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Gripes over electric car tax credit as Biden visits Detroit show

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US President Joe Biden arrives at the groundbreaking of the new Intel semiconductor manufacturing facility
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Fresh off of recent legislative triumphs aimed at supporting US manufacturing, President Joe Biden is set for an upbeat appearance Wednesday at the first Detroit Auto Show since the pandemic.

After months of inaction in Congress, Biden capped the summer by signing into law major new investments in semiconductor production and combatting climate change, lending the US president’s Democratic Party some momentum heading into the November midterm elections.

But not far below the celebratory surface, the auto industry is grumbling over a change in the consumer EV tax credit policy that industry officials warn could slow the transition to emission-free vehicles.

At issue are sourcing requirements in the recently passed Inflation Reduction Act meant to prod automakers into using EV batteries produced in North America as well as critical materials sourced from North America or countries with which the United States has a free trade agreement.

The restrictions come as Washington seeks to wean its economic dependence on Russia and China, and as pandemic-induced shortages underscored the vulnerability of having far-flung supply chains.

But auto industry officials and EV experts worry the measure — which affects a consumer tax credit of up to $7,500 on EVs — will slow their adoption in the United States.

“You’re going to see a stalling in the rate of growth,” said John Eichberger, executive director of the Fuels Institute, a nonprofit research group which is funded by a range of energy and transportation companies but does not engage in policy advocacy.

– ‘Missed opportunity’ –

A self-professed “car guy,” Biden has made previous presidential visits to tour General Motors and Ford plants in Michigan — a key electoral swing state.

Biden’s appearance Wednesday at the Detroit Auto Show lends some shine to the revived event following a three-year pandemic hiatus.

Since the last show in 2019, Detroit’s “Big 3” — GM, Ford and Chrysler (now called Stellantis) — have announced tens of billions of dollars in EV investment and unveiled numerous new offerings.

Last Thursday, GM unveiled the Equinox EV, a model with a starting price of $30,000, less than half the average price of EVs now available in the market.

On the same day, Stellantis brand Jeep showed images of two new electric SUVs and confirmed that its all-electric SUV for Europe would launch in 2023. 

The arrival of EV versions of popular models like the Ford F-150 has meant that EV sales in the United States surged more than 66 percent in the second quarter compared with the period a year ago, according to Cox Automotive. 

EVs comprised 5.6 percent of the total US market, according to Cox.

Still, a meaningful transition to EVs from the internal combustion engine faces several challenges, including shortfalls of lithium and other key battery materials and doubts over consumer demand, in part because of lofty price tags — something the $7,500 tax credit aims to combat.

The Alliance for Automotive Innovation, a Washington trade group representing big automakers, highlighted fine print around the tax credit that it said would derail EV growth.

One of those is the requirement that automakers gradually increase minimum levels for choice materials through 2026.

The alliance praised tax credits in the bill for EV manufacturing plants, but said they were offset by the consumer provisions.

– ‘A bumpy road’ –

“Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive,” said John Bozzella, president of the lobby group.

“That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle,” he added.

Alan Amici, chief executive of the Center for Automotive Research in Ann Arbor, Michigan, said the industry sees economic benefits to sourcing locally in light of the issues that surfaced during the pandemic.

But it takes time to adjust supply chains, he said.

“The industry needs to figure that out,” said Amici, adding that companies are studying the measure and hoped Washington officials might show flexibility in implementing the policy.

Eichberger cited analysis showing that, in certain years, only a few EV models would qualify for the credit under the standard.

He warned that a leveling off or decline in EV sales in the next couple of years could kill momentum for a transition that remains at an early stage.

“It’s going to be a bumpy road, and this is another bump,” Eichberger said.

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Big Tech earnings expected as Meta share price skyrockets

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Meta CEO and founder Mark Zuckerberg said he was upbeat about the future of his company, despite a one percent fall in sales in 2022
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Tech giants Google, Apple and Amazon will report their latest results on Thursday as shares in Meta skyrocketed after the Facebook owner posted a smaller-than-expected slump in sales for 2022.

The results of the world’s biggest tech companies follow several weeks of unprecedented layoff rounds in the usually unassailable sector amid pessimism about the economic outlook.

The souring mood followed a long spell of outsized growth during the peak Covid-19 period when consumers went online for work, shopping and entertainment.

Meta as expected on Wednesday said sales fell last year, the first time that occurred on an annual basis since the company went public in 2012.

The social media giant said sales dropped one percent to $116.6 billion, while it also announced that the number of daily users on Facebook hit two billion for the first time.

But CEO and founder Mark Zuckerberg said he was upbeat about the future, pointing to the success of short videos and better delivery of ads after Apple made targeting users harder on the iPhone.

He also assured investors that Meta would take bolder decisions and run a much nimbler operation, hinting at more layoffs. 

Shares in Meta jumped as much as 25 percent on Thursday, setting the bar high for the earnings announcements by the other tech giants after markets closed later in the day.

Following in Meta’s wake, Google’s parent company is expected to also announce a slump in ad sales, which would be only the second quarterly fall in since the search engine giant went public in 2004.

Google, which has long seen itself as an innovation leader, was caught off guard by the sudden rise of user-friendly AI apps such as ChatGPT, which is seen as a potential rival to Google’s all-powerful search engine.

CEO Sundar Pichai last month announced a plan to lay off 12,000 people in order to reverse pandemic over-hiring and focus on new areas, especially artificial intelligence.

Apple is the only tech giant that has yet to announce major layoffs in recent weeks and investors will be taking a hard look at how its sales have been affected by China’s zero-Covid policy that was only recently lifted.

China remains the key manufacturing hub for iPhones and the drastic restrictions adversely affected Apple’s ability to export the iPhone 14 during the key holiday season.

