Toyota... the world’s largest auto manufacturer by volume. The company’s annual revenues now account for roughly 8 per cent of Japan’s nominal GDP.
2. AI is supercharging weather forecasting, which has become very accurate over the years.
A committee under the Department of Consumer Affairs has designed a Repairability Index for the mobile and electronic sector based on six criteria: Disassembly depth, repair information, availability of spare parts within a reasonable timeline, software updates, tools, and fasteners (types and availability). A scorecard of a product would be asked to be displayed at the sales counter, on the e-commerce platform, or on the package itself. On May 2, Belgium became the second country in Europe after France to implement a Repairability Index. The Belgian index is mandatory for pressure washers and laptops (excluding tablets). It also assigns a score from 1 to 10 to products like dishwashers, vacuums, and lawnmowers, allowing buyers to make a conscious choice based on a product’s repairability. The country is also expected to extend the index to bicycles — especially electric ones — as well as electric scooters in the future.
4. What Tesla stands to lose from the Big Beautiful Bill?
The bill would eliminate tax credits of up to $7,500 for people who buy electric cars. It would quickly phase out subsidies for battery factories and lithium refineries, and end financial support for electric vehicle charging stations. The bill imposes an annual fee of $250 on electric vehicle owners that environmental groups say is punitive. Those measures would hurt all carmakers that sell electric vehicles. But the Trump administration and Republicans in Congress are also trying to kill regulations that are especially beneficial to Tesla. Those rules allow Tesla to sell clean air credits to other carmakers that fail to meet environmental standards. During the first three months of the year, Tesla sold regulatory credits worth $595 million, which was more than the company’s net profit of $409 million. In other words, without the credits, Tesla would have lost money...
The Republican measures would result in sales of 7.7 million fewer electric vehicles by 2030 than would be the case if Biden administration policies remained in place. Tesla would sell 3.4 million fewer electric vehicles, or almost two years’ worth of sales, assuming it maintained its current U.S. market share of 44 percent of all new electric cars sold. Republican legislation would also eliminate programs that subsidize the cost of large battery storage projects, which has been a growth business for Tesla.
More here
5. Vietnam's spectacular manufacturing success is not translating into much value addition and risks the middle income trap.
Annual foreign direct investment (FDI) reached $19bn in 2023. Foreign enterprises accounted for a fifth of GDP that year, up from 6% in 1995. The biggest is Samsung, whose complex in Pho Yen, a factory town near Hanoi, employs some 160,000 workers, who assemble the bulk of Samsung’s smartphones. The FDI boom, in turn, has produced a surge in exports, which have risen eight-fold since 2007, to $385bn a year. Foreign firms account for just 10% of employment and 16% of investment, but 72% of exports. Samsung alone accounts for 14%. Yet Vietnamese workers are simply assembling parts made, by and large, in China or South Korea. Even as export volumes have ballooned, the average unit value has stagnated. Vietnam adds less value to its exports than do nearby Malaysia and Thailand. Because final assembly is labour-intensive, productivity is low. Vietnam’s output per hour worked is 37% below the average for upper-middle-income countries in Asia. Over 90% of jobs in manufacturing require few or no skills...
Multinationals in Vietnam source the lowest share of local inputs of any country in East and South-East Asia. Despite Samsung Electronics’ huge presence in Vietnam, none of its core suppliers is a homegrown Vietnamese firm, noted a recent article in Guancha, a Chinese news outlet, that was widely read among the Vietnamese elite. The small number of Vietnamese firms that do supply global manufacturers mainly provide simpler materials, such as cardboard and plastics.Meanwhile, Vietnam has reached the “Lewis turning point”, at which developing economies exhaust their rural labour surpluses and wages begin to rise swiftly. Between 2014 and 2021, over 1m agricultural jobs disappeared each year despite a growing labour force; in 2022-23 the pace decelerated to 200,000. Labour costs in manufacturing are already higher than in India or Thailand and are set to climb by a further 48% by 2029, according to the Economist Intelligence Unit, our sister company. Vietnam could soon end up too expensive for labour-intensive manufacturing yet too technologically unsophisticated to do much else—a classic middle-income trap.
This low value addition is something India should guard against. This sounds impressive reform by President To Lam.
Mr Lam has been boldest. He has abolished five ministries and eliminated an entire layer of the bureaucracy, at the level of Vietnam’s 705 districts. He is reducing the number of provinces from 63 to 34. All this is eliminating 100,000 jobs from the civil service. He has decreed that there should be a 30% reduction in red tape. At the same time Mr Lam wants to build administrative capacity. He has called for higher pay for capable civil servants. Some of his changes seek to reverse the legacy of “blazing furnace”, an anti-corruption campaign initiated by his predecessor. Over 330,000 party members were prosecuted or punished and tens of thousands resigned. The effect was to make bureaucrats drastically risk-averse. Mr Lam has instead sought to engender an atmosphere of tolerance of mistakes.
6. China's EV dominance in two graphics. First, its share of major global markets
7. Important graphic about the changing perceptions about dollar safe haven status.
What we’ve been seeing in recent months, with interest rates and the dollar moving in opposite directions, doesn’t look like what we normally see in the United States, or for that matter advanced nations in general. Instead, it’s the kind of thing one sees in emerging markets, where big market moves often reflect crises of confidence: International investors lose faith, pulling their money out, and capital flight causes both a falling currency and rising interest rates.
