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Daily Intelligence Briefing
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Identifying Change-Driven Investment Themes – Five sections, explained here.
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We bring you our Daily Intelligence Briefing courtesy of McAlinden Research Partners. The report is provided to Hedge Connection members for free. Below is snapshot, login to view the full report. Not a member? Join today. McAlinden Research Partners is offering a complimentary one-month subscription to receive the Daily Intelligence Briefing – to Hedge Connection clients/friends. Activate yours by contacting Rob@mcalindenresearch.com and mentioning “Sent by Hedge Connection” |
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I. Today’s Thematic Investment Idea
A deep dive into a market driver with alpha generating potential.
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Warehouse REITs are on Fire. Here’s Why. →
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What are the signs of a booming warehouse market? Record-breaking deals, vacancy rates near all-time lows, and a shortage of facilities. And while ecommerce continues to boost the fortunes of the warehouse sector, volatile US trade policies and the UK’s pending breakup with the European Union are exacerbating a demand/supply imbalance. Read more +
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II. Updates of Themes on MRP’s Radar
Follow-up analysis of key market drivers monitored by MRP.
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Bonds: Global bond yields have fallen to 120-year low
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UK: U.K. Economy Is Set for the Worst Quarter Since 2012
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Trade War: S&P: 10% list 4 tariffs more damaging than previous 3
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Fintech: Mobile banking brings sea change in China’s financial system
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Media: Facebook Offers News Outlets Millions of Dollars a Year to License Content
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IoT: Huawei launches new operating system, says it can ‘immediately’ switch from Google Android if needed
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Auto Parts: Auto Supplier Continental Slams Brakes on Engine Parts Amid Shift to Electric
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Cannabis: Farmers Ditch Soybeans for Weed’s Cousin, Hemp
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Metals: Nickel soars on talk of Indonesia export ban
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Metals: Fall in Copper Prices Threatens to Drive Metal Shortages
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Emerging Markets: LatAm credit risk has been generally low, but the five-year CDS spreads ticked up over the past month.
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IV. Active Thematic Ideas
MRP’s active long and short themes, with an archive of follow-up reports.
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See Them Here →
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V. Macroeconomic Indicators
Key data releases relevant to MRP’s Active Thematic Ideas.
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See Them Here →
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Warehouse REITs are on Fire. Here’s Why.
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What are the signs of a booming warehouse market? Record-breaking deals, vacancy rates near all-time lows, and a shortage of facilities. And while ecommerce continues to boost the fortunes of the warehouse sector, volatile US trade policies and the UK’s pending breakup with the European Union are exacerbating a demand/supply imbalance.
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Consumers expect to be able to buy and return goods anywhere nowadays. Five-to-seven-day delivery is being replaced by one-to-two-day delivery, and even same-day delivery. Drone technology offers hopes of facilitating quick deliveries from remote locations in the future, but, for now, warehouses in close proximity to densely populated areas offer the best solution.
Record-Breaking Deals
Blackstone’s $18.7 billion warehouse bet is an indication of just how appealing that sector is to real estate players. In June, the world’s largest private manager of real estate assets doubled its US industrial holdings by purchasing 179 million square feet of logistics assets from Singaporean conglomerate, GLP Pte. The purchased portfolio comprises 1,300 properties spread across at least nine US states and includes Amazon as its biggest tenant.
Other deals already in negotiation are likely to follow this year, given that Blackstone is in the process of raising $5 billion for another real estate fund. As Ken Caplan, the global co-head of Blackstone Real Estate, said in a statement: “Logistics is our highest conviction global investment theme today … we look forward to building on our existing portfolio to meet the growing e-commerce demand.”
The scope of Blackstone’s record-breaking deal underscores the reality that a growing number of people would rather shop online than trek out to the store. And, the faster shoppers want those deliveries to arrive, the more valuable warehouse space will become.
Vacancy Rates At All-Time Lows
This expectation has led to a massive surge in demand for facilities. The need for space to store and distribute goods is so great that warehouse builders are having trouble keeping up with demand.
Take the United States, for example, where 25% to 30% of warehouse space is already dedicated to ecommerce. About 260 million square feet of new supply will hit the market this year, and 70% of that space is speculative — meaning, the warehouses are being built without a tenant under contract. Yet, developers are not worried about overbuilding anytime soon. That’s because there’s been a shortage of space averaging 170 million square feet every year since 2015. Moreover, rents have increased by 19.2% over those four years.