Apple, the world’s biggest company in terms of market value, will also be burdened by a drop in smartphone sales worldwide, its key driver for profits.

According to the International Data Corporation, worldwide smartphone shipments declined 18.3 percent year-on-year to 300.3 million units in the fourth quarter of 2022.

Amazon is also expected to report a hit to sales after the company announced a round of layoffs to correct for a hiring binge during the pandemic when business growth ramped up.

Last month, the company said it would let go more than 18,000 employees after the workforce swelled by 800,000 employees during the peak years of the pandemic period. 

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Asian markets drift as weak tech earnings dent recovery optimism

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Investors will be keeping a close watch on the release of US jobs figures
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Asian equities were mixed Friday as the optimism over a possible pause in Federal Reserve interest rate hikes again gave way to worries about the global economy as more than a year of monetary tightening kicks in.

Disappointing earnings from Wall Street titans Apple, Amazon and Alphabet — who together are worth almost $5 trillion — indicated higher borrowing costs and elevated inflation were weighing on consumer demand.

The readings came in towards the end of a week when the stocks rally that defined most of January hit the barriers as traders worried that the buying had been overdone and that there were plenty more bumps in the road for the economy.

Those concerns also overshadowed optimism about China’s reopening and recovery from nearly three years of zero-Covid policies that hammered business activity.

They also offset the positive mood created by an acknowledgement from the Fed that it was making progress in bringing inflation down from multi-decade highs, fuelling hopes it was nearing the end of its rate hike cycle.

Eyes are now turning to the release of US jobs data later on Friday, which will provide a clearer idea about the state of the world’s biggest economy.

“A softer payrolls data, so long as it does not fall off a cliff triggering a recessionary (backlash), could re-engage all the favourite trades of the year,” said SPI Asset Management’s Stephen Innes.

“Not least, it would provide the most critical evidence to date to suggest that the market’s rates pricing is more in line with reality than the Fed’s own more subtly hawkish higher for longer signalling.”

Wall Street’s three main indexes ended broadly higher, with the Nasdaq piling on more than three percent thanks to forecast-beating results from Facebook owner Meta.

However, the after-hours reports from Apple, Amazon and Google’s parent firm Alphabet brought investors back down to earth.

Apple said sales dropped more than expected in October-December, Amazon’s revenue was hit by weak consumer demand and Alphabet results fell short of estimates.

“The war in Ukraine, inflationary pressures, economic uncertainty and macroeconomic headwinds kept the consumer sentiment weak in 2022 while smartphone users reduced the frequency of their purchases,” Harmeet Singh Walia, of Counterpoint Research, said in a report on Apple.

Hong Kong led losses in Asian trade, losing close to two percent, and Shanghai was off more than one percent. Taipei was also down, while Singapore, Seoul and Wellington were flat.

Still, Tokyo, Sydney, Manila and Jakarta rose.

Futures in the Nasdaq and S&P 500 were both deep in the red.

On currency markets, the euro and pound lost further ground after weakening Thursday despite the European Central Bank and the Bank of England hiking interest rates more than the Fed.

Crude prices ticked slightly higher a day after suffering more selling pressure on concerns about the economic outlook and demand, with US stockpiles rising last week more than expected.

“Oil’s in a bit of a limbo as the market awaits tangible signs of China’s oil demand recovery,” Vandana Hari, of Vanda Insights, said.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.4 percent at 27,518.75 (break)

Hong Kong – Hang Seng Index: DOWN 1.9 percent at 21,547.50

Shanghai – Composite: DOWN 1.2 percent at 3,245.90

Dollar/yen: UP at 128.67 yen from 128.62 yen on Thursday

Euro/dollar: DOWN at $1.0898 from $1.0918

Pound/dollar: DOWN at $1.2218 from $1.2225

Euro/pound: DOWN at 89.18 pence from 89.21 pence

West Texas Intermediate: UP 0.1 percent at $75.97 per barrel

Brent North Sea crude: UP 0.2 percent at $82.29 per barrel

New York – Dow: DOWN 0.1 percent at 34,053.94 (close)

London – FTSE 100: UP 0.8 percent at 7,820.16 (close)

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Mexico invites foreign investment in clean energy transition

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Aerial view of the largest solar energy project in all of Latin America, in Puerto Penasco, Sonora state, Mexico
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Mexico welcomes investment by all countries in its clean energy projects, its foreign minister said on Thursday, launching a diplomatic charm offensive amid international concerns over controversial power reforms.

Several dozen ambassadors were taken on a visit to a giant solar park being built in Puerto Penasco in the desert in northern Mexico using photovoltaic panels made in China.

“We want to invite all the countries of the world, all the companies of the world” to “participate, invest, be part of the future of Mexico,” Foreign Minister Marcelo Ebrard said.

The first phase of the solar plant is due to be inaugurated in April by President Andres Manuel Lopez Obrador, according to officials.

Once completed, the park will be able to supply 1.6 million electricity users, thanks to an estimated investment totaling $1.6 billion, according to state power provider CFE.

Mexico pledged at the COP27 climate talks in Egypt in November to strengthen its emissions-cutting efforts as part of a $48 billion renewable energy investment scheme with the United States.

The Latin American nation previously committed to cutting greenhouse gas emissions by 22 percent from the business-as-usual levels by 2030, but will increase that to 35 percent, Ebrard said at the time.

The Mexican-US collaboration in renewable power comes despite tensions between the neighbors over Lopez Obrador’s efforts to boost the state’s role in the energy sector.

Mexico faces a formal trade complaint from Washington and Ottawa, which say the reforms hurt foreign investors and favor polluting fossil fuels over clean energy.

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