Philippa Kaur

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IN RECENT MONTHS Tesla has had a bumpy ride. In January the electric-vehicle (EV) pioneer warned that growth would be “notably lower” this year, as motorists’ enthusiasm for battery power loses charge. The same month it had to suspend most production at its giant factory near Berlin because of supply disruptions caused by turmoil in the Red Sea. Its market share in China, the world’s biggest EV market, is falling as it fends off cheaper local competition, especially from BYD, which late last year briefly eclipsed Tesla as the world’s biggest EV-maker.Tesla hit another big pothole on April 2nd, when it reported that it had delivered fewer than 390,000 cars in the first quarter. That was down by 8.5% from a year ago—and considerably worse than already cautious Wall Street analysts were expecting. Tesla’s market value has slumped by a third this year, to less than $550bn. That is still more than any other carmaker but a far cry from the $1.2trn it was worth in 2021. Its boss, Elon Musk, is now only the world’s third-richest man.If you think the billionaire and his firm are having a rough time, spare a thought for their once-white-hot imitators. Three years ago, as Mr Musk showed that EV-making could be a trillion-dollar business, investors scrambled to back the newcomers promising to be the next Tesla. Two American startups that had gone public earlier that year were accelerating as briskly as their cars. The market capitalisation of Lucid Motors, founded in 2007, exceeded $90bn; that of Rivian, created two years later, hit around $150bn. Each was worth more than Ford, which was nearly 120 years old and sold 4m vehicles in 2021, compared with 125 for Lucid and 920 for Rivian. Chinese rivals such as Li Auto (founded in 2015), Nio and Xpeng (both in 2014) were also valued richly. In late 2021 the combined market value of six prominent Tesla wannabes hit a stonking $400bn.Chart: The EconomistToday the six are worth $65bn, and falling (see chart). Fisker, an eight-year-old American firm, and HiPhi, a five-year-old Chinese one, have paused production. On March 25th a crumbling share price caused the trading of Fisker’s shares to be suspended and the firm may soon be delisted. HiPhi may be looking to sell itself to a big established Chinese carmaker. Faraday Future, which sold barely 11 of its upmarket EVs last year, is teetering on the brink of bankruptcy. Lordstown, an American startup founded in 2018 to make electric pickups and SUVs, went bust in 2023. Even somewhat sturdier firms are struggling. VinFast, a Vietnamese firm which was set up in 2017 and went public last year, briefly—and bafflingly—almost touched $190bn in market value last August. It sold 35,000 EVs in 2023 and is now worth $11bn. Rivian sold 50,000 and is worth a fifteenth of its peak in 2021. Lucid sold 6,000 and is also worth one-fifteenth. Li Auto, Leapmotor, Nio and Xpeng, which delivered over 800,000 cars between them last year, have also seen their share prices shrivel. Only Li turns a profit, mostly because it manufactures nothing but hybrid vehicles; its market value plunged recently after it revealed its first pure EV. Surviving—let alone thriving—in what was meant to be a brave new electric world is proving tough. Which Tesla wannabes, if any, will make it?It was all meant to be different. Making money from internal combustion engines, whose thousands of moving parts drove up complexity and costs, required carmakers to churn out large volumes. In contrast, the new economics of battery power was supposed to bring down barriers to entry. The electric upstarts, apeing Tesla by styling themselves as tech firms rather than manufacturers, reckoned they could keep costs in check by using simpler designs and reimagining the production process in a way stodgy incumbents could not. Components such as batteries and electric motors can be bought off the shelf, leaving the EV-makers to focus on developing whizzy software that would allow their vehicles to stand out thanks to a better in-car experience, from infotainment to mood lighting. Some companies, like Fisker, simply outsourced the metal-bending.These advantages have, however, failed to outweigh the old-school need for critical mass. Turning a profit from cars still requires producing perhaps 500,000 vehicles a year. “Scale is vital and manufacturing is hard,” sums up Tu Le of Sino Auto Insights, a consultancy. Though Tesla began as a luxury marque, putting big and pricey batteries in big and pricey cars, it always eyed the mass market. Profits started streaming in only once it overcame the near-death experience— “production