Following a decade of tightening supply, the US warehouse vacancy rate is at an all-time low of 4.4%. The supply of new facilities coming to market this year should therefore be absorbed easily by the ecommerce, food & beverage, wholesaler and third-party logistics users that have dominated pre-leasing activity lately.
Meanwhile, big warehouses are popping up on roadsides across Britain and Europe, and confirming the rising popularity of ecommerce in that part of the world. Strong demand for warehouses in the region has pushed vacancy rates down to 5.5%. This is true even in smaller markets like Scotland where demand for warehouses passed 360,966 sqft for the last six months of 2019. That’s a 180% increase on the full year figure for 2018 and marks a three year high as supply lags behind. The supply shortage in size and quality of available units has led to the lowest vacancy rate the country has ever recorded at 5.55%.
Trade-Related Stockpiling Exacerbates Warehouse Shortages
Politics are also affecting the market. For the past year or so, US importers have been front-loading their orders to get goods through customs before various tariff deadlines. While that strategy has enabled them to save millions of dollars, it has resulted in crammed storage spaces, especially on the West Coast of the United States.
One of the world’s biggest warehouse complexes which serves the California ports and boasts 1.8 billion square feet of capacity — enough room to house 9 million cars — is said to be “bursting at the seams.” Spare room is reportedly down to an unprecedentedly low level of about 1%-2%. That warehouse congestion may intensify, as new China tariffs coincide with back-to-school shopping and, if Trump escalates them through the holiday season.
The trade-related warehouse shortage is not just a US phenomenon. Across the pond, storage space is scarce and warehouses are running near full capacity as a result of companies stockpiling in preparation for the UK’s exit from the EU. Brexit was meant to happen on March 29, but was delayed to the end of October after the UK’s Parliament rejected the withdrawal agreement that the previous prime minister, Theresa May, had negotiated with the EU.
Before the extension was granted, many firms used up warehouse space in England and Ireland on the expectation that there would be delays moving goods between their respective ports if Britain crashed out of the EU on March 29 without a deal. Peter Ward, Chief executive of the UK Warehousing Association (UKWA) remarks that, while speculative warehouse building has been on the rise, the UK short-term plug-and-play warehouse space is still insufficient to cope with a no-deal Brexit.
Tailwinds for Warehouse REITS
Given the trends highlighted above, it should come as no surprise that warehouse REITs are having a stellar year. One such example is the Pacer Benchmark Industrial Real Estate SCTR ETF (INDS), which invests in US companies that generate the majority of their revenue from industrial REITs that are part of the e-commerce distribution and logistics network. INDS is also benefitting from current monetary policy tailwinds since REITs generally do well during periods of falling rates as their yields become more attractive.
INDS has surged 36% year-to-date, outperforming the Real Estate Select Sector SPDR Fund (XLRE) which has risen 27% and the SPY which has gained 16% over the same period.
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Industrial Real Estate vs Real Estate vs S&P 500
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Source material for today’s market insight…
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Warehouses
Online retailers are transforming warehouse construction
As e-commerce has soared in popularity, U.S. warehouses have evolved to meet the needs of online retailers, transforming from basic storerooms into automated, material-handling nerve centers.
The race to get products to the end-user as fast as possible has transformed the way warehouses are designed and built, said Brock Grayson, vice president at Layton Construction , which has constructed 10 million square feet of e-commerce distribution centers in the past five years for clients including Amazon, Macy’s, Home Goods and UPS.
“Gone are the days of stacking the product on the [distribution center] floor and moving it via forklifts,” said Daren Sealover, project executive with Graycor Construction Co., which has built more than 20 million square feet of industrial space including distribution centers, cold storage warehouses and manufacturing facilities in the past five years.
One of the main drivers of this transformation has been the addition of high-tech sorting equipment. Twenty-first century retailers rely on automated systems like pickers and robots to move merchandise faster and sometimes with less labor. These automated systems require special design and construction considerations, experts say, and require builders to stay up to date on changing specifications.
Automated storage and retrieval systems (ASRS) are featured prominently in many distribution and fulfillment center projects. The robotics-driven technology can safely retrieve merchandise placed at heights of more than 120 feet.
Read the full article from Construction Dive +
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Warehouses
U.S. warehouses full after import surge
A short drive outside Los Angeles lies one of the world’s biggest warehouse complexes. Gene Seroka says its 1.8 billion square feet of capacity — enough room to house 9 million cars — is “bursting at the seams.” The warehouse district is part of the Inland Empire, serving the Port of Long Beach and the twin port of Los Angeles, where Seroka is executive director. Together they handle almost half of American’s maritime trade with China.
