The race for electric vehicle supremacy

This is an audio transcript of the FT News Briefing podcast episode: The race for electric vehicle supremacy

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, July 6th, and this is your FT News Briefing.

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Marc Filippino
Boris Johnson lost several high-profile members of his cabinet yesterday. Oil prices had their biggest drop since March. And China wants to dominate the global industry for electric vehicle batteries.

Edward White
The amount of money that the Chinese companies are spending (just) and rising just in a matter of weeks really overshadows what everyone else is doing.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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Marc Filippino
Several key members of Boris Johnson’s cabinet quit yesterday. UK health secretary Sajid Javid and chancellor Rishi Sunak resigned within minutes of one another, and Alex Chalk, the solicitor-general, said a few hours later that he was out too. Conservative lawmakers worry that even more ministers will leave and that this could be the beginning of the end for the prime minister. I’m joined now by the FT’s political editor, George Parker. George, Javid and Sunak are really high-profile names. Do we know why they resigned yesterday?

George Parker
Well, it certainly came as a surprise that two old friends, they claim their resignations weren’t co-ordinated, but nobody really believes that. And once they resigned, well I mean, there was a clear common denominator, which was both Sunak and Javid believe the prime minister was leading the country in the wrong direction, that there was an undercurrent of dishonesty, I think, about the prime minister which angered both those ministers. And on top of that, I think there was also a sense from Rishi Sunak, the chancellor, that Boris Johnson well wanted to take the country in a different direction economically to the one that he favoured. Rishi Sunak has been someone who describes himself as a fiscal conservative. He wants to make the books balanced. He’s been prepared to put up taxes to make the books balanced. Whereas Boris Johnson’s been chafing at the bit to try to start cutting taxes to the delight he thinks of Tory rightwingers. The danger from Rishi Sunak’s point of view, of course, is that if you start cutting taxes in the middle of an inflationary crisis, you end up just pouring fuel on the fire.

Marc Filippino
Now Tory MPs think this could actually signal the end for Boris Johnson. How come?

George Parker
Well, the one thing that Boris Johnson has feared over the last few weeks as doubts have grown about his leadership, is the prospect of a rebellion by the Cabinet. But I’m not sure whether this downfall will be swift, and I can be absolutely certain it will be a messy affair because Boris Johnson will not leave Downing Street unless he’s dragged kicking and screaming out of it. There’s no way Boris Johnson will resign in the interest of the party or indeed of the country. He will cling on to power for as long as he possibly can. So Boris Johnson’s facing a tough time ahead. Uncertainty about the future of ministers in his government are more than gonna resign, the possibility of a revolt by the parliamentary party. And on Wednesday, he faces two very tough interrogations. The first, the prime minister’s question time in the House of Commons followed shortly afterwards by a marathon performance in front of senior MPs at the so-called Liaison Committee, where his leadership and his relationship to the truth are bound to come up.

Marc Filippino
George Parker is the FT’s political editor.

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Marc Filippino
Recession fears gripped the oil market yesterday and prices plummeted. Brent crude dropped almost 10 per cent. It’s a sharp turnaround from the spikes we’ve seen in the oil market after Russia invaded Ukraine. But they’ve slipped as investors grow more concerned that a recession could drive down demand. Yesterday’s fall in the oil prices also hit oil companies. ExxonMobil’s stock price ended down more than three per cent and Shell’s share price lost about eight and a half per cent. Tesla is no longer the world’s biggest electric vehicle maker in terms of sales. Elon Musk’s car company was just dethroned by the Chinese carmaker BYD. BYD is backed by US holdings conglomerate Berkshire Hathaway, and its sales exploded in the first half of this year. It outsold Tesla by about 80,000 vehicles. But China doesn’t want to just dominate in electric vehicles. The country already leads in the global market for EV batteries, and Chinese companies hope to cement that lead by amassing a war chest of funding.

Edward White
So we’re talking about in the order of $10bn for just three companies doing three capital raises over the coming weeks.

Marc Filippino
That’s the FT’s China correspondent Ed White.

Edward White
Why it’s kind of significant at the moment is because when you look at what governments around the world are doing, so in particular the US, but also Australia and Europe, they’re trying to get involved in this industry and they’re spending hundreds of millions of dollars and that’s being seen as really important because it’s trying to help supply chains outside of China catch up, trying to build plants in other parts of the world. But the amount of money that the Chinese companies are spending (just) and raising just in a matter of weeks really overshadows what everyone else is doing.

Marc Filippino
So Ed, I got to ask, western countries are also supposedly really concerned about climate change. It’s something we talk a lot about on the show. So why wouldn’t western countries want to see Chinese electric vehicle companies succeed?

Edward White
It’s absolutely a valid point. There’s a real paradox here where on the one hand you have people like John Kerry, the US president’s climate envoy, pushing China to do more on climate change. And here you have China leading by a country mile. This global industry that’s gonna be so critical to lowering emissions from the transport industry, and yet people are up in arms about how far ahead China has got in this space. And that reflects just a massively changing global environment where countries from the US to the UK all across Europe, into other parts of Asia and other parts of the world, everyone has become hugely fearful of losing a technology race to the Chinese Communist party and companies that are under the Chinese Communist party’s control.

Marc Filippino
What are other global companies doing to try to catch up to China?

Edward White
What we’ve seen really is something of an awakening, I suppose, in the last year or two where countries have had a look at not just who the EV battery producers are, but the entire supply chain. For instance, South Korean battery makers and carmakers. They are looking to actually try and take equity stakes in resource projects. And so that is a really big change for a you know, your traditional carmaker, which has just had its factories and had all the components and parts come to it. They’re now realising that they actually need to do more to kind of take control of their supply chain and try and wean themselves off this China dependence. And then the other thing that we’re seeing, which I think is really, really important, which is this idea that you’re going to have some sort of cross-border carbon adjustment. So, for instance, if you’re in Europe, in the US and you think, OK, we’ve got batteries being produced here that are more expensive than China, but over in China they’re burning a lot of coal and using fossil fuels to make those batteries. Maybe if we put a price on the, on the cost of the carbon that they’re producing, maybe that will make our products cheaper compared to the Chinese. That’s a long way off, but it is something that I think could at least gather pace in terms of conversations in the US and Europe in the coming months and years.

Marc Filippino
Ed White is the FT’s China correspondent.

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Marc Filippino
If you ever thought about investing in the Church of England, the church’s main investment foundation for the first time ever is about to issue bonds. The charity already has £10bn in assets, and it’s hoping to raise around 500mn in two separate blocks. It’s supposed to support ongoing activities and investment. The debt plan is being called Project Cranmer. That’s after the 16th-century Archbishop of Canterbury, Thomas Cranmer, who helped lead the Church of England’s breakaway from the Roman Catholic Church.

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Marc Filippino
Before we go, we want to hear from listeners who moved to a new location after their employer allowed them to work remotely. Please send us a voice memo about why you moved, where you moved from and where you moved to, and what your life is like now. Send it to marc.filippino@ft.com. We’ll leave that email in the show notes and we might just feature you in an upcoming episode. Thanks. You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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