hell”, in Mr Musk’s words—of trying to churn out high numbers of its cheaper Model 3.The Tesla wannabes, for their part, have taken too long to start production and are now taking too long to launch new models, says Pedro Pacheco of Gartner, a consultancy. The chances of survival by serving only a high-margin high-price niche are low, notes Philippe Houchois of Jefferies, an investment bank. Just look at the possibly futureless Faraday Future, whose models start at $250,000.The electric insurgents are waking up to the reality. Their first step is to look downmarket. On March 7th Rivian announced three less expensive models that will start arriving in 2026. Last year Xpeng signed a deal with Didi Global, a Chinese ride-hailing giant, to make cheaper cars and forged a partnership with Volkswagen to make mass-market EVs for China. Nio plans to launch two affordable sub-brands, Alps and Firefly. Even Lucid, whose cars go for as much as $250,000, plans to launch somewhat less exclusive $50,000 models within a few years. In October Leapmotor sold a 20% stake to Stellantis, a mass-market behemoth whose marques include Citroën, Chrysler, Fiat and Peugeot (and whose largest shareholder part-owns The Economist’s parent company), for $1.6bn. The pair will team up to make EVs.To succeed, these efforts must still produce a competitive product with unique features. Tesla pulled it off by putting technology first. The result was a desirable EV that wasn’t cheap but offered a svelte look and decent range; the legacy industry’s earlier attempts, such as the Nissan Leaf, were expensive but also ugly and short of juice. Despite a strong tech focus like Tesla, most startups have failed to deliver unique products at competitive cost, as they continue to lack scale, says Patrick Hummel of UBS, a bank. Now the novelty of clever EV technology “has worn off”, adds Becrom Basu of LEK, another consultancy. Good range and other once-cutting-edge tech is considered table stakes, including for incumbent carmakers with considerably beefier manufacturing chops.As a result, many of the EV entrants lack unique selling features. The cars made by Rivian and Lucid are technologically unremarkable. Their good looks alone do not justify the hefty price tag. Rivian’s cheapest electric pickup costs around $70,000, half as much again as Ford’s F-150 Lightning without offering one-and-a-half as much car. In Europe the Lucid Air, a luxury saloon, is significantly pricier than comparable electric BMWs or Mercedes. Fisker’s mass-market EVs are also well designed but still cost more than Chinese rivals with similar features, partly because its asset-light outsourcing strategy does not work well for cheaper cars. Why anyone would buy a VinFast remains a mystery; reviews of its VF8 SUV were damning, to put it charitably.With demand for their products tepid many of the companies need more capital to keep going. On March 25th Lucid said it had managed to wangle another $1bn from its biggest investor, Saudi Arabia’s sovereign-wealth fund. Many rivals are not so lucky. Rivian had $9.4bn in net cash at the end of 2023 but will need billions more to build its cheaper models. Gone are the days when moneymen would throw treasure at any firm with a plausible PowerPoint presentation and an artist’s impression of a sleek electric car. Having put up billions of dollars in the years leading up to 2021, only to see billions torched, they look askance at missed deadlines, disappointing new models and ever receding prospects of profits. Their second thoughts have not been dispelled by the recent slowdown in growth of EV sales in many countries. Incumbent carmakers have no interest in rescuing the insurgents. Mr Hummel of UBS thinks that most of the startups will simply disappear.The likeliest to survive are the Chinese. One reason is that they appear to be the most innovative of the bunch. Nio’s upmarket EVs come with the option of battery swapping and, in China at least, a vast network of stations to do it. Drivers can be on their way in minutes without getting out of the car. Bernstein, a broker, considers Xpeng one of the leaders in autonomous-driving technology.They are also a relative bargain compared with their Western rivals. Both Nio and Xpeng, as well as Li Auto, have benefited from an impressive battery supply chain, dominated by Chinese firms like CATL, and steadfast support from central and local governments, notes Mr Le. That in turn has allowed the Chinese companies to keep both their costs and their prices down. The result has been rapid uptake of EVs in their giant domestic market, and with it greater economies of scale.And another wave of carmaking