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‘China rocks,’ U.S. full of ‘entitlement’

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Tesla Inc CEO Elon Musk speaks at an opening ceremony for Tesla China-made Model Y program in Shanghai, China January 7, 2020.

Aly Song | Reuters

Tesla and SpaceX CEO Elon Musk lamented the “entitled” and “complacent” character of people in the United States, and lauded the “smart” and “hard working people” of China, in the first installment of a three-part interview with Automotive News’ “Daily Drive” podcast published Friday. 

Specifically, Musk criticized New York and California — states that have supported his businesses, especially Tesla, with considerable tax breaks, regulatory credits and other government help.

Automotive News publisher Jason Stein, who conducted the interview, asked Musk, “How about China as an EV strategy leader in the world?”

Musk replied: “China rocks in my opinion. The energy in China is great. People there – there’s like a lot of smart, hard working people. And they’re really — they’re not entitled, they’re not complacent, whereas I see in the United States increasingly much more complacency and entitlement especially in places like the Bay Area, and L.A. and New York.”

Last year, Chinese government officials helped Tesla secure loans worth around $1.6 billion to construct and begin manufacturing vehicles at the company’s relatively new Shanghai factory. This year, the Shanghai government helped Tesla get back to normal operations quickly, at its new plant, after the region was struck by a Covid-19 outbreak and issued widespread quarantines that temporarily suspended manufacturing there.

Musk pointed out, Telsa has not received as much assistance from the government in China as domestic companies there. “They have been supportive. But it would be weird if they were more supportive to a non-Chinese company. They’re not,” he said.

The enthusiasm the mercurial Musk expressed for China contrasted with his expressed disdain for communism. In a tweet on Monday this week, Musk mocked social welfare programs in general, and Karl Marx’s “Das Kapital.”

During the Automotive News podcast, Musk also compared the U.S., California and New York to sports teams about to lose their winning status.

He said:

“When you’ve been winning for too long you sort of take things for granted. The United States, and especially like California and New York, you’ve been winning for too long. When you’ve been winning too long you take things for granted. So, just like some pro sports team they win a championship you know a bunch of times in a row, they get complacent and they start losing.”

Tesla and the states

Among U.S. automakers, “Tesla has had the least government support of any car company,” Musk said.

He boasted about Tesla’s repayment of a loan to the U.S. Department of Energy ahead of schedule.

In June 2009, the Obama-era Department of Energy awarded Tesla a $465 million loan to set up a vehicle assembly plant in Fremont, California, and to begin production of its flagship all-electric sedan, the Model S. Tesla repaid it with interest by May 2013, nine years ahead of schedule. 

The DOE loan was small compared with the tens of billions in TARP loans that went to bail out General Motors and Chrysler during the financial crisis that began in 2008.

However, Tesla has benefited from other forms of government assistance in the U.S. According to analysis by the Los Angeles Times, Tesla’s government assistance in the U.S. has surpassed $4.9 billion.

Tesla’s government support in California has included more than $220 million in sales and use tax exclusions from the California Alternative Energy and Advanced Transportation Financing Authority, as well as zero emission vehicle and solar renewable energy credits granted by the state. The sale of these regulatory credits were a major factor in Tesla’s profitability in the past four quarters. 

As CNBC and others previously reported, New York state spent $959 million on a solar-panel factory in Buffalo, now operated by Tesla, in a drive to bring more than 1,000 high-paying tech and manufacturing jobs to the state.

Tesla hasn’t fulfilled its employment obligations in New York so far. A financial filing out this week revealed that Tesla has obtained a full-year extension from the state in order to meet the head count requirement. If it does not, Musk’s electric car and renewable energy venture will have to pay back $41 million to the Empire State.

Tesla stock and sales

On the podcast, Musk also celebrated the fact that Tesla is now seen as a “legitimate” American and multinational automaker. While it used to be an upstart and underdog, Automotive News asked him what was going on with the soaring price of Tesla shares, which are up more than 240% this year, and whether Musk felt a need to manage investors’ expectations.

The CEO demurred:

“It’s not worth trying to massage the stock market or manage investor expectations. It’s just. You know? At the end of the day, if you make great cars and the company’s healthy and making great products investors will be happy…If you make lousy products your customers will be unhappy and then your investors will be unhappy.”

Elon Musk, chairman and chief executive officer of Tesla Motors, speaks in front of a Tesla Model S electric car on day two of the 2010 North American International Auto Show in Detroit, Michigan.

