Monday, May 22, 2017

Battery component maker to boost production sixfold

Belgian battery component maker Umicore will invest €300m to increase its production for lithium-ion batteries sixfold by 2020, due to growth in demand for electric vehicles. The extra capacity will be to meet demand from Chinese electric cars and buses, and European carmakers, which are expanding electric car fleets, the company’s chief executive said. Umicore said demand for the company’s battery materials is “outpacing the market by a significant margin and the increased capacity will enable Umicore to cater for a surge in customer orders”. The money will be invested in Umicore’s plant in South Korea and in Jiangmen in China, it said, with first production lines expected to be commissioned in late 2018. Along with a $160m investment plan announced last year, the additional $300m will result in a more than sixfold increase in total capacity by 2020 compared with 2015. The company, which can trace its roots to the Congolese mining company Union Minière, which was founded in 1906, has for 15 years helped supply material for mobile phone batteries. It now aims to double earnings by 2020 and capture the growing market for electric vehicles. The company’s shares have risen 26 per cent over the past year and rose 3 per cent on Monday to €56.61. Marc Grynberg, Umicore’s chief executive, said it had benefited from “ethical” sourcing of cobalt, a key battery material, amid growing scrutiny over cobalt supply from the Democratic Republic of Congo. Last year, Amnesty International issued a report saying very few companies “are taking steps to meet even the most basic due diligence requirements” when it came to sourcing of cobalt from the DRC for batteries. “We have a definite competitive advantage from having this widespread effort in sourcing cobalt in an ethical manner more than 12 years ago,” Mr Grynberg said. “Even though other people are now trying to clean up their own supply chain it will take time to get there.” Analysts at Liberum estimate that the market for cathodes in electric vehicle batteries will grow by five times in the next five years to $4bn and Umicore will capture about 20 per cent of the market. The cathode is key to how much power a battery can store. While battery makers are aiming to reduce costs of the materials by reducing metals such as cobalt, the company will benefit from growing average size of batteries in electric cars that gives them greater range, Adam Collins, an analyst at Liberum said. Umicore makes cathode materials for nickel-manganese-cobalt (NMC) batteries, which are widely used in electric cars. The company supplies major battery companies such as LG Chem, Samsung SDI and China’s BYD, according to Liberum.

