When Tesla’s Shanghai plant and other auto factories were shut over the last two months by emergency measures to control China’s biggest COVID-19 outbreak, the burning question was how quickly they could restart to meet surging demand.

But with the Shanghai lockdown grinding into its fourth week, and similar measures imposed in dozens of smaller cities, the world’s largest boom market for electric cars has gone bust.

Other companies from luxury goods makers to fast-food restaurants have also offered a first read on the lost sales and shaken confidence of recent weeks, even as Beijing rolls out measures to help COVID-hit industries and stimulate demand.

Joey Wat, CEO of Yum China, which owns KFC and Taco Bell, said in a letter to investors that April sales had been “significantly impacted” by COVID-19 controls. In response, the company simplified its menu, streamlined staffing and promoted bulk orders for locked-down communities, she said.

The pressing question now is: how and when will Chinese consumers start buying everything from Teslas to tacos again?

In China’s once-hot EV market, the recent turmoil is a stark example of a one-two economic punch, first to supply and then to demand, from Beijing’s hard-line implementation of COVID-19 controls across the world’s second-largest economy.

Before Shanghai was locked down in early April to contain a COVID-19 outbreak, sales of electric vehicles had been booming. Tesla’s sales in China had jumped 56% in the first quarter, while sales for EVs from its larger rival in China, BYD, had quintupled. Then came the lockdowns.

Showrooms, stores and malls in Shanghai were shut and its 25 million residents were unable to shop online for much beyond food and daily necessities due to delivery bottlenecks. Analysts at Nomura estimated in mid-April that 45 cities in China, representing 40% of its GDP, were under full or partial lockdowns, with the economy at a growing risk of recession.

The China Passenger Car Association estimated retail deliveries of passenger cars in China were 39% lower in the first three weeks of April from a year earlier.

COVID-19 control measures cut into shipments, car dealers held back from promoting new models, and sales tumbled in China’s richest markets of Shanghai and Guangdong, the association said.

“Much will depend on how fast these restrictions can be lifted but the coming weeks may be difficult,” Helen de Tissot, chief financial officer at French spirits maker Pernod Ricard, told Reuters on Thursday. 

Kering, which owns luxury brands including Gucci and Saint Laurent, said a “significant chunk” of its stores had been shuttered in April.

“It’s very difficult to predict what will happen after the lockdown,” said Jean-Marc Duplaix, Kering’s chief financial officer. 

Apple also warned at its latest results over COVID-19-hit demand in China. 

City authorities from Beijing to Shenzhen are trying to stimulate some demand by giving out millions of dollars’ worth of shopping vouchers to encourage residents to spend.

On Friday, Guangdong, a manufacturing powerhouse with an economy larger than South Korea’s, rolled out its own incentives to try to restart sales of EVs and plug-in hybrids.

These include subsidies of up to $1,200 for a select range of what China classes as “new energy vehicles,” including from Volkswagen and BYD. Tesla, second in EV sales in China, was excluded from the subsidy program.

The U.S. automaker did not respond to a request for comment.

Chongqing, another major auto manufacturing hub, in March said it would offer cash of up to $300 for shoppers who exchange old cars for new models and set aside another $3 million for other measures to spur sales.

While noting such measures, Credit Suisse analysts still said they believe COVID-19 control measures have put both online and offline consumption on a downward spiral.

“We see the consumer sector as being at major risk if the prolonged pandemic and further tightening continue across China,” they said in an April 19 research note.
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Germany says it’s making progress on weaning itself off Russian fossil fuels and expects to be fully independent of Russian crude oil imports by late summer.

Economy and Climate Minister Robert Habeck said Sunday that Europe’s largest economy has reduced the share of Russian energy imports to 12% for oil, 8% for coal and 35% for natural gas. Germany has been under strong pressure from Ukraine and other nations in Europe to cut energy imports from Russia that are worth billions of euros, which help fill Russian President Vladimir Putin’s war chest.

“All these steps that we are taking require an enormous joint effort from all actors and they also mean costs that are felt by both the economy and consumers,” Habeck said in a statement. “But they are necessary if we no longer want to be blackmailed by Russia.”

The announcement comes as the whole European Union considers an embargo on Russian oil following a decision to ban Russian coal imports starting in August.

Germany has managed to shift to oil and coal imports from other countries in a relatively short time, meaning that “the end of dependence on Russian crude oil imports by late summer is realistic,” Habeck’s ministry said.

Weaning Germany off Russian natural gas is a far bigger challenge.

Before Russia invaded Ukraine on Feb. 24, Germany got more than half of its natural gas imports from Russia. That share is now down to 35%, partly due to increased procurement from Norway and the Netherlands, the ministry said.

To further reduce Russian imports, Germany plans to speed up the construction of terminals for liquified natural gas, or LNG. The Energy and Climate Ministry said Germany aims to put several floating LNG terminals into operation as early as this year or next. That’s an ambitious timeline that the ministry acknowledged “requires an enormous commitment from everyone involved.”

Germany has resisted calls for an EU boycott on Russian natural gas. It also watched with worry last week as Moscow immediately halted gas supplies to Poland and Bulgaria after they rejected Russian demands to pay for gas in rubles. European officials called those moves by Russia “energy blackmail.”

Germany’s central bank has said a total cutoff of Russian gas could mean 5 percentage points of lost economic output and higher inflation.
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Germany said Sunday it has made progress in sharply reducing its reliance on Russian energy, a strategic shift Europe’s biggest economy has embarked on since Russia invaded Ukraine.

Russian supplies now make up 12 percent of Germany’s oil imports compared to 35 percent previously, the economy ministry said in a statement.

Coal from Russia has also been slashed to eight percent compared to 45 percent of Germany’s purchases previously.

