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Morning Update

Musk Fails to Impress Investors in Texian Presentation

Yesterday, Tesla’s share price fell 6% as investors remained unenthused after Elon Musk’s presentation at the company’s investor day in Texas. Tesla continues to be the most valuable car company, but yesterday investors were expecting Musk to unveil a hotly anticipated smaller, lower price car which it is hoped will enable them to capture more of the mass market. This comes a few years after Musk unveiled Tesla’s hopes to develop a cheaper proprietary battery – the 4680 – which he claimed would enable the company to deliver a car for around $25,000 by 2023. Nevertheless, production of the 4680 batteries has failed to gather sufficient steam, and the company have just unveiled plans to move their battery production chiefly to the US, from Germany to further boost production.

Tesla’s electric cars currently have base price ranges between $43,990-$129,990 with the Model 3 – which has a range of 267 miles – being the least expensive. Thus, investors consider Tesla’s ability to bring the entry level price down as critical to tapping into the mass market. According to the Guardian: “Tesla’s chief financial officer, Zach Kirkhorn, estimated the company would need to invest six times more than it has to date to hit its long-term target of increasing output to 20m vehicles annually, a 10-fold increase from current capacity. The bill could be $175bn, he said. Capturing the mass market is critical to Tesla’s goal of increasing deliveries 15-fold – to 20m vehicles – by 2030.

Hence, given yesterday’s deflated reaction, all eyes are on whether Tesla’s reshoring of their battery production will enable them to increase production of the 4680 and the extent to which the company will be able to raise capital for the investment needed to crack the mass market.

Blinken Crosses Paths with Lavrov

Yesterday saw the US Secretary of State and Russian foreign minister Sergei Lavrov meet face-to-face for the first time since the full-scale Russian invasion of Ukraine a year ago. The two diplomats met in Delhi for the G20 meeting of foreign ministers. It is understood that Blinken expressed to Lavrov his concern that Russia had suspend itself from New START, as tensions between the two countries’ continue to sour. According to Reuters “The Russian foreign ministry said Lavrov and Blinken spoke “on the move” for less than 10 minutes at the end of the closed-door session, and did not engage in any negotiations, Russian news agencies reported.”

Blinken’s encounter with Lavroz follows the US Secretary of State warned against the CCP providing military support to help bolster the Russian campaign at the Munich Security Conference last month. According to Blinken, Beijing already provides “non-lethal support”, though a new report suggests that they are considering sending “lethal support” to their neighbour. While China continues to weigh up the extent to which its interests are served by its involvement in the Ukrainian conflict, shortly before the invasion Xi Jinping said that there are ‘no limits’ between China and Russia’s relationship and thus Western leaders fear China’s involvement could escalate the conflict further. Of course, Sino-US relations continue to remain frosty having been exacerbated by the recent diplomatic tensions over surveillance balloons.

As the recent rally on T-note yields eased yesterday, equities saw some upside with the S&P 500 closing 0.75% higher while the tech heavy Nasdaq and Dow Jones also rose 0.73% and 1.05% respectively. Across the Atlantic European shares were also buoyed by the relative ‘risk-on’ move, with the Stoxx 600 rising half-a-percent over the session.

Pressure on sterling helped push the FTSE 100 higher given that around 2/3rds of the index’s constituents earn the majority of their revenues overseas with the blue-chip finishing 0.4% higher. Meanwhile the FTSE 250 closed 0.1% lower.

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