coal.A half-hour drive south of Boden, hybrit—a joint venture between ssab, a steelmaker, Vattenfall, a power utility, and lkab, an iron-ore producer—is piloting a similar process. In July the board of Salzgitter, a German steel company, gave the green light to a €723m project called salcos that will swap its conventional blast furnaces for direct-reduction plants by 2033 (it will use some natural gas until it can secure enough hydrogen). Other big European steel producers, including ArcelorMittal and Thyssenkrupp, have similar plans.Cement-makers are heading in the same direction, albeit more slowly. Since heating limestone generates about 60% of the sector’s carbon emissions and a replacement technology, such as direct reduction in steelmaking, is lacking, the industry is chiefly focusing on abating emissions after the fact, using carbon capture and storage (ccs). Many firms are experimenting with a heating process that replaces air with pure oxygen, which produces CO2 suitable for sequestration. Some are trying to use electricity rather than fossil fuels to heat the limestone. The most ambitious are developing new, lower-carbon types of cement. HeidelbergCement, the world’s fourth-largest manufacturer of the stuff, has launched half a dozen low-carbon projects in Europe. They include a ccs facility in the Norwegian city of Brevik and the world’s first carbon-neutral cement plant on the Swedish island of Gotland. Ecocem, an Irish startup, is making cement that uses less clinker, the intermediate material derived from the heated limestone, and thus emits less carbon. Some companies are trying to retrieve cement from old concrete in demolished buildings.The chemicals industry faces perhaps the biggest challenge. Although powering steam crackers with electricity instead of natural gas is straightforward in principle, it is no cakewalk in practice, given the limited supply of low-carbon electricity. Moreover, the chemicals business breathes hydrocarbons, from which many of its 30,000 or so products are derived. Even so, it is not giving up. basf, a chemicals colossus, is working with two rivals, sabic and Linde, to develop an electrically heated steam cracker for its town-sized factory in Ludwigshafen. It wants to make its site in Antwerp, which emitted 3.8m tonnes of CO2 last year, net-zero by 2030. To achieve this goal, basf recently bought part of a wind farm off the Dutch coast to provide it with carbon-free electricity. The company is, like its cement counterparts, also taking a serious look at recycling, in particular a process called pyrolysis, where plastic waste is burned in the absence of oxygen and split into its hydrocarbon components. Other firms are dreaming up different types of greener feedstocks. afyrem, a French startup, is deriving hydrocarbons from biomass. Several dozen pilot projects—even large ones with proven technology—do not amount to a green transition. The hard part is scaling them up. The necessary infrastructure is either a work in progress (clean-electricity generation) or scarcely exists (hydrogen production and distribution). Costs remain high: green steelworks are still two to three times more expensive to build than the conventional kind. Attracting workers can be difficult, especially to renewables-rich places which are often, like Boden, remote. And rivals in other countries aren’t standing still; a couple of giant Indian conglomerates in particular are betting big on green hydrogen. Europe needs to hurry up if it is to maintain its lead, warns Frank Peter of Agora Energiewende, a think-tank.All these are real obstacles. But they need not be insurmountable ones. To understand why, once again consider h2gs. It has convinced firms including bmw, a carmaker, and two white-goods manufacturers, Electrolux and Miele, to sign contracts for 1.5m tonnes of green steel. That order book serves as collateral for banks to finance two-thirds of the project (with the rest coming from equity investments by backers including venture-capital firms and industrial giants such as Scania and Mercedes-Benz). To attract hundreds of skilled workers and their families to remote Boden, meanwhile, it will help them find housing in a complex that will, if its architects have their way, resemble a snazzy resort. To secure the other important input, hydrogen, h2gs has teamed up with Iberdrola, a Spanish energy firm, to build a large factory in Western Europe to produce the gas, with a view to supplying some of it to other industrial users. h2gs’s thinking is that if can establish its steel and hydrogen platforms early, it can lock in important advantages ahead of competitors elsewhere. These include things like setting standards and grabbing a slice of potentially lucrative businesses such as software to control hydrogen- and steelmaking equipment. For Europe to become a green-industry superpower, its governments and industrial giants will need to display similar ingenuity and ambition. ■ More