disruption may be swelling in China, courtesy of Chinese big tech. In 2021 Seres, an established Chinese car company, and Huawei, the closest thing China has to a national tech champion, jointly launched AITO, a new brand dripping with fancy tech. In January the venture delivered 33,000 cars. On March 28th Xiaomi, which has hitherto made mostly smartphones, launched its first SUV. The car, made by BAIC, a state-owned car giant, and costing as little as $30,000, attracted 90,000 orders in 24 hours.Xiaomi aims to take on, at least in China, both Tesla and BYD. Alibaba, China’s e-commerce behemoth, and SAIC, another big state-owned carmaker, have been producing cars together for two years and sold 38,000 last year. Foxconn, a Taiwanese contract manufacturer better known for assembling iPhones for Apple, many of them in China, aspires to build half the world’s EVs for its own brand or others. If Tesla and any other survivors of the current EV shake-out thought they could catch a breath, they should think again. ■ More

THE MOON will not start to move between Earth and the sun until the morning of April 8th. But the business impact of this month’s total solar eclipse, which starts over the Pacific Ocean, cuts a path across North America and ends in the Atlantic, is already plain to see. According to Jamie Lane of AirDNA, a travel-data firm, on a typical Sunday night in April around 30% of homes listed for short-term rental on Airbnb or Vrbo in areas in or around the eclipse’s path are occupied. A remarkable 92% of listings within the zone of totality have been booked for April 7th. Demand for homes just a few towns outside this roughly 180km-wide strip has barely changed.The eclipse will be visible from a handful of big or biggish cities, including Dallas, Indianapolis, Cleveland, Buffalo and Montreal. CoStar, a hotel-data provider, reckons that occupancy rates in those places are up anywhere from 12 percentage points (in Montreal) to 67 (in Indianapolis). The remaining rooms appear to be available only at elevated prices. The New York Times reports that nearly half of Super 8 motels in the eclipse’s path with rooms still available are charging at least twice the standard rate.Yet this path mostly covers areas with relatively scant lodging inventory. Of the 92,000 American short-term listings in this zone—just over 5% of the 1.6m in the United States as a whole—85,000 have been reserved for April 7th, compared with just 20,000 for the following Sunday. In theory, owners of short-term rental homes should have been able to jack up prices just like hoteliers, particularly in places with few hotel rooms.However, few Airbnb hosts run their properties with a hotel manager’s business acumen. AirDNA’s numbers show that in cities like Dallas and Niagara Falls, the majority of reservations for April 6th, 7th and 8th were made more than two months ago—far earlier than is typical. Savvy guests pounced on the standard prices on offer before hosts realised that they could raise them and still secure bookings. The average booking on April 7th went for $269, only slightly above the $245 level for April 14th. Combining the 65,000 additional bookings with a 10% increase in the nightly rate suggests that Airbnb and Vrbo hosts will receive a total revenue bump of merely $18m. Even counting the days before and after the peak of demand, when occupancy rates also exceed 80%, only brings the cumulative additional turnover to a total of $44m.The American hosts—and the digital platforms that live off commissions on such rentals—missed a trick, in other words. Unfortunately for both groups, they will not have another chance to learn from their mistake for a while. Alaskans have to wait until 2033 until the next total eclipse, North Dakotans and Montanans until 2044, and Floridians, tourist-friendlier providers of accommodation, until 2045. ■ More

Rule 1. The fire drill must never feel useful. It may be a proven way to help save people’s lives, to say nothing of being a legal requirement in many workplaces. But it is important that people experience the exercise only as an inconvenience. The drill should take place when people are up against a deadline. It must not be timed to coincide with a long meeting, when it might come as a bit of a relief. Ideally, it should be pouring with rain. The drill can be counted a success only if enough people are rolling their eyes and muttering to themselves. (The sixth rule is essential to achieving this outcome, too.)Rule 2. Remember that the drill is not really a drill but an exercise in begrudging consensus. When the alarm sounds, people must never just get up and leave. They must first satisfy