Friday, May 19, 2017

China Is the Future of the Sharing Economy

It's been an excellent few months for startups in China's sharing economy. Perhaps too good. The bike-sharing industry landed its first unicorn, and companies that allow phone users to share battery packs have raised at least $150 million in recent weeks. But at the same time, one startup recently announced that it expects to share at least 500,000 umbrellas in Guangzhou this year while a Jiaxing-based basketball-sharing company is getting positive coverage in the state media. No doubt, given the hype, they won't have trouble securing funding. 
It's easy to mock such businesses. (Just ask Kobe Bryant if anyone wants to share a basketball.) But even as money is wasted and companies merge or go bust, the sharing model looks to have a brighter future in China than almost anywhere else.
Homegrown ride-sharing and home-sharing companies emerged in China early this decade, shortly after Uber Inc. and Airbnb Inc. launched in the U.S. The industry has boomed ever since. According to the Chinese government's sharing-economy research office (there really is such a thing), 600 million Chinese conducted business worth $500 billion in the sector in 2016, up 103 percent over 2015.
Numbers like that attract investors: Chinese sharing companies raised almost $25 billion last year. The sector has grown well beyond cars and apartments: Bike sharing has been one of the country's most visible -- and bubbly -- destinations for venture capital over the last few months. Even as much of the Chinese economy is slowing or stalling, the government expects China's sharing economy to account for 10 percent of GDP by 2020.
Three factors justify that optimism. The first is China's demographic profile. At one end of the spectrum, China's millennials are the engine for the country's world-beating e-commerce industry and the sharing economy that's grown out of it. Rather than splurge on a car -- or even a phone battery pack -- many Chinese youth would prefer to save money for lifestyle experiences such as travel, or to seed their own startups. At the same time, Chinese seniors lack a strong social safety net and are thus dependent upon the support of children and grandchildren. They can also personally remember an earlier, harsher China. Unsurprisingly, they're by nature more frugal, which makes sharing assets more appealing.
The second factor is the rapidly changing nature of Chinese consumption. Skeptical about product safety, faced with rising home prices and burdened by the responsibility of caring for those aging parents, middle-class Chinese report they're becoming more discriminating in how they spend their money. That's propelling a well-documented shift away from mass-market products toward premium products and services. This has a twofold effect. First, money that might have been spent on, say, a car, is instead saved by ride-sharing and applied to other, premium purchases. Second, sharing enables access to premium experiences -- say, via a very good home share during a vacation. Interestingly, this trend parallels the growth of a rich, e-commerce based trade in secondhand goods (in effect, long-term sharing businesses), including luxury items like Gucci handbags.
The third and most important factor is the Chinese consumer's embrace of mobile payment systems such Alibaba Group Holding Ltd.'s AliPay and Apple Inc.'s ApplePay. Chinese mobile-based payments were 50 times greater than those in the U.S. in 2016. These days, it's commonplace to see Chinese consumers waving their phones in front of a payment terminal, or scanning a QR code to complete a transaction which, in many cases, might be for a very small sum. (A typical Chinese bike-share requires payments that range from $0.07 to $0.14 per 30-minute ride.) Little wonder that some investors might think that an umbrella-sharing service could be viable. 
This welcoming climate means many of the world's innovations in sharing businesses may start coming out of China, rather than Silicon Valley. Already Chinese bike-sharing companies are expanding into and being copied in Southeast Asia, spreading a business model built for China's peculiar transportation challenges. And soon China's vast manufacturing base may give rise to an app-based sharing economy of its own, providing small manufacturers access to 3D printers and other equipment. Sure, there will be boondoggles and busts along the way. But one day, China may be the one teaching the world how to share.

From Hair Oil to Cement, India Revamps Taxes: Winners and Losers

The wait is over: India has cleared the way for the biggest tax reform since independence in 1947.
The main beneficiaries of the new goods and services tax, due to be rolled out on July 1, include steelmakers and some consumer goods, though personal care items including sanitary ware will be taxed at the top rate, along with appliances such as air conditioners.
Here’s a look at the winners and losers:

Fast-Moving Consumer Goods

The sector is a clear winner. Consumer staples including milk, fruits and vegetables, grain and cereals have been exempted. Sugar, tea, coffee and edible oil will be taxed the lowest rate of 5 percent. Companies that may gain include Hindustan Unilever, Nestle India and Dabur India. 
Personal-care items to be taxed at 28 percent, save for hair oil, soaps and toothpaste, which will attract an 18 percent levy. This would impact Colgate-Palmolive IndiaGodrej Consumer ProductsMarico and Gillette India. 
Smokers be warned: cigarettes will attract a tax of 5 percent on top of the peak GST rate of 28 percent. ITC, Godfrey Phillips and VST may pass on the higher costs.


Here the impact is likely to be marginal. Vehicles already attract different levies, which add up to 28 percent -- the peak GST rate fixed for the sector. Gains derived from a unified tax system may still be passed on to consumers, analysts say. Maruti Suzuki IndiaTata Motors and Mahindra and Mahindra could benefit.

Consumer Durables

Appliances such as air-conditioners, refrigerators and washing machines will attract the peak rate, which is slightly higher than the existing tax slab. Companies may increase prices to preserve margins, Nirmal Bang Equities said in a note. Whirlpool of India, Voltas and Havells India could be impacted.

Metals, Cement

A reduction in tax on coal and metal ore to 5 percent will cut input costs for steelmakers, benefiting companies including JSW SteelVedanta, Tata Steel and Hindalco Industries. 
Cement makers including ACC and UltraTech Cement may increase prices to offset the impact of the peak rate, though a lower tax on coal is expected to cushion the blow.