For the past decade there were two more or less universally acknowledged truths about digital advertising. First, the rapidly growing industry was largely impervious to the business cycle. Second, it was dominated by the duopoly of Google (in search ads) and Meta (in social media), which one jealous rival has compared to John Rockefeller’s hold on oil in the 19th century.Both of these verities are now being challenged simultaneously. As China’s economy slows and the West’s slides towards a recession, companies everywhere are squeezing their marketing budgets. Until recently, that would have meant cutting non-digital ads but maintaining, or even raising, online spending. With most ad dollars now going online, that strategy is running out of road. Last quarter Meta reported its first-ever year-on-year decline in revenues. Snap, a smaller rival, is laying off a fifth of its workforce.For Meta and Google’s corporate parent, Alphabet, the cyclical problem may not be the worst of it. They might once have hoped to offset the digital-ad pie’s slower growth by grabbing a larger slice of it. No longer. Although the two are together expected to rake in around $300bn in revenues this year, sales of their four biggest rivals in the West will amount to almost a quarter as much. If that does not sound like a lot, it is nevertheless giving the incumbents reason to worry. Five years ago most of those rivals were scarcely in the ad business at all (see chart). What is more, as digital advertising enters a period of transformation, the challengers look well-placed to increase their gains.The noisiest newcomer to the digital-ad scene is TikTok. In the five years since its launch the short-video app has sucked ad dollars away from Facebook and Instagram, Meta’s two biggest properties. So much so that the two social networks are reinventing themselves in the image of their Chinese-owned rival. TikTok’s worldwide revenue will exceed $11bn this year and will be double that by 2024, forecasts eMarketer, a firm of analysts.The TikTok threat is well known—not least to Meta’s boss, Mark Zuckerberg, who mentioned the “unique” competitor five times on a recent earnings call. But Meta and Google may have more to worry about closer to home, where a trio of American tech firms are loading ever more ads around their main businesses.Chief among them is Amazon, forecast to take nearly 7% of worldwide digital-ad revenue this year, up from less than 1% just six years ago. The company started reporting details of its ad business only in February, when it revealed sales in 2021 of $31bn. As Benedict Evans, a tech analyst, points out, that is roughly as much as the ad sales of the entire global newspaper industry. Amazon executives now talk of advertising as one of the company’s three “engines”, alongside retail and cloud computing.Next in line is Microsoft, expected to quietly take more than 2% of global sales this year—slightly more than TikTok. Its search engine, Bing, has only a small share of the search market, but that market is a gigantic one. Microsoft’s social network, LinkedIn, is unglamorous but its business-to-business ads allow it to monetise the time users spend on it at a rate roughly four times that of Facebook, estimates Andrew Lipsman of eMarketer. It generates more revenue than some medium-sized networks including Snap’s Snapchat and Twitter.The most surprising new adman is Apple. The iPhone-maker used to rail against intrusive digital advertising. Now it sells many ads of its own. As sales of smartphones plateau, the company is looking for new ways to monetise the 1.8bn devices, from smartphones to smart earphones, it already has in circulation. So far it is only dabbling in ads and does not report sales figures. But Bloomberg reported recently that Apple’s ad business was already generating sales of $4bn a year, making it about as big an ad platform as Twitter. Apple executives believe there is much more to be had.They may well be right. Changes are coming to the digital-advertising industry which will suit the big-tech challengers. Apple itself is in part responsible for what may be the most consequential development. Its rules on “app-tracking transparency” (att), introduced last year, have made it much harder for advertisers to follow users around the web to serve them ads based on their interests. The eu’s Digital Services Act, unveiled earlier this year, takes steps in the same direction. America is mulling similar legislation of its own.The crackdown on tracking has been especially hard on platforms that serve display ads, which target consumers on the basis of their interests, as opposed to things they have actively searched for. Meta, whose social networks specialise in such ads, said in February that att would knock $10bn off its ad business this year. It is trying to develop other ways of divining consumers’ interests. So are smaller platforms reliant on display ads, but their task is more difficult without Meta’s deep pockets. Or at least that is how investors see it: Snap’s market value has plummeted by 83%, or $97bn, in the past 12 months.Amazon, Apple and Microsoft, by contrast, are insulated against anti-tracking