themselves that this is not a mistake. Someone might have pressed the wrong button; that voice might yet drone “This is a test” and for once people will feel grateful.They must then see other employees getting ready to leave. This stage involves people bobbing up and down at their desks like demented meerkats to see what their colleagues are doing. When it is clear that this is indeed a drill, people must then spend inordinate amounts of time deciding what things to take with them. What’s the weather like? Should they take the laptop? Where did they put their reusable coffee flask? Should they pack a suitcase? The one thing they must not have as they leave is any sense of urgency.Rule 3. This stage of the drill is when the fire wardens must show themselves. Only the wardens can accelerate the speed of departure from the building. This secretive group is the Opus Dei of the office but with a bit less of the fervour or sense of menace. The fire wardens have often been in the role for years; no one knows how they got the job or how to apply. They hide in plain sight: there may well be sepia photos of their younger selves on the office wall, next to an even more obscure sect known only as the “first-aiders”. The wardens reveal themselves during a drill by putting on high-visibility jackets, which instantly confer on them a mysterious authority. The cabal is never seen together at other times.Rule 4. The fire drill will produce a sense of belonging. That is because a drill will suddenly expose you to everyone who works in your building. In the normal course of events, you might briefly share a lift with people from other companies or other departments. You might glimpse their offices as the doors open and close and think how soulless they look. (They will think the same of yours.) But you never realise how outnumbered you are.In a drill, however, strangers surround you. Stairwells fill with people, most of them also weighed down by coats, laptops and reusable coffee flasks. They spiral down below you on the way out and form long queues by the lifts on the way back. You will suddenly feel grateful for the comfort of any recognisable face. You spot someone from legal you think may be called Keith and say hello. You have never given him any thought before; in this moment of grave non-peril he is like family.Rule 5. The assembly area is not so much a designated spot as a place of people’s choosing within a ten-minute walk of your building. Your employer might have specified a place for employees to gather. They may have given it militaristic names like the “primary muster point” or the “tertiary evacuation zone”. No one else will have the faintest idea where it is. A clump of people will mill about as close to the site of the notional blaze as possible. Another group will scatter in various directions in search of a coffee or an early lunch. If they walk purposefully enough, other people will assume they know where the assembly area is and follow them. As a result most of the office may accidentally end up at Starbucks.Rule 6. Confusingly also known as the first and second rules of fire drill, you must never talk about fire drill. At some point word will spread that the drill is over and people will start to drift back to the office. Once they have returned to their desks, everyone must act as though the whole thing never happened. There must never be any reference to how it went or whether any safety lessons were learned. The fire wardens must fold away their high-viz jackets and settle back into the shadows. The work you were doing must simply be picked up where it was left. You will not speak to Keith from legal again. But you do know not to use the lifts if there is a real emergency.■Read more from Bartleby, our columnist on management and work:The pros and cons of corporate uniforms (Mar 27th)The secret to career success may well be off to the side (Mar 21st)Every location has got worse for getting actual work done (Mar 13th)Also: How the Bartleby column got its name More