Renewable Energy

A 5 percent tax rate on equipment like solar panels and wind turbines may help keep a lid on project costs for developers such as Inox Wind and Suzlon Energy.

Wednesday, May 17, 2017

Digital Revolution Clears Hurdles for Asia's Emerging Economies

Asia’s emerging economies are embracing the digital revolution.
From the Philippines to Indonesia, developing nations across the region are jumping on the digital bandwagon faster than expected given their relatively low income levels, according to a new report by Deloitte LLP.
For economic policy makers, the shift matters. Governments, businesses and consumers are using digital technologies to leapfrog development hurdles. In India--which already has more Facebook users than the U.S.--digital transactions jumped 59 percent in March from December last year, the first month after the government announced a demonetization plan last year, Deloitte said.
In Indonesia, there are 1.3 mobile phones per capita in the country and most Internet users prefer mobile access, boding well for greater connectivity between government services and the wider populace; Indonesia also has more Twitter users than the U.K., Deloitte estimates show.
“Asia has become the center of global economic growth and by embracing digital, it will continue to lead global economic growth over the coming decade,” Deloitte said. 
China is now the world’s largest e-commerce market, while Singapore and other Asian countries have been gaining ground in the global competition for attracting and developing business talent amid a drive to build high-tech hubs.
Growth potential is still significant across multiple industries in poorer nations, Deloitte notes. In Indonesia fewer than one in 10 small businesses describe themselves as having advanced online capabilities while 73 percent are offline or have very basic online capabilities.
At the same time, the Philippines, India and Indonesia still have some of the lowest digital banking penetration rates in Asia.

Mom-and-Pop Joints Are Trouncing America's Big Restaurant Chains

There’s a limit to unlimited breadsticks after all.
Americans are rejecting the consistency of national restaurant chains after decades of dominance in favor of the authenticity of locally owned eateries, with their daily specials and Mom’s watercolors decorating the walls.
It’s a turning point in the history of American restaurants, according to Darren Tristano, chief insights officer at Chicago-based restaurant research firm Technomic.
“This really seems to be the dawning of the era of the independent,” Tristano said. “The independents and small chains are now outperforming. The big chains are now lagging.”
Free-marketing websites, such as Yelp Inc., have boosted the fortunes of independents in the age of McDonald’s, Cracker Barrel, Domino’s, Taco Bell, Olive Garden -- the list goes on. In a shift, annual revenue for independents will grow about 5 percent through 2020, while the growth for chains will be about 3 percent, according to Pentallect Inc., an industry researcher in Chicago. Sales at the top 500 U.S. chains rose 3.6 percent last year. The gains were larger, 3.9 percent, for the whole industry, Technomic data show.

Closing Locations

It’s not that Wendy’s Baconator or the Grand Slam Slugger Breakfast from Denny’s will soon go the way of the dodo. But some national chains are feeling the pain amid dismal sales. Subway Restaurants, the biggest U.S. food chain by number of locations, saw the number of domestic outlets declinefor the first time ever last year. Noodles & Co. and Red Robin Gourmet Burgers Inc. are shutting locations after failing to attract customers. Applebee’s, owned by DineEquity Inc., reported same-store sales tumbled almost 8 percent in its latest quarter, and casual-dining chain Ruby Tuesday Inc. said in March it may sell itself after a prolonged slump.

Large chains seem rooted in the American experience. But times, and tastes, are changing. Customers these days believe locals have better food, service, deals and even decor, the Pentallect report said.
Sales are reflecting that. Last year, revenue was up 20 percent at DineAmic Group in Chicago, which owns nine different restaurants.

Honors System At Chicago’s Brown Bag Seafood Co., where sales jumped 63 percent in 2016, lunch customers can grab a cookie out of the “honors system” mailbox for just $1. There are homey touches, like a watercolor painting of the Clark Street Beach in nearby Evanston, Illinois, that founder Donna Lee’s mother painted. 