initiatives. They rely mostly on “first party” data of their own. Amazon’s ads are based on what users search for on its site: type “socks” into its search bar and you will see sponsored promotions for exactly that. Microsoft’s Bing is similarly immune. LinkedIn is probably less so, though Microsoft could theoretically use data from Bing to fine-tune the ads shown to LinkedIn users (at the moment it does not, though it has looked into it). Ads on Apple’s app store follow the same principle as Amazon: search for TikTok, say, and you may see an ad for a rival app like Pinterest. Apple is rumoured to be preparing to introduce ads on its Maps app, to promote local businesses. Through its move into payments it could learn about customers’ shopping habits. None of this would require tracking, since the behaviour all happens on Apple’s platform.Advertising’s other big coming change is the migration of television-viewing from broadcast and cable to internet-connected tvs, capable of delivering targeted ads. Amazon has already shown ads alongside sport on its Prime Video streaming service. Apple has done the same on Apple tv+, and may yet launch an ad-supported subscription tier, as rivals Netflix and Disney+ soon will. Microsoft has no tv offering, but its acquisition earlier this year of Xandr, an ad-tech company, has given it a foothold in serving ads for other streamers. In July Netflix chose Microsoft to run its forthcoming ad business—to disappointment at Google, which had bid for the contract, and to some surprise at Microsoft itself.Digital advertising is spreading into other markets where the new challengers are well positioned. Audio is undergoing a similar digitisation to video, as listening switches to streamed music and podcasting. This presents an opportunity for Amazon and Apple, both of which have audio-streaming services and make smart speakers. Both also have voice-activated assistants, Alexa and Siri, who could just as easily bark out promotions as take orders. Amazon sees Alexa as a future saleswoman as well as a servant.Meanwhile, Microsoft’s pending acquisition of Activision Blizzard, a video-gaming giant, will make it a powerful force in that fast-growing and increasingly ad-supported industry. Its Xbox console already shows some ads on the user’s on-screen “dashboard” and will reportedly soon offer more help for developers to sell in-game ads. Activision’s units include King, the maker of “Candy Crush”; last year King generated revenue of $2.6bn from ads and in-game purchases by its quarter of a billion players.As digital ads work their way into more corners of the economy, “a new order is going to materialise”, believes Mr Lipsman. He thinks Amazon will overtake Meta in total advertising revenue, possibly within five years. Google is better placed to take advantage of the coming changes, with its healthy search ads and its vast YouTube video and audio services. Still, it will find things more competitive in future. The incumbent digital-ad duo might have hoped that, as ever more advertising went online, their empires would only extend. It looks instead as if new rivals will reach into their business. ■ More

It was to be the biggest industrial merger ever. In late 2000 General Electric (ge), the world’s most valuable company at the time, agreed to pay $43bn for Honeywell, a smaller American manufacturer of, among other things, aircraft electronics. Jack Welch, ge’s ceo and America Inc’s capitalist-in-chief, put off his retirement to see it through. The transaction, codenamed “Project Storm”, seemed a done deal. American authorities gave their blessing, finding no threat to competition (ge made jet engines but not avionics). Regulators elsewhere were expected to defer to America in a merger involving two American firms. So it came as a shock when, in 2001, the European Commission killed it. A diversified ge would, the eu’s competition watchdog argued, wield too much power in the market for aircraft parts. America’s trustbusters pooh-poohed the commission’s theory of “conglomerate effects”. The treasury secretary, Paul O’Neill, called the ruling “off the wall”. Listen to this story. Enjoy more audio and podcasts on More

Monkeypox isn’t covid-19. Since May the viral disease has infected 35,000 people in 92 countries, less than one-tenth as many as covid infects in a day. Though symptoms, including fever, headaches, muscle aches and a pus-filled rash, can be nasty, it seldom causes death. Critically, in contrast to covid, both a vaccine and a treatment predate the current epidemic. Their makers, two smallish drug companies, are struggling to keep up with demand. Listen to this story. Enjoy more audio and podcasts on More