Bloomberg | Bloomberg | Getty Images

He also gave this advice to other entrepreneurs: 

“My advice, you know, to corporate America or companies worldwide is spend less time on marketing presentations and more time on your product. Honestly that should be the number one thing taught in business schools. Put down that spreadsheet and that PowerPoint presentation and go and make your product better.”

He also predicted that online car sales, and delivering cars direct to consumers, rather than vehicle sales through stores or traditional dealerships, would become even more of a standard, after Covid-19. 

Tesla saw “strong orders through the whole pandemic,” Musk said. Tesla deliveries that declined about 5% for the second quarter of 2020. Due to Covid-19 impacts, most other automakers saw sales plunge more than 30% during the same period. The CEO concluded, “Having a traditional dealer situations I think seems increasingly unnecessary and I think probably the pandemic just reinforced that.”

Tesla shares closed down 3.8% on Friday, but have been on a spectacular run this year despite the global coronavirus pandemic and the onset of a recession

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Bank of England expected to hold policy but outlook could be tweaked

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A woman wearing a protective face mask crosses the road in front of the Bank of England in what would normally be the morning rush hour in the City of London on March 17th, 2020. The financial district of the UK is unusually quiet after the government requested people to refrain from all but essential travel and activities yesterday.

Jonathan Perugia

The Bank of England will announce its latest monetary policy decision before the opening bell on Thursday as the U.K. navigates an emergence from lockdown measures and crucial Brexit talks with the EU. 

Although the market does not expect the central bank to alter its base lending rate or deploy any further fiscal stimulus, signs of a second wave of coronavirus infections and the potential for mass job losses when the government’s furlough scheme ends in October could dent its previously optimistic projections for a V-shaped economic recovery. 

The BOE announced an additional £100 billion ($131.4 billion) expansion of its bond-buying program in June, taking the total value of the central bank’s Asset Purchase Facility (APF) to £745 billion. 

The Bank also held its main lending rate steady at 0.1%, having cut rates twice from 0.75% since the beginning of the coronavirus pandemic. 

While the existing accommodative monetary policy stance is expected to remain unchanged, the Monetary Policy Committee’s new quarterly projections could include a shift in tone. 

Alan Custis, head of U.K. equities at Lazard Asset Management, suggested that May’s projection of a V-shaped recovery now looks “out of kilter” with current market expectations.

“We would expect the Bank of England to upgrade its GDP (gross domestic product) expectations for 2020, but at the same time lower its expectations for 2021, as the risk of a second virus wave, and further disruption suggests it had been too optimistic,” Custis said Wednesday. 

“Longer term the recovery in the U.K. economy is likely to be protracted and at a lower level than other economies as the effects of leaving the EU also weigh on expectations.” 

The U.K. is currently embroiled in tense discussions with EU leaders in a bid to hammer out a new trading relationship. Should talks fail, the U.K. would face a sudden exit from its transitional period without a deal at the end of the year, a scenario widely expected to compound the economic damage caused by the pandemic. The next round of talks is set to commence on August 17. 

“We judge that the current level of the broad GBP implies that a U.K./EU-27 FTA (free trade agreement) being struck by year-end is about as likely as one not being struck (in terms of market-implied odds),” BMO Capital Markets European Head of FX Strategy Stephen Gallo said in a note Tuesday. 

“The Bank’s assumptions for growth and inflation (H2 2020 & FY 2021) are likely to be tweaked, but the high level of uncertainty surrounding virtually all forecasts means that market participants will probably assign very low weights to their importance.”

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Global deaths surpass 700,000; CVS fills fewer prescriptions

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The global death toll from the coronavirus pandemic has now surpassed 700,000, with the U.S., Brazil and Mexico leading the world in total deaths, according to data from Johns Hopkins University. On Wall Street, Moderna reported a fivefold increase in its second-quarter revenue related to its work on a potential coronavirus vaccine. The company said it has begun talks with multiple countries to supply its potential vaccine. 

Here are the big developments Wednesday: 

The following data was compiled by Johns Hopkins University:

  • Global cases: More than 18.56 million 
  • Global deaths: At least 701,085
  • U.S. cases: More than 4.77 million 
  • U.S. deaths: At least 156,839

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Death toll could top 100, ammonium nitrate stash blamed

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Firefighters spray water at a fire after an explosion was heard in Beirut, Lebanon August 4, 2020.

Mohamed Azakir | Reuters

Beirut’s residents are in shock and mourning after an enormous explosion at the city’s port ripped through the Lebanese capital, injuring more than 4,000 people and killing at least 100, according to the emergency services. Hospitals are overwhelmed, with some too damaged by the blast to operate.