Bloated storage facilities are a consequence of President Donald Trump’s trade war with China and an illustration of how it’s throwing supply lines into disarray, forcing business to improvise. But as the tariffs keep mounting, they’re running out of solutions to avoid them.
It’s not just near ports that storage space is strained, Seroka said. “The surge in imports late last year, driven by anxieties over higher tariffs, coincided with the continued explosion of e-commerce in generating a largely unprecedented demand for warehouse space.”
That’s been a boon to owners of industrial real estate such as Prologis, one of the world’s biggest warehouse landlords and a major owner of space in the Inland Empire. Its shares have soared more than 35% this year.
Read the full article from Finance & Commerce +
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Warehouses
Blackstone in talks to purchase 11 warehouses near JFK airport
Blackstone is reportedly in negotiations to purchase 11 warehouses from TA Realty near JFK airport in New York City, according to a report from Crain’s New York. The purchase is thought to be part of a larger deal between the two companies in which Blackstone will acquire additional industrial properties nationwide. Neither Blackstone nor TA Realty responded to requests for comment at the time of this reporting.
The move follows Blackstone’s two other recent urban logistics real estate purchases. In March 2018, the firm purchased 22 million square feet of warehouse and distribution facilities across the country from Canyon Industrial Portfolio, which had Amazon, Coca-Cola, DHL and FedEx among its tenants. In June 2019, Blackstone purchased 179 million square feet of logistics assets from GLP, which rents space to Amazon.
Buying warehouse space is an opportunity for investment firms to cash in on demand for prime real estate. Not only is space already at a premium in New York City and other urban locales, but accumulating warehouses in one of the country’s biggest e-commerce markets, and in Blackstone’s case, near a major air freight hub, could be well worth the investment. As e-commerce and logistics firms looking to acquire space in the city, real estate firms are banking on their willingness to pay more rent for a prime location.
Read the full article from Supply Chain Dive +
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Warehouses
Distribution, Warehouse Demand Continues to Outpace Supply in South Florida
Miami-Dade continues to be propelled by persistent economic growth, bustling port activity, positive investor sentiment and strong leasing, creating a perfect recipe for industrial demand. Following its most successful year ever in 2018, PortMiami broke records yet again in first-quarter 2019, recording its highest ever monthly cargo activity amount in January with a total of 104,183 twenty-foot equivalents (TEUs) of containerized cargo, a 17 percent increase over January 2018. Meanwhile, a $437.5 million expansion project, the largest ever, is planned for Port Everglades in nearby Broward County.
Despite the differing industrial inventories of each South Florida market with Miami-Dade County at 186.2 million square feet, Broward County at 96.9 million square feet and Palm Beach County at 39 million square feet, demand for space across the region has fueled unprecedented development activity.
Net industrial absorption in Miami-Dade was impressive during the first quarter, posting positive 1.2 million square feet, a notable 45 percent increase from the net absorption recorded for first-quarter 2018. Demand trends against development indicate healthy industrial markets in Broward and Palm Beach as well.
The outlook remains positive for South Florida’s industrial sector as e-commerce and the demand for industrial and logistics space continues to drive the market. Economic indicators such as population growth consistently correlate with demand, and investor-developers are finding creative ways to keep up.
Read the full article from REB Online +
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Select a theme to see when and why we added it. Also included is a link to all recent Market Insight reports we’ve written about that theme, allowing you to track its progress.
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Week Ahead
This week the US will be publishing inflation rate, retail sales, industrial production, housing data and flash Michigan’s consumer sentiment. Elsewhere, other important releases include: UK unemployment, wage growth, inflation and retail sales; Eurozone trade balance and industrial production; Germany Q2 GDP figures; China industrial output, retail sales, fixed asset investment and house price index; Japan machinery orders and corporate goods prices; and Australia consumer and business morale, wage price index and employment figures.
Click here to access the data +
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US Producer Prices Rise 0.2% on Energy Cost
Producer prices for final demand in the US rose 0.2 percent from a month earlier in July 2019, after a 0.1 percent gain in June, boosted by a rebound in energy prices. Excluding food and energy, producer prices dropped 0.1 percent in July, the first decline since February 2017 and below forecasts of a 0.2 percent advance. Year-on-year, the PPI rose 1.7 percent, matching the smallest annual gain since January 2017; while the core index rose 2.1 percent, below consensus of 2.4 percent.
