Thursday 06/09/18

1. In MACROECONOMIC NEWS, the nightmare continues for emerging markets and UK services sector strength contrasts with construction slowdown
2. In VEHICLE-RELATED NEWS, Volvo plans to do away with domestic flights, UK car sales rise and Mobike abandons Manchester
3. In INDIVIDUAL COMPANY NEWS, Amazon moves to develop its delivery service and Gaucho restaurants are thrown a lifeline
4. In OTHER NEWS, I bring you some hope for us all in old age with some amazing world records! For more details, read on…

So the nightmare continues for emerging markets and the UK services sector trends up…

No respite for emerging markets as crisis grows (The Times, Tom Knowles) highlights the continued sell-off of emerging markets sparked by currency crises in Turkey and Argentina. Indonesia’s rupiah traded close to lows last reached in the 1998 Asian crisis and the Jakarta Composite index had its biggest one-day fall since November 2016. The South African rand also hit new lows after the latest data showed the country entering recession territory for the first time since 2009. Capital Economics economist Oliver Jones observed that “We think there is more to come. We doubt the main factors which have

caused equities across much of the emerging world to weaken together recently will go away just yet”.

Services sector strength offsets construction slowdown (Daily Telegraph, Tim Wallace) cites the latest Purchasing Managers’ Index (PMI) from IHS Markit which shows growth, strengthening orders and hiring activity returning to February levels – all good news given that the services sector accounts for 80% of the UK’s GDP. This survey also suggested that companies are having to pay higher wages to attract new talent and retain existing employees. Ruth Gregory, of Capital Economics put a positive spin on things pointing out that “the new orders index rose, while the increase in the employment index also indicated that firms remain confident enough in the outlook for demand to pick-up the pace of hiring” whilst Howard Archer, chief economic adviser to the EY Item Club, observed that “It looks unlikely that interest rates will rise again until after the UK leaves the EU in March 2019 given the major uncertainties that are likely to occur in the run-up to the UK’s departure”.

In vehicle-related news, Volvo targets domestic flights, UK car sales rise and Mobike gets out of Manchester…

In Dream ride: Volvo takes on air travel with car that drives while you sleep (Daily Telegraph, Alan Tovey) we see that Geely-owned Volvo has unveiled a concept driverless car that could replace short-haul air travel as it does away with things like, you know, a steering wheel to give its 360c autonomous vehicle more interior room which can have various configurations such as commuting, mobile office, entertaining (!) and sleeping. The company is aiming at trips of under 400km (roughly the distance between London and Newcastle) where flights can take up to four hours all-in if you take into account airport security and all the other bits and pieces. Robin Page, Volvo vice-president of design, suggested that “If we see dedicated lanes on roads for autonomous vehicles, then they could ‘platoon’ together at much higher speeds than when they share the road with conventional cars”. Don’t get too excited, though – this concept car isn’t expected to be on the road until the 2030s. Runners and riders in race for autonomy (The Times, Robert Lea) does a good job of summarising where we are at currently with driverless vehicles – Google’s Waymo is closest to getting a self-driving taxi service on the road with plans for launch either this year or next. Jaguar Land Rover has committed 20,000 of its all-electric I-Pace models to Waymo to be part of the project. Amongst the established manufacturers, General Motors has a lot of potential as it aims to have a driverless Chevrolet Bolt on the road in 2019 and in Europe, Daimler – the owner of Mercedes-Benz and Smart – is seen to have its nose just in front of the competition and has been testing the V-class van for its own autonomous product. There are many other side projects going on with Aptiv working with the Renault Zoe, Renault and Nissan providing leading driver assistance tech in volume cars like the Qashqai, Zoox working on a Toyoya Highlander and, of course, Tesla. * SO WHAT? * All impressive stuff and I like the idea of driverless-taxi-as-alternative-to-short-haul-flights, but surely it’s going to take a lot longer for this to become a reality. Sorry to sound boring, but all this kind of stuff is at the fringes – companies also need to be concentrating on what’s going on at the volume end of things. For instance, there is a widely-held belief that consumers will be less and less likely to own cars outright, which means that there are going to be problems in the resale market and then there’s the whole emissions/model electrification thing going on as well. FWIW, I think that there is a sea-change going on in the automotive industry at the moment as established players adapt to a world with increased competition (especially from China and “newcomers” such as tech

companies), changes in ownership models and a leap in technological advances that probably haven’t been since the early days of the automobile. Exciting times, but potentially dangerous ones for those who do not adapt successfully.