The explosion, which blew out windows and destroyed property for miles around, has been initially blamed on a shipment of 2,750 tons of ammonium nitrate stored in an unsecured warehouse at Beirut’s cargo port.

But the government subsequently announced an investigation to determine the exact cause of the explosion and “who was responsible” within five days.

“I will not rest until we find the person responsible for what happened, to hold him accountable and impose the most severe penalties,” Lebanese Prime Minister Hassan Diab said in the early house of Wednesday morning, adding that it was unacceptable that such a volume of the explosive chemical had been present for six years in a warehouse without any “preventive measures.” It wasn’t immediately clear what ignited the shipment of ammonium nitrate.

The chemical is commonly used as fertilizer, but is also a component in mining explosives when combined with fuel oil and detonated by an explosive charge. Ammonium nitrate can also combust, however, when met with an intense fire, which appeared to be burning in a part of the port before the explosion took place.

‘It’s apocalyptic’

Local media footage and videos uploaded to social media following the blast showed bloodied people walking through debris-strewn streets. Medical staff had to treat patients in parking lots as hospitals exceeded capacity. And countless more victims remain missing — by Wednesday morning, an Instagram page called “LocateVictimsBeirut,” where residents post photos of their missing friends and family, had amassed 63,500 followers.

“I was in the car when we felt the huge blast, the airbags opened,” one Beirut resident told CNBC. “I ran away — it’s apocalyptic. There is no other word to describe it. We’re walking on glass, the entire area of Achrafieh,” he said, describing one of Beirut’s oldest residential quarters.

“Everyone I saw was bleeding from their head, their arms, everywhere. People shouting in despair… I’m still in shock.”

Yumna Fawaz, a local journalist, described the population as “shocked.” “We lost our people and our city. My entire apartment is destroyed,” she said. Another witness described “chaos,” and said that many friends were injured, with some still searching for family members.

Crisis will ‘accelerate government collapse’

The immediate crisis in homelessness, health, overwhelmed medical services and destroyed property and businesses on top of an already crippled economy will only accelerate government collapse, Eurasia Group analysts wrote in a note Wednesday morning.

“The government’s credibility is declining, and large elements of the public no longer believes the government is able to manage,” the consultancy wrote. “In our view this accelerates movement towards collapse of the current government. The economic crisis will also deepen as the port is the main trade valve and base for many stored goods awaiting clearance.”

Any recovery for Lebanon now will be “massively difficult,” said Rodger Shanahan, a Middle East research fellow at Australia’s Lowy Institute.

“This is the last thing a country like Lebanon needs right now,” Shanahan told CNBC’s “Capital Connection” on Wednesday. “Any country would find this difficult, but with Lebanon having been in the middle of probably the worst financial crisis it’s seen … and now here is another example of slack governance — it just continues to reinforce the average Lebanese citizen’s views that they don’t have a government that can govern properly.”

Catastrophe amid already historic crisis

The disaster hit a nation already reeling from crisis and fraught with domestic and regional political tensions. Lebanon is facing its worst economic crisis since its 1975-1990 civil war, with skyrocketing inflation and unemployment, and a currency in free fall. People’s life savings in the local currency, the pound, have seen their value wiped out. The World Bank warned in November that half of the country’s population of 6.8 million may fall below the poverty line.

And this was all before the coronavirus pandemic hit — now, locals are struggling to afford food and basic goods, with angry protesters decrying government inaction and corruption as forcing them to choose between virus infection or starvation. The country has also defaulted on its sovereign debt, and Lebanon’s debt-to-GDP of more than 150% is the third-highest in the world. A shortage of dollars in the country has led banks to restrict withdrawals, leaving people unable to access their money. Talks with the International Monetary Fund over an emergency bailout package broke down last month.

The small Mediterranean country is also home to more than 1.5 million Syrian refugees. Endemic state corruption, crumbling infrastructure, regular power cuts, a pollution crisis and government failure to provide many basic services led to nationwide protests that began in October and continue in various iterations.

On Monday, Lebanon’s foreign minister resigned, criticizing the government’s lack of action and will to solve the country’s financial problems that risk making it a “failed state.” And the port explosion came as tensions simmered ahead of a UN tribunal verdict on Friday on the assassination of former Lebanese Prime Minister Rafik Hariri in a truck bombing in 2005.

The four suspects in the trial are all members of Hezbollah, the Iran-backed Shia paramilitary and political group widely seen as the most powerful political party in Lebanon. The suspects deny any role in Hariri’s death. Hezbollah is designated a terrorist organization by the U.S. government.

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