Click here to access the data +
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Gold Trades Near $1500 on Trade, Growth Worries
Gold prices edged higher during morning trade on Monday, amid persistent worries regarding a slowdown in the global economy and uncertainty over the trade deal between U.S and China. Gold prices went up more than 0.3% to $1500 an ounce around 10:15 AM London time.
Click here to access the data +
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Chinese Yuan at Near Decade Low
The Chinese offshore yuan, which trades outside the mainland, changed hands at around 7.1 against the US dollar on Monday, remaining close to its weakest level since the global financial crisis after posting its biggest weekly drop in over a year on uncertainty about US-China trade negotiations. The People’s Bank of China set its midpoint reference at a fresh 11-year low of 7.0211 per dollar, weaker than the previous fix of 7.0136.
Click here to access the data +
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MARKET INSIGHT UPDATES: SUMMARIES
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Bonds
Global bond yields have fallen to 120-year low
It’s been 120 years since bond yields around the world were this low. That’s according to a calculation by Bank of America Merrill Lynch, which uses average yields from a host of countries — the U.K, Australia, Japan, Switzerland, France and the U.S. — to arrive at the data.
These low yields are the talk of the market as strategists wonder whether the bond rally will ever run out of stream. Prices and yields move inversely. “With a substantial amount of central bank easing already priced, in our view, a marked deterioration in economic data would be required for the rally to continue. We believe the risk of a reversal has risen, and [we] turn neutral on duration,” strategists at Goldman Sachs said this week.
J.P. Morgan strategist Marko Kolanovic pointed out that the S&P earnings yield is 5.9% while the global 10-year bond yield is at 0.59% — with that wide spread being in the 95th percentile in data going back to 1985.
Bond yields for leading G-7 rivals were even lower, with Germany’s and Japan’s 10-year in negative territory.
Read the full article from MarketWatch +
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UK
U.K. Economy Is Set for the Worst Quarter Since 2012
A report Friday will show the U.K. economy stagnated last quarter, according to a Bloomberg survey of economists. Such a reading would be in line with the Bank of England’s prediction and represent Britain’s worst quarter since the economy shrank in 2012. Bloomberg Economics, meanwhile, predicts a contraction of 0.1% in the period, citing the unwinding of the stockpiling that preceded the previous Brexit deadline on March 29.
Read the full article from Bloomberg +
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Trade War
S&P: 10% list 4 tariffs more damaging than previous 3
The impending 10% tariffs on $300 billion of Chinese imports, set to go into effect Sept. 1, would be more damaging than the previous three tranches because it includes more intermediary and finished goods, according to a report from S&P Global emailed to Supply Chain Dive. As a result, S&P expects major firms, including Cisco, Dell, HP and Seagate, to raise prices or shift production and sourcing to Southeast Asia to compensate for projected revenue losses.
S&P, along with the Consumer Technology Association (CTA), expressed concern that whiplash from the trade war could hamper tech companies’ ability to innovate at a time when the U.S. and China are currently racing to develop and deploy artificial intelligence (AI), machine learning and 5G technologies.
According to the CTA, the upcoming tariffs include smartphones, laptops, smartwatches, wireless earbuds, lithium batteries and more. While consumers can expect varying degrees of price increases from brands if the 10% tariffs go into effect, changes in the cost of completed goods only tell a small part of the story.
Tech companies are looking to retool and diversify their supply chains in China and Southeast Asia, which is a resource drain and means less cash is available to invest in innovation, CTA Vice President of International Trade Sage Chandler told Supply Chain Dive.
Read the full article from Supply Chain Dive +
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Fintech
Mobile banking brings sea change in China’s financial system
The mobile banking units of e-commerce giant Alibaba and internet conglomerate Tencent Holdings are changing the landscape of financial services in China, lending to more than 100 million people so far, including those in rural areas and microbusiness owners.
Farmers and microbusinesses — which employ no more than nine people — that previously had trouble securing loans from conventional banks are reaching out to Alibaba and Tencent for help. Both companies make their lending decisions by artificial intelligence, processing vast amounts of information gathered from the mobile payments they handle.
The two companies control more than 90% of smartphone-based payments in China. The total transactions they handled in 2018 came to around $25 trillion. And how long does it take to make those lending decisions? One second. MyBank calls its lending procedure “3-1-0.” It refers to the three minutes it takes for a loan applicant to input necessary information, one second for AI to decide whether to extend a loan and zero staff required.