Dependence on gas remains substantial, but Europe’s biggest economy had also reduced its Russian sources to 35 percent of the total compared to 55 percent before Russia’s aggression in Ukraine.

The government had in March laid out plans to halve oil imports from Russia by June and to end coal deliveries by the autumn.

Germany is also expected to be able to largely wean itself off Russian gas in mid-2024. 

“All these steps that we have taken require an enormous effect from all players and they also mean costs that are being felt by the economy and consumers,” said Economy Minister Robert Habeck.

“But they are necessary if we no longer want to be blackmailed by Russia,” he stressed. 

The reliance of Europe’s biggest economy on Russian energy has been exposed as an Achilles’ heel as Western allies scramble to penalize Vladimir Putin for his attack on Ukraine.

The export giant has since been racing to find alternative energy suppliers to replace Russian contracts.
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Голова МЗС провів телефонну розмову з державним секретарем США Ентоні Блінкеном
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Billionaire finance guru Warren Buffett, who complained recently that he did not know where to put his money, said Saturday he has invested billions of dollars so far this year, even as he took jabs at Wall Street.

Buffett, 91, took questions for five hours at the much-anticipated annual shareholder meeting of his holding company Berkshire Hathaway in Omaha, Nebraska, its first in-person gathering since before the COVID-19 pandemic. He did so along with his right-hand man Charlie Munger, who is 98.

The event, dubbed a “Woodstock for Capitalists,” draws thousands of shareholders from around the world to hear the investment wisdom of Buffett, revered among investors as the “Oracle of Omaha.”

As markets vacillated since the start of the year, Berkshire Hathaway spotted bargains and bought shares worth more than $51 billion from January through March.

For example, it raised its investment in oil company Chevron from $4.5 billion in late 2021 to $26 billion in late March. Chevron is now among the top four of the holding’s investments, along with American Express, Apple and Bank of America. Berkshire Hathaway also acquired a 14% stake in Occidental Petroleum.

It bought an 11% stake in computer maker HP, as well, and increased its share of video game maker Activision — which is being acquired by Microsoft — to 9.5%.

Berkshire sold shares worth $10 billion over the same January to March period.

Bottom line, Berkshire’s war chest of cash on hand dropped from $147 billion to $106 billion.

But Buffett said investors need not worry because Berkshire “will always have a lot of cash” to weather hard times.

Joining him and Munger on the podium were vice president Greg Abel — at 59, he is Buffett’s designated successor — and company executive Ajit Jain.

Profits down

Buffett took some pot shots at Wall Street, saying, “They make a lot more money when people are gambling than when they are investing.”

He said the fact that his company acquired 14% of Occidental Petroleum in just two weeks shows that “overwhelmingly large companies in America, they became poker chips.”

Of cryptocurrencies, he said: “Whether it goes up or down in the next year or five or 10 years, I don’t know. But the one thing I’m pretty sure of is it doesn’t produce anything.”

The question of succession at Berkshire Hathaway is a big one because of the age of Buffett and Munger, but neither said anything about retiring.

Before the meeting, Berkshire said its net profit plunged by 53% in the first quarter due to a drop in the paper value of its investments.

Berkshire listed net profits of $5.5 billion, down sharply from the $11.7 billion of the year-earlier period.

Operating profits of companies owned by the conglomerate — ranging from insurance companies to energy providers and even frozen desserts — remained essentially unchanged, at $7.04 billion.

A drop in profits from insurance companies was compensated by profits from rail lines, energy firms, manufacturing, services and retail sales, said a statement from Berkshire Hathaway.

But the value of its investments, which can be volatile from one quarter to the next, plunged amid the year’s market weakness, leading to a paper loss of $1.58 billion.

Buffett regularly advises his shareholders to ignore quarterly fluctuations, whether positive or negative.

The value of Berkshire shares themselves has held up well— rising 7% since the beginning of the year, while the S&P 500 index, representing the 500 biggest Wall Street-traded firms, lost more than 13%. 
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Prices for Russian credit default swaps — insurance contracts that protect an investor against a default — plunged sharply overnight after Moscow used its precious foreign currency reserves to make a last-minute debt payment Friday.

The cost for a five-year credit default swap on Russian debt was $5.84 million to protect $10 million in debt. That price was nearly half the one on Thursday, which at roughly $11 million for $10 million in debt protection was a signal that investors were certain of an eventual Russian default.

Russia used its foreign currency reserves sitting outside of the country to make the payment, backing down from the Kremlin’s earlier threats that it would use rubles to pay these obligations. In a statement, the Russia Finance Ministry did not say whether future payments would be made in rubles.

Despite the insurance contract plunge, investors remain largely convinced that Russia will eventually default on its debts for the first time since 1917. The major ratings agencies Standard & Poor’s and Moody’s have declared Russia is in “selective default” on its obligations.

Russia has been hit with extensive sanctions by the United States, the EU and others in response to its Feb. 24 invasion of Ukraine and its continuing military operation to take over Ukrainian territory.

The Credit Default Determination Committee — an industry group of 14 banks and investors that determines whether to pay on these swaps — said Friday that they “continue to monitor the situation” after Russia’s payment. Their next meeting is May 3.

At the beginning of April, Russia’s finance ministry said it tried to make a $649 million payment due April 6 toward two bonds to an unnamed U.S. bank — previously reported as JPMorgan Chase.

At that time, tightened sanctions imposed for Russia’s invasion of Ukraine prevented the payment from being accepted, so Moscow attempted to make the debt payment in rubles. The Kremlin, which repeatedly said it was financially able and willing to continue to pay on its debts, had argued that extraordinary events gave them the legal footing to pay in rubles, instead of dollars or euros.

Investors and rating agencies, however, disagreed and did not expect Russia to be able to convert the rubles into dollars before a 30-day grace period expired next week.
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