July 21, 2022
🚀 Off we go! Today's newsletter, edited by Mickey Meece, has a Smart Brevity count of 1,215 words, 5 minutes.
🚨More than 100 million Americans are under heat warnings today, including the D.C.-to-Boston corridor.
🎸 Guitar great Slash celebrates a birthday this weekend, and he's in epic form on Ben's favorite Guns N' Roses song that's today's intro tune...
1 big thing: Ford charts its EV resource path
Breaking: Ford Motor Co. unveiled a bunch of deals and agreements the auto giant says will ensure it has the batteries and raw materials to support rapid growth of electric vehicle production, Ben writes.
Why it matters: As automakers and policymakers plan for the EV transition and boost investments, the ability to source supplies is becoming an intense geopolitical competition — and a logistical knot.
Driving the news: Ford said its battery chemistry and contracting will enable enough batteries for an annualized production rate of 600,000 EVs by late 2023 and 70% of what's needed for 2 million-plus by 2026.
The company is boosting output of vehicles including the Mustang Mach-e and the F-150 Lightning pickup.
Zoom in: Ford's many domestic and international announcements include...
- Battery giant CATL will provide battery packs for Mustang Mach-E models starting next year and F-150 Lightning pickups in early 2024. Suppliers LG Energy Solution and SK On will also boost output.
- A binding agreement with Ioneer for lithium from its proposed Rhyolite Ridge project in Nevada "to support EV production beyond 2025."
There are also several nonbinding deals with big resource companies for lithium and other key materials. Some examples...
There's one with mining behemoth BHP for nickel supply from Australia; a pact with PT Vale Indonesia and Huayou Cobalt on nickel processing and supply; an agreement with Rio Tinto for lithium from Argentina; and one with Syrah Resources and SK On to secure graphite from a Louisiana facility.
The big picture: The deals are part of Ford's wider EV push that envisions investing over $50 billion through 2026 and having EVs account for half its global production by 2030.
Yes, but: There are tradeoffs too as automakers balance EV efforts with internal combustion lines that remain the dominant share of sales.
Bloomberg reported yesterday that Ford may cut up to 8,000 jobs in coming weeks as it "tries to boost profits to fund its push into the electric-vehicle market."
Bonus EV notes: Tesla and USPS
💵 Tesla's Q2 profits declined to $2.3 billion, which was higher than analyst expectations of $1.9 billion, but down from a record $3.3 billion in Q1.
- The big picture: Tesla was up against COVID-related factory shutdowns in China, which led to the company's first quarterly profit decline since 2020, Axios' Hope King reports.
- The intrigue: The Q2 report revealed that Tesla has dumped 75% of its bitcoin holdings to bring in $936 million, a move CNBC calls a "rapid retreat" for CEO Elon Musk after his prior crypto-boosterism.
- What we're watching: Remember the futuristic (or dystopian) pickup Tesla unveiled in 2019? Musk said he expects Cybertruck deliveries to begin mid-2023, which The Verge calls a more specific timeline than previously provided.
📬 The U.S. Postal Service has significantly boosted its commitment to replace its aging delivery fleet with more electric vehicles, Axios' Joann Muller reports.
- Why it matters: The agency faced a massive backlash from lawmakers after saying in March it would spend nearly $3 billion on an initial order for 50,000 new mail trucks from Oshkosh Defense — 90% of which would be gasoline-powered.
- Read the whole story.
2. Takeaways from Biden's latest climate path
ICYMI, President Biden unveiled modest steps yesterday to help protect communities from extreme heat and spur offshore wind projects — and promised more executive efforts soon, Ben writes.
Quick take: We covered the rollout and Biden's speech, and here are a few more thoughts...
1. About the "e" word. Biden called climate change an "emergency" five times, and expectations are rising that Biden will formally declare a climate emergency that would unlock more executive powers.
- Climate envoy John Kerry tells the NYT it's happening in some form (remember it could mean any number of things and it's not a magic wand).
- Oil industry groups yesterday warned against using the tool to advance what they call "false" solutions like banning crude exports.
2. He's not raising expectations for legislation. While the door remains open a crack for reaching a deal with Sen. Joe Manchin (D-W.Va.), Biden's speech seemed to be moving on.
- "I have a responsibility to act with urgency and resolve when our nation faces clear and present danger," he said.
3. But squint and see the opening. ClearView Energy Partners, in a note, saw "Manchin-friendly signals" in yesterday's speech and other press appearances by Biden officials.
4. A bureaucratic move recognizes a hotter country. One step yesterday is new federal guidance about how Low Income Home Energy Assistance Program grants can support cooling initiatives.
The program has historically been more geared toward heating needs.
3. Charted: The rise of next-wave aviation finance
Recent years have brought a surge in funding for electric aviation and other segments of "future air mobility," per a new McKinsey & Co. analysis, Ben writes.
Yes, but: Funding is slowing this year for various reasons, but McKinsey says it's "merely a resumption of normal growth after a big spike in 2021." Also, the analysts caution that not all funding is disclosed.
The bottom line: "The industry is applying a portfolio approach, casting a wide net, and letting a broad range of companies pursue their own solutions," they write.
"Some will inevitably fail, and — as with the current blip in funding — that should not be taken as a signal of deeper problems."
4. Europe's heat wave magnifies energy woes
Europeans didn’t need another reminder that they’re living through an energy crisis — but, boy, did they get one, Axios’ Kate Marino writes.
- The historic heat wave pummeling the continent this week sent power prices to new record highs; in France and Italy, average weekly prices have more than tripled over the last five weeks, according to Rystad Energy.
Why it matters: The strains on Europe’s ability to power its economy will not only hurt its growth but could also drag on economic partners like the U.S.
☁️ Andrew's thought bubble: The heat has enveloped a wide swath of Europe. Today, Hamburg, Germany hit an all-time high of 104.2°F (40.1°F), and Denmark notched its highest July temperature on record.
Analysts at Goldman Sachs already forecast heightened odds of an EU economic downturn, including a full-on recession in Germany, due to the deteriorating outlook for the Russian gas supply.
Go deeper: Goldman sees a risk of a substantial spillover into the stateside economy since 28% of U.S. exports find their way to Europe — representing 3% of U.S. GDP.
What to watch: Russia today resumed sending natural gas at a reduced volume via the key Nord Stream pipeline to Europe after a weekslong shutdown for maintenance — but that could prove fleeting, the WSJ reported.
5. 🏃🏽♀️Catch up fast: Oil, nuclear, trade fight
🛢️ "Saudi Arabia has limited additional capacity to ramp up oil production, according to people familiar with its pumping ability, a constraint that would make it difficult for Riyadh to increase global supply even if it were willing to do so," the Wall Street Journal reports.
⚛️ Holtec is moving forward on its $7.4 billion plan to build up to four small modular reactors and a "supersize" reactor factory in New Jersey, Axios' Alan Neuhauser reports.
- Why it matters: Holtec, a legacy player in the nuclear energy industry, is among the handful of companies racing to develop small-scale nuclear reactors. Read the whole story.
🥊 "The U.S. and Canada said Mexico’s nationalist energy policies violate North America’s free-trade deal, with Washington requesting dispute-settlement talks under the agreement and Ottawa saying it will do the same," Bloomberg reports.
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