Friday 23/11/18

1. In CAR-RELATED NEWS, Tesla cuts prices in China and Nissan sacks Ghosn
2. In TECH-RELATED NEWS, we see that Tencent and Alibaba’s investments are behind a big chunk of profits, that the US is telling everyone to avoid Huawei and that Apple is thinking about a dongle
3. In RETAIL-RELATED NEWS, Mitchells & Butlers sounds caution over staff and Dolce & Gabbana get into very hot water in China
4. In OTHER NEWS, I bring you the top 10 worst things (everyone loves a list). For more details, read on…

So Tesla gets fruity in China and Nissan votes Ghosn out…

Tesla rides out trade war by slashing prices in China (The Times, Tom Knowles) shows just how important China is to Tesla as it has cut its selling prices to absorb the cost of rising tariffs in the ongoing US-China trade war. It said that it would cut the prices of the Model S by 12% and the Model X by 26% to make them more affordable in a country that is aiming to be at the forefront of EV technology. * SO WHAT? * Tesla is clearly keen to have a seat at the table in China and is willing to do whatever it takes to get it. Given that the major chunk of future growth in the country is likely to come from lower-income customers who can’t afford a Tesla, maybe taking some short-term pain will be worth the long-term gain, especially as the market for electric vehicles is likely to become much

more crowded in future.

Nissan board unanimously votes to fire Ghosn as chair (The Guardian, Justin McCurry) spells out the inevitable as the drama continues to unfold about the fallen car god Carlos Ghosn. Renault appointees on the Nissan board also backed the decision, which might serve to mitigate the rift that could have worsened between France and Japan had they not done so. Nissan said that it would form a special committee that will seek advice on how to improve its management system and governance of directors’ pay in addition to another committee that will oversee Ghosn’s successor. Not a peep has been heard from Ghosn since his arrest. * SO WHAT? * Speculation continues that the Renault/Nissan/Mitsubishi alliance will be broken up as Ghosn has in the past been perceived to be the glue that held them all together. All sorts of dirty laundry is going to be aired during this investigation it seems – we’re only at the beginning! 

It turns out that Tencent and Alibaba’s investments are earning them tidy sums, the US is rattling cages by steering countries away from Huawei and Apple considers its dongle…

We’ve been treated to a lot of Singles’ Day chat and what’s going on with gaming these days from the Chinese tech behemoths, but Investments fuel a third of profits at Tencent and Alibaba (Financial Times, Louise Lucas) takes a look at another way they make money – investments. Both companies generated almost one third of their profits from their investment portfolios in the latest quarter, a big jump from previous years. Tencent made 7% of profits from investment in 2016 and then 22% in 2017, with Alibaba netting 14% in 2017 and 30% this year in investment profits. The gains have come in particularly welcome at Tencent as its gaming division is currently coming under fire. * SO WHAT? * Given how much cash these companies generate it seems eminently sensible for them to diversify their income streams via investment – and the bigger they get, the more opportunities they will see as their growing in-house M&A teams increasingly become the first port of call for companies looking for serious investors. One other major side benefit of investing in different (but largely related) businesses is that it gives them access to much broader data sets – information that they would otherwise not have so much access to, which in turn helps them in their core businesses. I suspect this trend of investment will continue for some time to come.

Washington asks allies to drop Huawei (Wall Street Journal, Stu Woo and Kate O’Keefe) is a move that is unlikely to help its trade negotiations with China as the US government is trying to persuade wireless and internet

providers in “friendly” countries not to use telecoms equipment from China’s Huawei for fear of cybersecurity risks. Apparently, it is also considering increasing financial aid for telco development in countries that commit to not using Chinese-made equipment. Huawei is the world’s second biggest smartphone maker behind Samsung and is the global leader in telecom equipment that includes things like the hardware that goes into cellular towers, internet networks and other communication infrastructure. * SO WHAT? * We are at a crucial moment now because wireless and internet providers around the world are gearing up for 5G that promises superfast connections that will facilitate self-driving cars and the Internet of Things where increasing numbers of devices “talk” to each other. US officials are concerned about the prospect of Chinese telecom equipment companies placing themselves in the chain in key positions that could give them access to sensitive information and the power to disable tech at will and are therefore keen to minimise the risks. Huawei has effectively been shut out of the US after a 2012 congressional report accused it of being a threat to national security but the company itself protests its independence from government and the fact that it is employee-owned. However, these efforts may prove to be too little too late as some allied countries already have Huawei embedded in their networks (including the UK). The Cold War tech war is well and truly on. This might be good for non-Chinese tech providers in the long term but it’s too early to tell yet.

Apple may launch dongle to give access to streaming service (Daily Telegraph, Matthew Field) tells us that Apple is considering releasing a “dongle” device that could plug directly into TVs (a la Amazon Fire Stick, for example) to give users more access to its streaming service. The company is currently developing its own TV streaming service with original shows and hopes to launch it in March 2019. * SO WHAT? * Apple is not known for being first to market, but I think in this case it faces a MASSIVE uphill battle given how far ahead everyone else is. Also, it seems to me that Apple is investing the least amount of money into its content versus its rivals, so I’m not confident that it will do all that well as things stand.

Mitchells & Butlers sounds a note of caution over staffing and Dolce & Gabbana faces Chinese ire…

Mitchells & Butlers cautions over staff as profit rises 69pc (Daily Telegraph, Oliver Gill) warned at its results meeting yesterday that Brexit could have “material impact” on labour costs and lead to a shortage of staff at its bars. Currently, it employs 44,000 people, 13% of whom are non-British EU nationals and the company pointed out that “Any restriction on the free movement of labour would have a material impact on both the cost of labour and access to talent”. * SO WHAT? * Most employers are facing the same problems but we’re not really going to know the effects of leaving Europe until Brexit actually happens and/or if we get definitive guidance on labour mobility. I suspect that retailers and those in the hospitality industry will suffer more than most, however.

Dolce & Gabbana goods pulled from Chinese ecommerce sites (Financial Times, Yuan Yang and Nian Liu) highlights a major disaster for the Italian fashion house as some of the country’s leading luxury e-commerce platforms are pulling the brand after the Italian company was accused of racism in its latest ad campaign. This was then followed by explicitly racist messages posted on D&G’s official Instagram account and that of the G in D&G, Stefano Gabbana. * SO WHAT? * The company said that it had been hacked, but the resulting backlash led to the company having to cancel a high-profile fashion show in Shanghai. This is serious stuff because China is the world’s largest luxury market – and one that Stefano Gabbana has identified as one of its most important for sales – and if this snowballs to the extent that offline shops and the government get involved it could be curtains for their prospects. Nasty. 

And finally, in other news…

Everyone loves a list, don’t they? Well I thought that this one was quite unusual: Top 10 worst of absolutely everything revealed – from foods and films to places (The Mirror, Sam Jordison https://tinyurl.com/ya9m8axx). One entry in the “Ten saddest places to visit” category sounded like quite a good place to get a selfie – a place called Sh!t, in Iran. Who knew?