Transcript: US-owned ship attacked off Yemen

This is an audio transcript of the FT News Briefing podcast episode: ‘US-owned ship attacked off Yemen’

Josh Gabert-Doyon
Good morning from the Financial Times. Today is Tuesday, January 16th, and this is your FT News Briefing.

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A US-owned cargo ship is hit by a missile off the coast of Yemen. Europe’s largest economy contracts. Plus, the rise and rise of Chinese electric vehicles. I’m Josh Gabert-Doyon , and here’s the news you need to start your day.

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Houthi forces struck a US-owned commercial vessel off the coast of Yemen on Monday. The rebel group says they’re attacking ships in the area in response to Israel’s offensive against Gaza. The strike comes despite raids by US and UK forces in Yemen last week, which were meant to prevent Houthi attacks on maritime trade. The ship’s crew and cargo in this latest attack were not seriously harmed, but many of the world’s largest shipping companies have stopped using the Red Sea route. The latest attack underscores the risk of Washington being drawn deeper into a regional conflict.

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Germany is off to a rough start this year. Data from the country’s statistical agency places it as the worst performing major economy in the world. Germany’s output contracted in 2023 — bad news for a country that is seen as a major driver of European industry. Germany is struggling to work through a couple of tricky economic issues. Here to tell me more is Martin Arnold, the FT’s Frankfurt bureau chief. Hi, Martin.

Martin Arnold
Hello.

Josh Gabert-Doyon
So how has Germany ended up being the world’s worst performing major economy?

Martin Arnold
So I would say that there’s three big reasons that have dragged down the German economy. They are in many ways common to other countries, but they’ve hit Germany harder. So they are high inflation — in particular, high levels of energy inflation. Then there’s high interest rates, which have weighed on the property market here in Germany, but also weighed on industry. And finally, weak global demand,  which is ... Germany is a ... relies heavily on exports. That’s really hit Germany harder as well.

Josh Gabert-Doyon
And what does it mean for the country? Are people and businesses struggling?

Martin Arnold
Yes. We have seen in the past year a big increase in the number of insolvencies that are being filed. So the number of businesses that are going bankrupt, they were up about 25 per cent in 2023. House prices here in Germany have fallen about 10 per cent in the past year. It’s not a particularly happy place at the moment, Germany. There’s quite a lot of political discontent and these rather gloomy figures just added to that downbeat mood.

Josh Gabert-Doyon
OK, so pretty dreary. But you know, the factors you mentioned as being the driver of this poor economic performance, that’s something that’s hitting Europe more broadly. Why is Germany, in particular, feeling the burn here?

Martin Arnold
Germany has been particularly hard hit by this surge in energy prices that we saw after the Russian invasion of Ukraine. A lot of German industry is very energy-intensive. And Germany was very reliant on Russian ... imports of Russian energy. And that’s really hit industrial production here in the manufacturing heartland of Europe.

Josh Gabert-Doyon
What’s the outlook for Germany in this year, in 2024? Could it see stronger economic growth?

Martin Arnold
Most economists think there will be a pick-up in growth. So for instance, the OECD predicts growth for Germany in 2024 of 0.6 per cent. But since those forecasts were published late last year, there’s been several factors that have caused economists to downgrade their forecasts for Germany even lower than that, including a government budget crisis.

Josh Gabert-Doyon
Martin Arnold is the FT’s Frankfurt bureau chief. Thanks, Martin.

Martin Arnold
You’re very welcome.

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Josh Gabert-Doyon
Earlier this month, the Chinese company BYD overtook Tesla as the world’s largest electric-car maker. The founder of the company, Wang Chuanfu, isn’t nearly as high-profile as Elon Musk, but he’s been able to lead the company on a pretty astounding global expansion. So how did BYD get to be so successful? And can the company keep this up? The FT’s China correspondent Edward White joins me now. Hi, Ed.

Edward White
Hi.

Josh Gabert-Doyon
Tell me a little bit about BYD and its founder.

Edward White
So, Wang Chuanfu is a really extraordinary Chinese business person. He is considered something of a savant when it comes to engineering. And the people that have invested in him have a great belief in him. And I think that the entire company revolves very much around him as an individual. He’s a billionaire now, but he started off life in very humble beginnings. He managed to get himself into a good university, ultimately became a professor. His expertise was in metals and chemistry and that kind of thing. And then he saw an opportunity in manufacturing and engineering, and he found his way to Shenzhen, the city in southern China where at the time, in the 1980s and 1990s, was really booming and becoming a global manufacturing hub for technology companies. And so his company, which he founded in 1995, BYD, started off really much more focused in the world of manufacturing batteries for early cell phones. And then over time, he decided that the future lay not so much in cars, but actually in electric vehicles.

Josh Gabert-Doyon
And what is it about the company that allowed BYD to get such a foothold in the EV market?

Edward White
The cars themselves are good. They’re cheap. They have very cutting-edge technology. But in terms of overtaking Tesla, to be able to do this at such a scale and to ramp up production in the way that they have and sell so many cars in the last few years, practically coming from nowhere. That has really come down to a few key factors that you don’t necessarily see when you just buy the car. This is all about manufacturing. It’s all about cost cutting. It’s about being able to produce at scale and also use a supply chain where you control most of the elements, really from the mines all the way through to the batteries to the computer chips that go into cars. And that’s something that very few companies do in any industry, but particularly in electric vehicles, which is something that really is now the envy of most of their competitors.

Josh Gabert-Doyon
Right. So tell me more about this rivalry with Tesla. How does a BYD car compare to a Tesla?

Edward White
The key thing really is less about Tesla versus BYD, but it’s actually about BYD and Tesla versus the rest of the auto industry. And you’re talking about companies with hundreds of years of operations behind them. You know, Toyota for Japan, Volkswagen for Germany and for Europe and many others. And these companies now face an existential crisis. If we look at just the EV market in China alone, 45 per cent or thereabouts of new car sales are sold out by BYD and Tesla. So two companies are dominating. Many people would say that the quality of the Tesla cars is still possibly superior. However, that is going to become a very close race, and it might matter less if BYD is producing cars at half the price.

Josh Gabert-Doyon
And it’s not just China, is it? The companies moving into foreign markets, and they face these very established carmakers like you mentioned, that has to pose some challenges to BYD. What kind of issues are they up against?

Edward White
So BYD has found itself trying to expand overseas, possibly at one of the worst times in terms of Chinese relations with the west. On a political front, they’re going to face a lot of opposition. People think that they have had too much state support from Beijing, and that makes them a company that has benefited from unfair trade practices. So that’s a real big problem for them and one that has not been really addressed, I think, by the company just yet. However, on the other hand, here’s a company which could really help kick-start the electric vehicle industries and create a competitive landscape and, and drive innovation in other markets. And so the world, the west in particular, with some governments, they have a choice between trying to block China, trying to slow down China’s rise and trying to chase faster and more ambitious climate change goals. And it’s a really stark choice, and that’s ultimately what it comes down to.

Josh Gabert-Doyon
Ed White is the FT’s China correspondent. Thanks, Ed.

Edward White
Thank you.

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Josh Gabert-Doyon
You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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