New car sales up 23pc as one in 12 buys electric (Daily Telegraph) cites the latest figures from the Society of Motor Manufacturers and Traders (SMMT) which show that new car registrations were up by a decent 23.1% in August with petrol car sales rising by 39% and one in 12 buyers buying a hybrid, plug-in hybrid or electric model. Car sales jump as manufacturers offload older models (Financial Times, Peter Campbell) shows that some car companies experienced a huge rise in August activity with Suzuki and Jaguar sales doubling while Honda saw sales up by 92%, Mitsubishi up by 79% and VW by 62%. * SO WHAT? * It sounds like this is probably a one-off as August is normally a quiet month and dealers were keen to shift older stock before the introduction of the new emissions test where ALL cars will have to have a CO2 test before being sold in order to give customers a more accurate picture of the vehicle’s actual emissions.

Moving on from four-wheeled transport to the two-wheeled variety, Mobike gives up on bike hire in Manchester (Financial Times, Andy Bounds) shows that one of the largest bike-hire companies in the world along with the likes of oBike, Ofo, GoBee and now Uber has decided to give up operations Manchester after too many of its bikes were stolen or damaged in the city. In July alone, it lost 10% – or about 200 – of its bikes. Users pay a deposit to hire a Mobike, use an app to get a location of the bike and a code to unlock it and then pay 69p per half hour to use it. It will continue to operate in London, Newcastle, Oxford, Cambridge and other European cities. * SO WHAT? * This is another example of an idea mushrooming and then attracting loads of investment capital whilst well-funded start-ups race to build market presence like taxis and food delivery businesses before them etc. etc. Mobike isn’t the only one to suffer from idiots taking the mick out of a service intended to enhance people’s lives – GoBee had to abandon France and Italy earlier on this year – in France, it said that 60% of its bikes were destroyed in only four months. To dock, or not to dock – that isn’t the only question. The fact is that whatever way you do this, security and tracking needs to improve A LOT and you also have to have a population who are generally law-abiding. I must say that I was sceptical about dockless bike-sharing not only because of vandalism concerns, but also because I thought that bikes would just get left all over the place, cluttering up our towns and cities. Given the enormous set-up costs, I just could not see how these things could be run at any kind of decent profit (well not for the moment, anyway). I expect there to be a lot of consolidation among the operators in the next few years – THEN things might start to get a bit more interesting as economies of scale start to kick in and the whole thing starts to get more profitable.

In individual company news, Amazon aims to further develop its delivery capability and Gaucho gets a lifeline…

Amazon orders 20,000 Mercedes-Benz vans for new delivery service (Wall Street Journal, Laura Stevens) highlights the announcement made yesterday that the e-tailing behemoth has ordered a ton of vans as part of a plan to juice up its existing delivery fleet and help entrepreneurs create delivery companies, with each employing up to 100 drivers and leasing between 20 and 40 vans with the Amazon logo. This is all part of its move away from reliance on services such as the US Postal Service and FedEx. Amazon hopes to have 100 vans on the road by year end and take delivery of all 20,000 vans by the end of next year. It won’t own them – it will supply them to fleet management companies who will then buy them and lease them to small delivery-service providers. * SO WHAT? * This is a VERY interesting development IMHO as Amazon is effectively going to be building up its own logistics business with almost zero downside as it won’t 

own the vans! It can achieve a goal of less reliance on the national postal  service and other delivery companies whilst bringing their own delivery drivers under one umbrella. Very canny – and I think all the competition should get VERY worried about this. For instance, growth in parcel delivery for the Royal Mail has been an important area of growth as the volume of letters continues its terminal decline. If Amazon take parcel delivery away from them, they will have (almost) nothing left. It’ll be interesting to see how the likes of UPS and FedEx respond to this move.

Gaucho’s lenders ride in to save restaurant chain and 750 staff (Daily Telegraph, Oliver Gill) sounds some good news for the troubled UK casual dining sector as Gaucho’s lenders, South African bank Investec and Hong Kong fund SC Lowry, have agreed to buy its 16 restaurants from administrator Deloitte, as long as its CVA is successfully implemented. Oliver Meakin, who was chief exec for only seven months (and who was previously CEO of Maplin – see a pattern forming anyone?? If you see him approach your company you need to run a mile!!!) will step down and be replaced by Martin Williams, chief exec and founder of M Dining and Bar. * SO WHAT? * This is great news for Gaucho and gives them a clean break from sister chain Cau. Mind you, they’ve still got to get customers through the door, so it’s not all rainbows and unicorns just yet!

…And finally, in other news…

Most of us get a little bit sadder at the prospect of aging, but Life begins at 80 for new world record breakers (Metro, Zoe Drewett https://tinyurl.com/y7tme7k8) gives hope for us all! The new 2019 Guinness World Record book is released today and ranks an 85 year-old trapeze artist and an 83 year-old club DJ as examples of oldies learning new tricks!

As always, thank you for reading Watson’s Daily!