Lee started Brown Bag in 2014 after realizing chains didn’t do it for her. “It feels like you’re there only and solely to get your food quickly and get out the door,” she said. “There really is no charm.” Brown Bag’s top seller is its daily-catch powerbox with grilled fish -- barramundi was on the menu on a recent weekday -- served atop quinoa, wild rice and spinach for $9.99. A nearby Panera Bread Co., which has more than 2,000 locations in 46 states and Canada, charges the same price for a strawberry poppyseed salad with chicken.

Maggiano’s has new menu items and meals that cater to customers’ allergies and diets -- think vegetarian, vegan and the occasional gluten-free ravioli. The chain updated its menu to include executive chef photos and short bios, and in February it introduced an emblem of millennial hip: brunch.Some chains are trying to imitate the success of smaller, independent brands. At Maggiano’s Little Italy, which has 52 locations and is owned by Chili’s parent Brinker International Inc., traffic has been on the wane. Same-store sales dropped 1.6 percent in the most recent quarter for the fourth-straight decline.

“The experience of dining out has become much more important than it was before,” said Larry Konecny, chief concept officer.

Bullish on Mom

Restaurant suppliers also have noted the trend. Diners prefer the experience, service and value offered by independent restaurants, Pietro Satriano, chief executive officer of US Foods Holding Corp., said during a conference call this month. “Growth with independents was very solid” in the latest quarter, he said.
While national chains advertise like crazy, mom and pops depend mostly on word of mouth and Yelp reviews.
“It’s not the same barriers to entry that there were, that if you put up this group of restaurants that you have to have this big TV campaign. No, you don’t,” said John Gordon, restaurant and franchisee consultant at Pacific Management Consulting Group in San Diego.
It’s “authentic” and Instagram-able experiences that diners are searching for these days, Gordon said. “It’s not experiential to sit in a rundown McDonald’s.” 

Monday, May 15, 2017

Data-led tech threatens to make agents obsolete

New online property platforms offer a greater wealth of data than ever before. They also provide the means to do business in a transparent and standardised way, potentially mitigating transaction risks without the need for an agent. Websites such as Rightmove and Zoopla have already offered a snapshot of how access to data can change the industry. Buyers and renters find out everything they need to know about a property without setting foot in an agent’s office. Online platforms such as Purplebricks and Yopa are taking this a step further by offering upfront fixed fees for transactions instead of commission. So far, commercial property agents have escaped such disruption. But they are vulnerable. “The traditional gut-feel world is going to change,” says Andy Pyle, head of UK real estate at KPMG. “Agents that don’t change with it or ahead of it will become obsolete. Access to data will accelerate the pace of obsolescence.” KPMG is playing its part in this process by launching an online platform called Deal Room to sell property loan portfolios. For now, it is focused on portfolios larger than £50m. But Mr Pyle says Deal Room could be adapted to sell individual properties. “Smaller [commercial] deals may be more ripe for disruption. We could do what Zoopla and Purplebricks have done for the residential market for the commercial property sector,” he says. Property Partner, an online property crowdfunding platform, is also changing the investment landscape. It has reduced barriers to investing by offering shares in buy-to-let properties that pay dividends and track asset values. The company plans to create the first global stock exchange for all types of property. It used agents to find the £51.5m of transactions completed so far, but does not expect this to always be the case. “Once we get the [global] scale, we will have a market of buyers and sellers and there may not be a place for agents any more,” says Mark Weedon, its head of institutional development. The amount of information everyone has on one another checks the risks Tushar Agarwal The company is attracting a new type of investor who previously could not afford to buy property and does not want the liabilities attached to managing assets. If the company achieves its global ambitions it will probably attract some investors who know little about property. “One of the biggest risks is people who don’t understand it well enough and overestimate their liquidity position,” acknowledges Mr Weedon. So far, he says, this has not happened. Hubble, a start-up based in London’s tech hotspot of Shoreditch, is introducing a similar concept to the office leasing market. It is attempting to empower tenants by using data to improve the market’s transparency. The company brings together people hunting for flexible office space with those who own space on an online platform that automates a search process normally undertaken by agents. “The average transaction time for office space is down from three months to three weeks — although in some instances we can do it in three days,” says Tushar Agarwal, chief executive of Hubble. He argues that agents “hide behind smoke and mirrors” to support higher prices. To combat the usual upfront risks faced by young businesses, Hubble has standardised client reviews, leases, contracts, deposits and financial outlay. The are risks involved in doing deals directly online. Property agents have long been characterised as a necessary evil by many clients. Yet many would also begrudgingly concede that the market advice received from brokers can often be of comfort despite its cost. This underpinning of the intermediary’s central role, though, is weakening. “The risk to consumers is real,” Mr Agarwal says. “But on other platforms it is dealt with by ratings and reviews. The amount of information everyone has on one another checks the risks. We have come a long way from where a broker is needed.” Agencies are alive to the threats posed by data and technology. As a result, larger companies are investing heavily in both to remain relevant. “We are reinventing how we provide services via data,” says Charles Boudet, managing director of JLL France. “The risk also creates opportunity — so we are completely behind the data drive. It is up to us to move further up the value chain and give better advice.” Chandra Dhandapani, chief digital and technology officer at CBRE, is equally bullish about the opportunities data and technology could bring. But there is a caveat. “Digital technology is only as effective as the quality of the data that fuels it, and importantly, the expertise of the organisation that leverages it,” she says. “The risk associated with purely online transactional activity is the imbalance of knowledge and understanding between the parties involved.”