“TEXAS IS AN El Dorado for us, an energy El Dorado,” declared Patrick Pouyanné, boss of TotalEnergies, last month at CERAWeek, the energy industry’s annual shindig in Houston. He unveiled an expansion of the French supermajor’s shale holdings in the south of the state, a deal intended to bolster its position as the leading exporter of American liquefied natural gas. It had earlier bought three Texan gas-fired power plants and opened a new electricity-trading desk in Houston. Meanwhile in Brazoria, a windswept county an hour’s drive from the city, it has built a solar park capable of producing 380 megawatts (MW) of clean power, and of stashing some of the resulting joules in a bank of lithium-ion batteries made by Saft, its energy-storage arm. Hundreds of sheep and the odd gazelle graze among 700,000 photovoltaic panels on its 2,300 acres (930 hectares), with not a nodding donkey in sight. “You love energy here in all forms, from gas to renewables,” Mr Pouyanné told the oilmen at the Houston gabfest.This ecumenical strategy is TotalEnergies’ attempt to bridge its industry’s transatlantic divide when it comes to the energy transition. The French firm’s big European rivals, BP and Shell, invested heavily in “electrons” businesses like wind and solar energy—until weak returns and sagging share prices forced them into embarrassing U-turns. Its American counterparts, ExxonMobil and Chevron, have instead doubled down on oil and gas, while backing “clean-molecule” businesses like hydrogen and carbon capture—and have been rewarded with higher valuations.Chart: The EconomistMr Pouyanné thinks he can straddle both worlds. His firm will continue to invest in “System A”, as he calls the oil and gas that the world still needs. Examples include its recent hydrocarbon projects in Brazil, Suriname, Namibia and the United Arab Emirates. Here Mr Pouyanné’s imperatives are reducing the amount of carbon released in extracting the crude and, critically, slashing production costs, down to “less than $20 a barrel”, he says. If barrels keep trading for around $90, this should spin out plenty of cash to invest in “System B”, the low-carbon business that needs to grow fast if global climate goals are to be met. TotalEnergies has or is building some 5,000MW of clean-power capacity in Texas alone, making it one of America’s biggest backers of such ventures. It plans to devote 30% of its capital spending, or around $5bn a year globally, to low-carbon electricity, twice as much as a typical major. By 2030 it wants to produce over 100 terawatt-hours annually, enough to light up Arizona. Perhaps a quarter of those terawatt-hours would be generated in America.What makes TotalEnergies’ green plans distinctive is that it has found a way to make good money from them. Last year its return on capital was nearly 20%, higher than all its big rivals (see chart 1). As a result, since 2019 its shareholders have enjoyed a total stockmarket return, including dividends, of nearly 80%, roughly in line with Chevron’s and around twice those of BP and Shell (see chart 2).Chart: The EconomistOne big reason renewable energy suffers in the marketplace is intermittency. In time lots more grid-scale batteries like those installed in Brazoria will cleanly complement its wind and solar. Until then TotalEnergies will use gas turbines as “flexible” backup to manage windless days and sunless nights. A big chunk of the profits from its low-carbon-electricity business last year came courtesy of those gassy “flexible-generation” assets.The dual strategy is a byproduct of TotalEnergies’ history. CFP, in its original French acronym, was founded 100 years ago to ensure France’s energy independence. Initially that involved drilling for hydrocarbons in Iraq. This profitable business ended when the Iraqi oil industry was nationalised in 1972. In 2021 the company returned to Iraq in a spectacular way by securing the lead role in a $27bn energy project. Mr Pouyanné thinks it edged out competitors because it offered financial and technical assistance to help Iraq generate electricity using gas that would otherwise be flared, as well as building 1,000MW of solar power. A similar approach has found favour in Libya, Mozambique and other countries with plentiful hydrocarbons and pitiful power sectors. Now, amid the energy transition, it is gaining ground even in places like America.Some climate campaigners question this strategy. They see gas, which burns more cleanly than oil or coal, not as a bridge to a greener future but a fossil cul-de-sac. TotalEnergies’ capital-spending plans suggest that view is too cynical. Of its $5bn in annual investments in low-carbon energy, 93% is going to renewables and just 7% to gas. By 2028 flexible generation’s share of profits is expected to fall to a quarter, as a surging System B begins to match, and then surpass, a shrinking System A. By 2050 only 25% of TotalEnergies’ sales will derive from oil and gas, according to the company’s climate plan, down from 90% today. The firm envisages that electricity generation and renewables will make up half its revenues, with hydrogen and renewable biofuels making up the rest. Between now and then it will try to prove that profits and the planet need not be at odds—even for an oil major. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More