MyBank began operating in 2015 and has extended loans to 17 million microbusinesses and other companies in the first four years. Of those, 80% had never borrowed from banks before. Total lending by MyBank has amounted to 3 trillion yuan.
Read the full article from Nikkei Asian Review +
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Construction & Real Estate
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Warehouses
Online retailers are transforming warehouse construction
As e-commerce has soared in popularity, U.S. warehouses have evolved to meet the needs of online retailers, transforming from basic storerooms into automated, material-handling nerve centers.
The race to get products to the end-user as fast as possible has transformed the way warehouses are designed and built, said Brock Grayson, vice president at Layton Construction , which has constructed 10 million square feet of e-commerce distribution centers in the past five years for clients including Amazon, Macy’s, Home Goods and UPS.
“Gone are the days of stacking the product on the [distribution center] floor and moving it via forklifts,” said Daren Sealover, project executive with Graycor Construction Co., which has built more than 20 million square feet of industrial space including distribution centers, cold storage warehouses and manufacturing facilities in the past five years.
One of the main drivers of this transformation has been the addition of high-tech sorting equipment. Twenty-first century retailers rely on automated systems like pickers and robots to move merchandise faster and sometimes with less labor. These automated systems require special design and construction considerations, experts say, and require builders to stay up to date on changing specifications.
Automated storage and retrieval systems (ASRS) are featured prominently in many distribution and fulfillment center projects. The robotics-driven technology can safely retrieve merchandise placed at heights of more than 120 feet.
Read the full article from Construction Dive +
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Warehouses
U.S. warehouses full after import surge
A short drive outside Los Angeles lies one of the world’s biggest warehouse complexes. Gene Seroka says its 1.8 billion square feet of capacity — enough room to house 9 million cars — is “bursting at the seams.” The warehouse district is part of the Inland Empire, serving the Port of Long Beach and the twin port of Los Angeles, where Seroka is executive director. Together they handle almost half of American’s maritime trade with China.
Bloated storage facilities are a consequence of President Donald Trump’s trade war with China and an illustration of how it’s throwing supply lines into disarray, forcing business to improvise. But as the tariffs keep mounting, they’re running out of solutions to avoid them.
It’s not just near ports that storage space is strained, Seroka said. “The surge in imports late last year, driven by anxieties over higher tariffs, coincided with the continued explosion of e-commerce in generating a largely unprecedented demand for warehouse space.”
That’s been a boon to owners of industrial real estate such as Prologis, one of the world’s biggest warehouse landlords and a major owner of space in the Inland Empire. Its shares have soared more than 35% this year.
Read the full article from Finance & Commerce +
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Warehouses
Blackstone in talks to purchase 11 warehouses near JFK airport
Blackstone is reportedly in negotiations to purchase 11 warehouses from TA Realty near JFK airport in New York City, according to a report from Crain’s New York. The purchase is thought to be part of a larger deal between the two companies in which Blackstone will acquire additional industrial properties nationwide. Neither Blackstone nor TA Realty responded to requests for comment at the time of this reporting.
The move follows Blackstone’s two other recent urban logistics real estate purchases. In March 2018, the firm purchased 22 million square feet of warehouse and distribution facilities across the country from Canyon Industrial Portfolio, which had Amazon, Coca-Cola, DHL and FedEx among its tenants. In June 2019, Blackstone purchased 179 million square feet of logistics assets from GLP, which rents space to Amazon.
Buying warehouse space is an opportunity for investment firms to cash in on demand for prime real estate. Not only is space already at a premium in New York City and other urban locales, but accumulating warehouses in one of the country’s biggest e-commerce markets, and in Blackstone’s case, near a major air freight hub, could be well worth the investment. As e-commerce and logistics firms looking to acquire space in the city, real estate firms are banking on their willingness to pay more rent for a prime location.
Read the full article from Supply Chain Dive +
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Warehouses
Distribution, Warehouse Demand Continues to Outpace Supply in South Florida
Miami-Dade continues to be propelled by persistent economic growth, bustling port activity, positive investor sentiment and strong leasing, creating a perfect recipe for industrial demand. Following its most successful year ever in 2018, PortMiami broke records yet again in first-quarter 2019, recording its highest ever monthly cargo activity amount in January with a total of 104,183 twenty-foot equivalents (TEUs) of containerized cargo, a 17 percent increase over January 2018. Meanwhile, a $437.5 million expansion project, the largest ever, is planned for Port Everglades in nearby Broward County.