One-in-three people ready to ditch cars for apps

One-in-three people say the ability to book a taxi or minicab through their smartphone is an alternative to owning a car, in a sign of the potential upheaval vehicle manufacturers are facing to their business models.  

Carmakers are grappling with the prospect of falling vehicle ownership in large cities, where parking costs and congestion make traditional ownership less attractive than in rural areas. 

Ride-sharing and on-demand taxi apps were considered a viable alternative to ownership by 34 per cent of people, up from 29 per cent a year earlier, in a global Capgemini survey of 8,000 people in eight countries.  

The annual consumer survey, which polled 1,000 consumers in the UK, US, France, Germany, Italy, India, China and Brazil, also showed the percentage of people who would consider using an on-demand service had risen from 34 per cent to 50 per cent in the past two years. 

 “There is now a huge interest in this,” said Nick Gill, senior automotive analyst at Capgemini. “In the last year it has really taken off.” 

This is a trend that is likely to continue, with two-thirds of the world’s population set to live in cities by 2050. 

Several carmakers have responded by investing in ride-booking services, such as Uber or Lyft, while some, from BMW to Ford, have launched their own car sharing schemes in city centres. 

The launch of shared riding options, such as Uber’s Pool or Gett’s GettTogether service, has increased the scope of on-demand services. Ford and VW are also launching inner-city minibus services.  

Mr Gill forecast that the shift from car ownership to shared ownership or on-demand services is “closer than we think”, as city authorities bring in measures to disincentivise personal car use and ease congestion. 

He said within five years there may be “strong legislation or pushes, fiscal incentives to not drive cars, and the inner-city areas reserved just for mobility services”. 

The survey showed a spread in attitudes towards transport services between developed nations and emerging markets. 

While 80 per cent of respondents in China said they were likely or very likely to use “mobility on demand” services, the figure was 39 per cent in the US, 29 per cent in Germany and just 18 per cent in the UK. Mr Gill said the numbers in China were “very scary” for carmakers. 

Didi, the Chinese rival to Uber, carries out almost 20m rides daily, or 7bn a year. But despite the growing use of ride-booking options in China, attachment to car ownership remains on a similar level with other international markets. 

In both mature markets and emerging markets, a third of consumers said they would consider app services as an alternative to car ownership. In one surprising finding, those aged over 50 were fractionally more likely to ditch their vehicles in favour of transport apps compared with those in the 35-49 bracket. Some 32 per cent of 35 to 49-year-olds would consider apps as an alternative to a car, while 34 per cent of over-50s would. Among those aged 18-34, the figure was 36 per cent.