Happy Sunday! Hope you’ve all had a great week!
I’ve finally (almost) recovered from Covid, so a big sigh of relief from me.
It’s been an interesting week, so I’ll get right into it.
Key Events
Brexit NI Protocol Deal Reached
On Monday, the UK Prime Minister, Rishi Sunak, gave a surprise announcement regarding the Northern Ireland Protocol. It seems that the UK and EU have come to a negotiated agreement after months – years, even – of deadlock since 2016, when Brexit was originally decided upon.
The agreement still requires approval by parliament, but is a good step forward in “getting Brexit done”, whatever that even means. In this agreement, the UK has secured two key rules.
Firstly, there will be a “red lane” and “green lane” for transporting goods from mainland Britain to Northern Ireland. In the green lane, trusted companies can send goods to Northern Ireland that are not destined to move onto an EU country, meaning no customs checks or paperwork will be needed. These goods will be held to UK health and safety laws, allowing businesses in Northern Ireland to receive goods from Britain with ease. Essentially, the green lane allows goods to be treated in much the same way as goods going from England to Scotland, albeit with some commercial checks.
The red lane, however, is where any goods destined for an EU-country, or could go on to an EU country, will need to go through the standard EU customs checks.
Secondly, a mechanism dubbed the “Stormont Brake” was announced. This will allow Northern Ireland to flag concerns regarding new laws on goods which will affect the country. The final stage of the mechanism is to be reserved for emergency situations (i.e., NI deciding to ‘pull the brake’), but allows the UK to discuss and even veto EU laws if required.
Ofgem Lowers Energy Price Cap By Almost £1,000
On Monday, Ofgem announced its quarterly update on the Energy Price Cap. This dictates the ‘maximum’ amount an ‘average’ household will pay for their energy per year. It’s a ridiculous system with many flaws (in reality, it’s simply a cap on the unit rate of gas or electricity used, not an overall cap. I.e., the more you use, the more you pay), but it is what it is…
For the first three months of 2023, the Energy Price Cap was set at an eye-watering £4,279 per year.
Ofgem have announced that from 1st April to 30th June 2023, the Energy Price Cap will be lowered to £3,280 per year, down £999. Expectations are that this will be lowered again in the June-August quarter.
However, this figure is meaningless to most Brits, as the Energy Price Cap is still above the government’s Energy Price Guarantee, which is currently set at £2,500. In fact, the Energy Price Guarantee was originally due to be increased to £3,000 per year.
Thankfully, a huge campaign initiated by Martin Lewis and his team, which has now been backed by over 110 charities, seems to have convinced the government to halt this increase. It hasn’t officially been announced, but Martin Lewis posted on Twitter this week saying that all signs point to this being the case. A huge relief for many, who are already struggling to pay their electric/gas bill.
Stock Market News
Further Job Losses Announced
The job cuts continue, but seems to be at a slower pace. Here are the key cuts announced this week:
- Palantir – Reducing its workforce by ~2%, or 75 employees.
- Sainsbury’s – Intends to close two Argos Depots (Basildon, Essex and Heywood, Greater Mancheseter), along with its remaining Habitat sites, affecting ~1,400 jobs.
- Though, staff will be able to apply for other jobs within the company.
Tesla (TSLA) – Investor Day, Giga Berlin Milestone
On Monday, Tesla Berlin reported it hit its next production milestone; 4,000 vehicles per week. This translates to an annual production of around 208,000 per year. The factory still has a long way to go to reach capacity, but this is good news for Tesla’s margin. In mid-2022, Elon Musk described the factory as a “money furnace” due to the slow ramp and high costs.
On Wednesday, Tesla livestreamed their Investor Day presentation. For those physically there, they were given a tour of the factory. For us public viewers, there was a 2-3 hour presentation, with a 30-60 minute Q&A session. Investors weren’t too pleased and declared the presentation ‘unprofessional’, ‘boring’ and ‘too technical’, with no real announcements given. However, for those who are more tech-savvy, the company gave away a lot of key details.