Despite the differing industrial inventories of each South Florida market with Miami-Dade County at 186.2 million square feet, Broward County at 96.9 million square feet and Palm Beach County at 39 million square feet, demand for space across the region has fueled unprecedented development activity.
Net industrial absorption in Miami-Dade was impressive during the first quarter, posting positive 1.2 million square feet, a notable 45 percent increase from the net absorption recorded for first-quarter 2018. Demand trends against development indicate healthy industrial markets in Broward and Palm Beach as well.
The outlook remains positive for South Florida’s industrial sector as e-commerce and the demand for industrial and logistics space continues to drive the market. Economic indicators such as population growth consistently correlate with demand, and investor-developers are finding creative ways to keep up.
Read the full article from REB Online +
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Media
Facebook Offers News Outlets Millions of Dollars a Year to License Content
Facebook Inc. is offering news outlets millions of dollars for the rights to put their content in a news section that the company hopes to launch later this year, according to people familiar with the matter.
Representatives from Facebook have told news executives they would be willing to pay as much as $3 million a year to license headlines and previews of articles from news outlets, the people said. The outlets pitched by Facebook on its news tab include Walt Disney Co.’s ABC News, Wall Street Journal parent Dow Jones, The Washington Post and Bloomberg, the people said.
Facebook’s plans come as the company is facing growing criticism for its role in the news industry’s struggles by sucking up much of the advertising revenue that used to go to newspapers. Combined, Facebook and Alphabet Inc.’s Google earned 60% of all digital advertising revenue in the U.S. last year, according to eMarketer.
The news-licensing deals between Facebook and news outlets would run for three years, some of the people said. Facebook is planning to launch the section sometime in the fall, the people said. It isn’t known whether any news outlets have formally agreed yet to license their content to Facebook.
Read the full article from The Wall Street Journal +
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IoT
Huawei launches new operating system, says it can ‘immediately’ switch from Google Android if needed
Huawei has launched its own operating system — the HongmengOS, known in English as the HarmonyOS, said the CEO of the Chinese tech giant’s consumer division, Richard Yu, on Friday. Speaking at the Huawei Developer Conference in the Chinese city of Dongguan, Yu said the operating system can be used across different devices from smartphones to smart speakers and even sensors. It’s part of Huawei’s play in the so-called Internet of Things, which refers to devices connected to the internet.
HarmonyOS will first be used on “smart screen products,” such as televisions, later this year. Over the next three years, the operating system will be used in other devices, including wearables and car head units. Huawei said the OS will initially launch in China with plans to expand it globally, Yu said.
Google’s services are effectively blocked in China. So Huawei uses a modified version of Android in its domestic market that is stripped of Google apps. That means not having access to Google in China isn’t that a big problem for China. However, if Huawei were to get banned from being able to use Android internationally, analysts said this could hurt the Chines firm’s smartphone business abroad.
Yu reiterated that Huawei would prefer to use Android on its smartphones, but if it had to migrate to HarmonyOS, that would not be difficult. He said moving to the new OS would only take one or two days and it is “very convenient.” “If we cannot use it (Android) in the future, we can immediately switch to HarmonyOS,” Yu said .
Read the full article from CNBC +
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Auto Parts
Auto Supplier Continental Slams Brakes on Engine Parts Amid Shift to Electric
One of the world’s biggest car-parts makers is preparing for a future without the internal combustion engine—the machine that has been at the heart of the auto industry for well over a century.
In a major strategy shift, Continental AG said Wednesday that it would cut investment in conventional engine parts because of a faster-than-expected fall in demand as major auto makers accelerate their shift to electric vehicles. The move by the Hanover, Germany-based maker of tires, lubricants, powertrains and other core components shows how tougher regulation of greenhouse-gas emissions is pushing the industry toward electric models and forcing manufacturers to redraw their supply chains.
Continental said its board had voted to halt the expansion of its hydraulics components business, largely focused on fuel injectors and pumps for gasoline and diesel engines, to shift its focus and future investments to components for electric vehicles. “The future is electric. We are convinced of this,” said Andreas Wolf, head of Continental’s powertrain division, which is reorganizing under the name Vitesco Technologies.
The auto industry’s multiyear boom after the financial crisis came to a sudden end this year, as trade conflicts and slower economic growth caused new vehicle sales to start declining.
Read the full article from The Wall Street Journal +
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