With a fortune of $270bn or thereabouts, Elon Musk is not a man strapped for cash. Thank goodness, for the entrepreneur may soon be compelled to make a sizeable donation to his favourite social-media platform. On September 13th shareholders of Twitter voted to approve the $44bn buy-out offer Mr Musk made in April. The decision was a no-brainer, given that the company’s market value currently languishes below $32bn. In his capacity as Twitter’s largest shareholder, with a 9.6% stake, he would no doubt accept his offer. As the acquirer, he is trying to wriggle out of the deal. Twitter, armed with a bulletproof takeover agreement, is having none of it. A Delaware court will decide the buy-out’s fate in October.Listen to this story. Enjoy more audio and podcasts on More

“If you want to change the world, start off by making your bed,” Admiral William McRaven told the graduating class of 2014 at the University of Texas, Austin. What the us Navy counts as “making your bed”—square corners, centred pillow, blanket neatly folded at the foot of the rack—is idiosyncratic. Yet the admiral’s broader point is universal: whether you are a sailor, a salesperson or a ceo, “if you make your bed every morning you will have accomplished the first task of the day.” His commencement speech went viral.Listen to this story. Enjoy more audio and podcasts on More

If you want to glimpse the frontier of Indian capitalism, take a trip to Tamil Nadu in the south of the country. New factories with solar panels on their roofs lie on a vast 550-acre (220-hectare) site. Inside, it is reported, Tata is making components for the latest iPhones on behalf of Apple—and in the process finally connecting India to the world’s most sophisticated supply chain, which used to be anchored to China.The project is not a one-off. It is part of a new and staggering $90bn investment surge by India’s biggest business that is repositioning itself towards its home market and away from its 30-year strategy of fanning out globally. Tata’s ambition to create electronics factories and semiconductor fabs in India could transform its economy. “I firmly believe that this is going to be India’s decade,” says Natarajan Chandrasekaran, who runs the holding company, Tata Sons, which oversees the group. The change in strategy also reflects the dramatic psychological shift within the business world’s most ardent globalisers, as they adapt to new megatrends. These include the rebasing of strategic manufacturing away from China; the rise of a new energy system; and industrial policy, which in India is being championed by Prime Minister Narendra Modi. Anyone who follows India, the world’s fastest-growing big economy, may be under the impression that it is run by Mukesh Ambani and Gautam Adani, two swaggering tycoons, whose conglomerates generate headlines and make them Asia’s richest men. Together the “two As” may spend over $100bn in the next five years. Yet Tata is in fact the country’s biggest business measured by market value ($269bn) and operating profits ($16bn last year), spanning everything from steel mills to software. And we estimate that its new plans are larger than any other individual firm’s, encompassing electric vehicles (evs), electronics, battery gigafactories, clean power and chips (see chart 1). If that doesn’t sound ambitious enough, it has also taken on the Everest of corporate turnarounds, buying Air India. The firm’s scale, reputation and record instantly make it one of the world’s most important companies. With 800m-900m customers, it employs almost 1m people, more than any listed firm anywhere bar Amazon and Walmart, across ten business lines. It is also the ultimate survivor. Of the world’s firms worth over $200bn that have remained independent, it is the oldest, founded in 1868, 18 years before Johnson & Johnson was incorporated. When blue-chip multinationals head to India—not just Apple (reportedly), but everyone from Starbucks to Zara—they seek to team up with Tata, the one firm you can really trust. In a twist, Tata is run by technocrats who report to what may be the world’s least-known and richest charity, not tycoons eyeing the Forbes rich list.To understand where Tata and India are heading in the 2020s and 2030s you have to go back in time. The company has stayed alive by adapting to technological and political change. It made steel for colonial railways and after independence it coped with India’s socialist detour. When the economy opened up in the early 1990s it helped reinvent white-collar work by selling information-technology (it) services to outsourcers. Ratan Tata, the boss between 1991 and 2012, spent the first decade dragging the group into the modern era and the second taking it global through $18bn of cross-border takeovers, including of Jaguar Land Rover, a British carmaker, and Corus, an Anglo-Dutch steelmaker. Tata’s belief in the boundless opportunities of borderless commerce was shared by many others at the time. Annual investment by Indian firms abroad soared almost 40-fold between 2000 and the peak in 2008; for all emerging markets it rose by four times. China urged its bosses to “go out there”. Even Cemex, Mexico’s cement giant, became an unlikely deal machine. In, out, shake it all about Behind the boom lay insecurity as well as optimism. Tata worried India was too corrupt to offer a level playing field. More broadly it and fellow emerging-market firms believed that to tap advanced technologies