8. Reshoring manufacturing to the US faces daunting challenges. For most products, manufacturing in the US is more costly than for its largest trading partners.
9. If the tariffs on China were intended to gain leverage in negotiating a trade deal for the US, then it appears to have handed back all that leverage with the two rounds of negotiations that have been held to date. It appears that China has succeeded in linking its restrictions on rare earth exports to the US's restrictions on high technology exports.
The US has accused China of not honouring its pledge in Geneva to ease restrictions on rare earths exports, which are critical to the defence, car and tech industries, and dragging its feet over approving licences for shipments, which has affected manufacturing supply chains in the US and Europe. Beijing has accused the US of “seriously violating” the Geneva agreement after it announced new restrictions on sales of chip design software to Chinese companies. It has also objected to the US issuing new warnings on global use of Huawei chips, and cancelling visas for Chinese students. On Monday, a senior White House official indicated that Trump could ease restrictions on selling chips to China if Beijing agreed to speed up the export of rare earths. That would amount to a significant policy shift from former president Joe Biden’s administration, which implemented what it called a “small yard, high fence” approach designed to restrict Beijing’s ability to obtain US technology that could be used to help its military.
Instead of building on President Biden's successes in restricting high-technology exports, President Trump appears to have allowed the Chinese to place on the negotiating table their easing in return for similar easing of their recently imposed export controls on rare earths. Here is Hal Brands,
China wants few things more than a relaxation of curbs on its access to high-end semiconductors; so do corporate players and analysts who argue that they do more harm than good. Although the details are hazy, the Trump administration reportedly agreed to lift some recent controls as part of a deal to deescalate the trade war. Let's hope the administration doesn't go much further than that. Ditching or dramatically rolling back the measures that preserve American's technological advantage — and that have been imposed, with bipartisan backing, over the past several years — would be strategic self-sabotage of the highest form.
The export controls at issue pertain to the most advanced computer chips and the inputs, both hardware and software, required to make them. During Trump’s first term, the US hit specific Chinese firms, namely Huawei, with targeted bans. Under President Joe Biden, Washington went big: It intensified the tech war by expanding their application to cover China as a whole. Since then, Washington and Beijing have been playing cat-and-mouse, as China has sought to evade tech controls while the US gradually tightens them... The goal, as then-National Security Adviser Jake Sullivan said in 2022, was to maintain “as large a lead as possible” in key sectors like AI and advanced computing, because those sectors will shape the future economic and military balance... if Trump's deal with Xi entails an agreement not to impose new export controls in the future, it will — thanks to the cat-and-mouse dynamic — severely erode America's ability to keep even its existing restrictions effective and up to date.
10. Samsung appears to have done a better strategy of geopolitical risk diversification than Apple.
A research by S&P Global shows that Samsung’s share of global final assembly volume of smartphones in India in 2024 was at 25 per cent compared to only 15 per cent of the Cupertino-based Apple Inc in the same period. For Samsung, its biggest exposure is smartphone assembly in Vietnam, which is more than double of India at 55 per cent, and Brazil is in the third spot at 12 per cent. These account for the top three assembly markets. In the case of Apple Inc, its exposure to different countries is very different — China still dominates with 83 per cent, a market from where Samsung had withdrawn assembly years ago in phases, preferring to shift to Vietnam and India. And apart from China and India, Apple has a small exposure of 2 per cent in Brazil and some other countries... one commonality in both Samsung and Apple is that they don’t assemble their phones in the US.
11. Are private credit and hedge funds the likely sources for the next financial crisis? TT Rammohan writes
The Economist says, “The five top players in private credit manage $1.9trn of credit assets across funds and insurance balance-sheets. Assets of the five biggest multi-manager hedge funds sit at $1.6trn, including huge leverage.” Moody’s Analytics warns that private credit’s linkages with banks and insurers could make it a “locus of contagion” in the next crisis. It warns that private credit could amplify a future financial crisis even if it’s not the source of one... after the GFC, bank ownership or sponsorship of hedge funds in the US has come to be heavily restricted under the Volcker Rule. Data on bank exposure to hedge funds in the US must be made public... Bank failure during the GFC was pervasive due to the combination of three factors: Excessive leverage, inadequate liquidity and mark-to-market losses on the proprietary trading book (and not losses on loan exposures). All three have come to be addressed by regulation. Banks are better capitalised. The Liquidity Coverage Ratio ensures that banks are better covered for liquidity. Stiffer capital requirements have discouraged proprietary trading. These measures may need to be augmented by bringing systemically important entities among hedge funds and private credit under the ambit of regulation if required. The Financial Stability Oversight Council in the US has the authority to do so.
12. Which is the world's largest packaged food company? JBS, a Brazilian company started in 1953, had revenues of $78 bn in 2024 with half its sales in the US.
13. The Print has a good article on Gujarat’s potato revolution
The growth of the fast-food industry and increasing consumer cravings for fries, hash browns, and ready-to-cook frozen products kicked off this change. Homegrown companies like HyFun, Falcon Agrifriz, Iscon Balaji, and McCain started investing in processing technologies and an expanding network of high-end cold chain facilities crystallised. Scientists did their part as well. The Central Potato Research Institute (CPRI), under the Indian Council of Agricultural Research (ICAR), developed varieties with low sugar and high dry matter—qualities that make for crispier fries that soak up less oil. Now, India is not only meeting its own demand but shipping frozen potato products internationally.
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