Happy Wednesday! 🐪

Programming note - the MFM will be off tomorrow and back on Friday!

📝 Focus

• 3 million BYDs in 2023 vs 2 million Teslas

📊 In the Markets

• Faster China Growth... and Lying Flat

• J&J, Goldman, BofA, Lockheed

📖 MoneyFitt Explains

🎓️ Domestic Product. Gross! (GDP)

📝 Focus

3 million BYDs in 2023 vs 2 million Teslas

Chinese automaker BYD said at the biennial Auto Shanghai that it aims to sell 3 million electric and hybrid vehicles in 2023, from 1.85mn last year. In perspective, Elon Musk maintains a global 2023 target of 2mn Teslas (with a 50% compounding growth rate thereafter), having ignited the EV price war in January. With the new CEO of Toyota calling it "a life or death situation", the world's largest carmaker is targeting annual sales of 1.5mn EVs a year... by... 2026. (In 2022 they sold just 24,000 EVs out of 5.1mn total shipments.)

..... ▷ To help get it there, BYD's introducing the smallest in the Ocean range, the Seagull --joining the Sea Lion, Seal and Dolphin-- which is priced super cheaply at US$11k (or less?), attacking the final area still dominated by combustion-engine cars: entry-level passenger cars, now mostly made by global automakers like the Japanese, GM, Ford and VW with local, usually state-owned, partners. (Tesla’s Model 2 is targeting a price of $25k.)

..... ▷ The Seagull is also powered, in the shorter range version, by a SODIUM-ion battery, which is safer, cheaper and cleaner than LITHIUM-ion, and which BYD is planning for all its cheaper cars. (See here for science!) Meanwhile, it also unveiled an electric supercar U9 under its new luxury brand Yangwang. But we want to show you the Seagull:

..... ▷ All of BYD's vehicles are New Energy Vehicles, i.e. either fully electric or "plug-in hybrids", and so far this year, sales in China are up 70% for an 11% market share, greater than both Volkswagen's and Toyota's sales of all types. Passenger car sales were down 13% in the first quarter, but EVs and plug-in hybrid sales were up 22%. NEV sales are forecast to make up 35% of total 2023 China sales. Globally, Tesla, BYD and VW are the top EV makers, but no Japanese carmaker even makes the top 20, despite Nissan once having been a pioneer in the space with the Nissan Leaf. A sneak preview of Japanese car sales globally? (See above: 2026?!)

(BYD is sometimes known in the markets as being Warren Buffett or Berkshire Hathaway backed but is the 4th largest automaker by market capitalisation in its own right at $100bn, trailing only Tesla, VW and Porsche. Buffett has been trimming his stake and now has about 11% of BYD's H-shares from 21% in 2008. The HK-traded H-shares make up 36% of total share capital, with another 36% listed in Shanghai as domestic-only A-shares and the balance privately held by the founders, all with the same voting rights.)

📊 In the Markets

US markets were little changed, with the S&P 500 trading near two-month highs, as traders digested first-quarter results that continued to flood in. They even ignored Fed luminaries like St. Louis's Bullard and Atlanta's Bostic, both saying another rate hike is on the way (neither are voting members of the FOMC in 2023.)

..... ▷ Texas two-steppin' Johnson & Johnson disappointed not on taking a $6.9bn hit to its "bottom line" (i.e. profits) for its talc-and-asbestos baby powder settlement, but for its warning about inflationary pressure on its costs, though the world’s largest healthcare products company also raised its sales guidance.

..... ▷ Goldman Sachs, once described by Rolling Stone as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”, dropped 1.7% after profits fell 19% mainly on a slump in dealmaking and bond trading, but also from a partial sale and markdown of its consumer loan portfolio, which has generally been a failed growth area for the firm.

..... ▷ Bank of America, the second largest lender in the US and not the central bank despite its name, saw profits increase on strong loan growth in the first quarter, against expectations by Wall Street's highly-paid analysts of a drop, generally exceeding expectations as did its large bank peers did at the of last week.

..... ▷ Killing-machine maker and Defence industry "Prime" Lockheed Martin again beat the best guesses of Wall Street's Finest despite parts and labour shortages, with more orders for F-35 fighters, Blackhawk helicopters, missiles and other defence equipment. It closed up 2.4%, having touched an all-time high.

Faster China Growth... and Lying Flat

China’s gross domestic product (GDP)🎓 grew 4.5% in the first quarter on strong growth in exports, infrastructure investment and a rebound in property prices. The recovery was uneven, though, with industrial activity remaining soft. Overall, growth was faster than the 4% analysts were expecting, according to a Bloomberg poll, but still below the government’s full-year target of 5%. However, the encouraging data has led highly-paid forecasters, having gotten it wrong this time round, to lift their expectations, several of them now looking for a full-year rate of 6%.

..... ▷ The March unemployment rate fell to 5.3% from 5.6% in February, but the youth rate rebounded to almost 20% again, which would normally indicate a weak services economy. At 19.6%, it's close to the 19.9% hit in July last year. Admittedly, youth unemployment often picks up in March as graduates hit the market after the Chinese New Year holidays, but there could be a cycle of weak consumer confidence leading to weak hiring leading to weaker consumer confidence.

..... ▷ China's youth unemployment in urban areas was already high before the pandemic at around 13%, and some suggest it's down to a mismatch between the education system and the jobs market. But it could also be a countercultural rejection of the corporate rat race for more fulfilling if lower-paid work, a phenomenon known as 躺平 (tǎng píng) or "lying flat."

📖 MoneyFitt Explains

🎓️ Gross Domestic Product (GDP)

• The GDP is the value of all goods and services produced in a country within a given time period, usually a year. It is used to measure the size and growth of a country's economy. It is calculated by adding up consumer spending, government spending, investments, and net exports, or in economist-speak: C+I+G+(X-M).

• A strong GDP can lead to job growth and increased consumer spending, while a weak GDP can lead to budget cuts and unemployment.

• While a higher GDP is generally seen as a positive indicator of a strong economy, it doesn't take into account factors such as income inequality and environmental sustainability.