you had to be in the West. Tellingly, at home in India the fashion then was for “Jugaad Innovation”: basic, frugal engineering that was supposedly a source of advantage. Tata launched the Nano, an ultra-basic car for India that cost $2,000. This era of reflexive corporate globalism has come to an end. Geographical sprawl weakened the finances of most multinational acquirers. In Tata’s case, we reckon that about two-thirds of its sales were abroad by 2012. Meanwhile, 70% of its capital employed earned a return of less than 10%, our yardstick for underperformance. Net debt had risen to twice gross operating profit. The strain helped trigger a governance crisis as Mr Tata fell out with his successor, Cyrus Mistry, whose family own 18% of Tata’s holding company (Mr Mistry died in a car crash near Mumbai on September 4th). In early 2017 Tata replaced him with Mr Chandrasekaran, the meritocrat’s choice, who had run the thriving it business that had kept the group afloat. The rise of Mr Chandrasekaran to the pinnacle of Asian business illustrates another sharp change: emerging markets’ self-confidence in technology. In the past decade India has created perhaps the world’s most advanced payments systems and a venture-capital scene that has helped fund (at least before the recent worldwide tech slump) over 100 private tech “unicorns” valued at $1bn or more. The it-services firms, including Tata’s, have more than doubled in size and are far more technically sophisticated. And though Tata might not like to admit it, Mr Ambani’s landmark $46bn ten-year investment in Jio, a 5g telecoms business, has shown that you can profitably deploy vast sums of capital in cutting-edge tech in a developing economy. More self-confidence in tech has coincided with the last shift, the changing relationship between the role of businesses and the state, championed by Mr Modi’s government. A move in supply chains away from China, new technologies and the energy transition all create opportunities. But who will exploit them? The usual suspects are not up to snuff. India’s state-run firms are hopeless. Foreign multinationals have ushered in neither industrialisation nor technological breakthroughs. Capital markets have failed to create young firms with enough equity to take big risky bets. India’s last investment cycle, an infrastructure boom in 2003-11, was debt-fuelled and ended in tears. The government and some bosses now favour giant firms. Those include conglomerates as well as specialist firms like jsw Steel and hdfc, a bank which is concluding a $140bn mega-merger. Some firms, such as Adani Group and Mr Ambani’s Reliance, embrace this role and the proximity to the state it brings. Others are making a more calculated bet that the demands of national development and responsible, profitable business really are compatible. Tata is in the second camp. Whereas Mr Tata is aristocratic and enigmatic, Mr Chandrasekaran is quick and ultra-rational, with a dash of humour. Emails are dispatched fast. Satraps running divisions are told to deliver performance first and get capital later. The worst bits of Tata are being quietly killed off: Tata Sons has written off $10bn since 2017 as it has exited weak areas such as telecoms, and recapitalised fragile subsidiaries. Some of Tata’s domestic laggards have got their act together. The cyclical steel business is booming, for now, and Tata’s market share in cars has surged, especially for electric vehicles (even though its best-selling Nexon ev costs $17,000 more than the abandoned Nano). The clean-up operation is roughly two-thirds complete and as a result of it, we calculate that Tata’s return on capital has reached 21%, or 14% excluding it services. The share of capital underperforming by our 10% yardstick is down to 48% (see chart 2). Leverage is less than half what it was. By our maths a share in Tata Sons has outperformed India’s stockmarket by 46 percentage points since 2017. A legal battle over the succession ended when India’s Supreme Court ruled in Tata’s favour last year. In February Mr Chandrasekaran was appointed for another five years.Something striking is also happening. Tata is becoming more Indian for the first time since the 1990s. Sales from the subcontinent reached 38% of the total last year, having grown almost twice as fast as foreign ones in the past decade. The plan for the next five years will accelerate this by deploying an estimated $90bn of capital, mostly in India and mostly in projects that have a technological edge and are compatible with the government’s agenda. Some are a play on growing consumption in India, others on manufacturing for export. There is a “global opportunity for global companies to create a supply chain based in India”, Mr Chandrasekaran says. Chandra’s capex challengeTata’s annual capital spending will rise to $18bn, over twice the average of the past decade, we reckon. That would make it India’s biggest investor. Along with Reliance it would account for 7% of the total for all private firms. If all goes to plan, new, higher-tech businesses could rise from