Here are a few key takeaways from the day:
- A new giga factory was announced, to be built in Mexico. This factory will product Tesla’s ‘next generation vehicles’.
- It was teased that one of these next-gen vehicle will be a smaller, sub-$30,000 car. This car is likely to be used as the basis of the robo-taxi platform in future.
- It was also teased that a second, larger vehicle is in the works, in the same category as the Cybertruck. Most believe this to be a panel van, similar to the Mercedes Sprinter.
- The majority of the presentation was focused on how Tesla intend to reduce the cost of vehicle production by around 50%. For example, in the new Mexico factory, the company will be manufacturing each part of the vehicle (the doors, front, rear, base/battery/seats) separately, to maximise output. These individual parts will be painted and then assembled only once the individual parts were complete.
- Currently, cars are manufactured in a linear way. Each part is added to the main unit as it goes through production. The doors are often attached, painted, then removed again until the end of the process; at which point they are re-attached. This is very inefficient and requires constant lifting of the entire vehicle. But it also minimises the number of workers able to work on the vehicle at one time. By assembling the parts in parallel, more workers (or robots) can work on the vehicle at once, with assembly being done at the end.
- But the cost reduction doesn’t stop there. For its next-generation vehicles, Tesla intend to design and manufacture 100% of its own electronics, something not done by any competitor. They also intend to ramp up 4680 battery cell production, manufacture drivetrains using 0% rare-Earth metals, and even switch to a 48V electronics architecture. The latter is another industry first, which will reduce the copper wiring mass per vehicle by around 4x. Then, of course, there’s the use of giga-castings to produce entire portions of the vehicle in one take; removing hundreds of parts.
- All of these efficiency improvements, along with many others, will make Tesla’s vehicles cheaper. Much cheaper. To the point that a high-quality budget vehicle can be mass-produced.
- It’s worth noting that Tesla will not retrofit older factories; at least not yet. They claim this is not worthwhile, as those factories would have extended downtime. They are already very profitable, so it’s not a concern for now; better to improve the build quality of those vehicles instead.
- During the Q&A, the team suggested only around 10 different models will ever be produced; one or two vehicles per ‘category’ (e.g., mini-SUV, sedan, truck, van, semi-truck, etc).
- There was a small section on the Optimus robot, showing progress made on its ability to walk and perform tasks requiring relatively fine motor skills. There’s a lot of work to do here, but showed incredible progress in just the last 6 months.
- On Tesla energy, the company gave its vision of a sustainable world. It suggests that the whole world’s energy needs can be met with ease using just solar, wind and battery pack technology. This need, the company claims, can be met using just 0.2% of the world’s landmass. This figure actually includes the need to power a world of electric vehicles, too.
Company Earnings Reports for W/E 5th March 2023
On Tuesday, I covered the earnings reports of the following 3 companies. Click here to find out what happened:
- Zoom Video Communications (ZM) – Q4 (Fiscal Q4 2023) Earnings
- Target (TGT) – Q4 Earnings
- Rivian (RIVN) – Q4 Earnings
On Wednesday, I covered the earnings reports of the following 2 companies. Click here to find out what happened:
- Persimmon (PSN) – FY 2022 Earnings
- Salesforce (CRM) – Q4 (Fiscal Q4 2023) Earnings
On Thursday, I covered the earnings reports of the following 3 companies. Click here to find out what happened:
- Taylor Wimpey (TW) – FY 2022 Earnings
- Costco Wholesale (COST) – Q4 (Fiscal Q2 2023) Earnings
- Dell Technologies (DELL) – Q4 (Fiscal Q4 2023) Earnings
Next Week
Company Earnings
Here’s a list of the companies I’ll be covering next week (subject to change):
- Restaurant Group (RTN) – 8th March
- Legal & General Group (LGEN) – 8th March
- Darktrace (DARK) – 8th March
- Docusign (DOCU) – 9th March
Let me know your thoughts on this week’s events, in the comments below!