a quarter of Tata’s capital employed to half by 2027. Some 77% of Tata’s new investments will be in India. These are large and potentially transformational shifts—for the firm and the country alike.That money is going into several bets. One is on the energy transition: its power subsidiary will invest almost $10bn over the next five years in renewable generation. There is a $5bn project to build gigafactories in India and Europe, to supply Tata’s own cars and those of other manufacturers. The Indian car operation is launching 10 ev models (it has just bought Ford’s plant in Gujarat). And Tata will ramp up the manufacturing of solar panels, a business China dominates today. Another wager is on tech and electronics. Tata has invested $1bn so far in electronics manufacturing for Indian and global customers, mainly in Tamil Nadu, and there is more to come. It intends to make 5g telecoms gear using the software-heavy Openran standard, and challenge Huawei, China’s hardware-focused champion. It is entering semiconductor testing and packaging (the final, less intricate stage of chip fabrication) and Mr Chandrasekaran is weighing up building what may be the first fully fledged semiconductor “fab” in India, in partnership with a foreign firm. The factory, which could cost $5bn or more to build, would not make chips as advanced as those of Taiwan’s tsmc. But it would be a leap for India and, Mr Chandrasekaran concedes, the biggest challenge for all of Tata Group. There are other contenders, too: on September 13th Vedanta, an Indian-focused firm, and Foxconn, from Taiwan, said they would invest $19.5bn in a semiconductor plant in Gujarat.The third gamble involves the Indian consumer. The firm has spent $2bn on a digital platform and app called Neu that aspires to be a “superapp” for Tata customers, linking them to its retail, hotel, health-care, transport and financial services, and to products including cars. It has amassed 17m users since its launch in April—a tad disappointing, but the plan is to keep investing, particularly as some startups with competing services are now being starved of cash by a global venture-capital crunch. Lastly there is Air India, the perennially troubled flag carrier. Before you wince, consider its selling point: it owns international slots for a huge aviation market, was bought from the state for a meagre $350m, debt-free, and can be merged with Vistara, a domestic airline joint-venture Tata has with Singapore Airlines. The idea is to create a powerful national airline like Emirates or Lufthansa, which India has always lacked. Press reports suggest that Tata may soon buy 300 new aircraft. These bets could sour. Tata is doubling down on being a conglomerate, opting for geographic concentration but sectoral diversification. In India, and many emerging economies, conglomerates have advantages: brand presence, clout with regulators, shared access to scarce land. But they bring complexity: Tata’s holding company has over 30 big business and 286 legal subsidiaries and Mr Chandrasekaran is on the board of seven listed firms. Though Tata is huge, it lacks global scale in individual industries. Its $1bn bet on electronics is equivalent to 8% of the capital of Foxconn, the leading contract manufacturer: it must deploy much more cash to truly compete. The $5bn investment in batteries amounts to 40% of the plant of catl, the top Chinese firm. In India Reliance’s two main specialisms, in 5g, and petrochemicals and refining, each has double the capital of Tata’s largest subsidiaries. A lack of focus could make technical breakthroughs harder. The boss of a big chipmaker is sceptical that India can build a globally competitive fab: “It’s too soon.”Another risk is Tata’s ownership. It has three layers. At the top are self-governing charitable trusts that together own 66% of Tata Sons. They are chaired by Mr Tata, with other venerable directors. They are asset-rich—together they are worth $100bn, more than the Gates Foundation—but income-poor, getting dividends equivalent to under 1% of the group’s operating profits. Below them is Tata Sons, the middle layer, which Mr Chandrasekaran runs and which has stakes in the operating companies, the third layer. Instability could come a number of sources. The death of Mr Mistry, and of his father in June, may lead to a reappraisal by his family of their 18% stake in Tata Sons. They have the right to sell the stake to the company, which would force it to scramble to raise $27bn of cash to finance the purchase. Mr Tata himself is 84 and, though still mentally sharp, physically frail. When he retires from the trusts, as is likely, it is unclear who will inherit the de facto leadership of the trust boards. The hope is that a consensus forms, or a strong and respectable candidate emerges who doesn’t meddle in the business. The nightmare scenario is a power struggle, or someone cosy with the government gaining sway.The final risk is the government. The prime minister’s critics fear that he is presiding over crony capitalism, pointing to exhibit “two As”. Some of this is over the top. India’s business scene is slightly less concentrated than America’s: the four biggest groups have operating profits of 1.1% of gdp, compared with 1.2% in America. Unlike classic rent-seeking firms, India’s giants are reinvesting furiously. But even Tata, which considers itself aloof from politics, has paid symbolic homage to Mr Modi’s populist nationalism. In 2019 Mr Tata visited the headquarters of the rss, the Hindu-chauvinist association that backs Mr Modi. In the same year Mr Modi attended the launch of a book by Mr Chandrasekaran. The Tata charities are also working more closely with the state, for example on hospitals. And Tata is participating in India’s $26bn manufacturing-subsidy scheme (though it insists the handouts are too small to swing investment decisions). For the time being Mr Modi’s firm hold on power and vision for the economy are tailwinds. But that could change. Unlike the chaebol which made South Korea rich by exposing the country to global competition through export markets, some of India’s big firms are eyeing the domestic market only. They could become too cosy or corrupt. As a handful of giants diversify at home they will increasingly overlap, as they already do in renewable energy. When all that happens, can Tata be sure of equitable treatment? And when some of Tata’s new bets fail, as some surely will, can it be sure it can exit even if that deprives India of a presence in an industry the government regards as “strategic”? Some of the reasons for Mr Tata’s wariness of investing in India in the 2000s still hold. Deploying tens of billions of dollars at home is a risky game. If it works, though, Tata and others may finally industrialise and digitise India, turning it into a source of innovation and manufacturing for Indians and the world. To see which way the country goes, follow Tata. ■ More

In a book from 1945 entitled “Germany Is Our Problem”, Henry Morgenthau, America’s treasury secretary, presented a proposal to strip post-war Germany of its industry and turn it into an agricultural economy. Though his radical proposal had some influence on Allied plans for the occupation of Germany after Hitler’s defeat, it was never implemented. Almost 80 years later Vladimir Putin might achieve some of what Morgenthau, whose parents were both born in Germany, had in mind. By weaponising the natural gas on which Germany’s mighty industrial base relies, the Russian president is eating away at the world’s fourth-biggest economy and its third-biggest exporter of goods. It doesn’t help that at the same time, Germany’s largest trading partner, China, which bought €100bn ($101bn) of Germany goods last year, including cars, medical equipment and chemicals, is in the midst of a severe slowdown, too. A national business model built in part on cheap energy from one autocracy and abundant demand from another faces a severe test.The consequences could be dire for Deutschland ag: German blue chips have suffered more amid this year’s market turmoil than counterparts elsewhere, dropping 27% year to date in dollar terms, almost twice the fall in Britain’s ftse 100 or America’s s&p 500 index. “The substance of our industry is under threat,” warned Siegfried Russwurm, boss of the bdi, the association of German industry, last month. The situation was looking “toxic” for many businesses, he said. And through globalised supply chains the poison could spread to the rest of the industrialised world, which relies heavily on German manufacturers.German industry’s biggest problem is the spiralling cost of energy. The electricity price for next year has already increased 15-fold, and the price of gas ten-fold, says the bdi. In July industry consumed 21% less gas than in the same month last year. That is not because companies used energy more efficiently. Rather, the fall was due to a “dramatic” reduction in output. Since June the Kiel Institute for the World Economy, a think-tank, has revised down its forecast of gdp growth in 2022 by 0.7 percentage points, to 1.4%. It now expects the economy to contract in 2023 and inflation to exceed this year’s with 8.7%. Smaller firms are hardest hit. According to a survey in July fti Andersch, a consultancy, of 100 medium-sized “pocket multinationals” of Germany’s Mittelstand, smaller companies are struggling more than bigger ones. Almost a quarter of firms with fewer than 1,000 employees have cancelled or declined orders or are planning to do so, compared with 11% of those with more than 1,000 staff. In the land of more than 3,000 types of bread, around 10,000 bread producers are struggling as never before in post-war Germany. They need electricity and gas to heat ovens and run kneading machines, even as they contend with the higher costs of flour, butter and sugar, as well as of bakers. A shop assistant at the 127-year-old Wiedemann chain of bakeries in Berlin reports that the firm is desperately short-staffed and trying to save energy by, for instance, keeping outlet ovens cool and baking all the loaves at headquarters.Another recent survey, by the bdi, More