China’s Car Dynasty

Plus: Startup founders are building protections against an Altman-like firing. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

January 10, 2024

Good morning.

It's not-so-big tech.

After years of boomtime growth, including 267,000 jobs added in 2022, last year saw the US information-technology sector add just 700 new hires, according to Bureau of Labor Statistics data analyzed by tech consultancy firm Janco Associates. That's unsurprising, given the roughly 262,242 jobs slashed amid mass layoffs last year. Worse, entry-level IT gigs, such as office support, customer service, and research, look increasingly likely to be replaced by artificial intelligence. It seems "learn to code" was sound advice until AI learned, too.

AUTOS

The Global Auto Industry Is Recentering Around China

Photo of busy Shanghai interchange in China

Photo by Denys Nevozhai via Unsplash

China's auto industry is shifting into a higher gear.

Overseas sales of China-made cars hit a record high in 2023, likely outpacing Japan to make China the world's top exporter, according to the China Passenger Car Association. Meanwhile, international car makers are having an even harder time making inroads inside the Middle Kingdom's massive car market.

To Russia, With Love

Prohibitively high tariffs mostly keep Chinese cars from ever mingling with Fords and Chevys on American roadways. Europe, too, has largely been skeptical of Chinese imports, with the EU last year opening an antitrust probe into the Chinese government subsidies allegedly propping up the nation's automaking industry. But there are still plenty of customers around the globe to snap up Chinese cars. Case in point: With virtually all Western carmakers ceasing business in Russia amid the country's invasion of Ukraine, Chinese carmakers have happily steered into the sales vacuum. Last year, Russian consumers purchased about 800,000 China-made cars, according to the China Passenger Car Association, a roughly five-fold increase from 2022.

Overall, Chinese carmakers shipped an estimated 5.26 million cars overseas in 2023, the industry group says, or likely 1 million more than Japan's auto industry, long the pace car in global sales. American and European automakers, meanwhile, are increasingly finding themselves locked out of China's massive market:

Last year, GM sold fewer vehicles in China than it did in the US for the first time since 2009, with deliveries in China dropping roughly 9% to 2.1 million while US sales increased to nearly 2.6 million, the company said. The company sold more than 4 million cars in China in 2017.
Despite a $5 billion investment to maintain its top market position, Volkswagen, which has long seen half of its annual profits come from China sales, lost its top spot in China's market last year to domestic player BYD.

Overall, international brands have seen their market share in China shrink to about 44% in December, from 64% in 2020. "With the exception of Tesla, foreign brands were caught flat-footed as they did not anticipate the market shift [to EVs] and are rapidly losing relevance," Bill Russo, Chrysler's former China head and founder of Automobility, wrote in a recent research note.

Electric Boogaloo: Speaking of EVs, analysts at BloombergNEF on Tuesday published a report predicting sales of electric vehicles and plug-in hybrids to increase about 22% in 2024 to around 16.7 million vehicles — good for about one-fifth of total car sales. That would mark a bit of a slowdown in sales growth rate, after a 33% jump in 2022. But fret not, tree huggers: the BNEF analysts predict a sales boom to come in 2025 and 2026 when a slew of cheaper EV models are due to hit Western markets.

Written by Brian Boyle

You're Outta Here

Though it's still not clear why the board fired Altman, it's been reported that he wanted to grow the nonprofit-corporate hybrid company as much — and as quickly — as possible. The board, on the other hand, was apparently concerned with risks associated with unchecked AI expansion, like widespread disinformation and automating massive swathes of the global workforce. A board was taking the humanitarian approach for once — crazy, we know.

The most shocking part was how quickly Altman was first fired. OpenAI's board didn't even notify Microsoft, OpenAI's biggest shareholder with a 49% stake. Now, other startup founders are making "Don't get fired" their top New Year's resolution:

Long-Term Stock Exchange founder Eric Ries told the WSJ one of the most practical strategies is implementing supervoting shares, which give founders ultimate control. For example, Mark Zuckerberg owns just 13% of Meta's stock but controls about 60% of the voting rights. In the early days of Facebook, he used this power to veto a $1 billion sale to Yahoo.
Another method is essentially cherry-picking board members who have allegiance not to investors or other directors, but to the company, and likely the founder. BreatheEV founder Max Bregman told the WSJ he's trying to avoid "career" board members and that he might have his board take an ethics pledge.

Can You Spare a Dime? Another new concern for founders: the possibility of less venture capital funding. In 2023, venture firms invested $140 billion into startups, but Ernst & Young's Jeff Grabow told Institutional Investor that "we won't hit $100 billion." Similar to how many companies went on hiring sprees post-pandemic only to pivot to hefty layoffs and a wait-and-see approach, Grabow said VCs are likely to take their time deciding what startups to back this year.

Written by Griffin Kelly

SOCIAL MEDIA

Dating Apps Are Squeezing a Dwindling User Base

What's love got to do with it – apps, that is?

The Financial Times reported on Tuesday that dating apps owned by conglomerate Match Group — which counts Tinder and Hinge among its digital-matchmaker lineup — have hiked their subscription fees over the past year as well as introducing new tiers. This is in response to growth becoming steadily more lethargic.

Money Can Buy You Love

As dating apps left the tech-startup larval stage of being free, they resisted the urge to introduce advertising as a revenue stream and instead layered in subscription models with premium features. But relying on one source of revenue can be risky and dating apps are relying on subscriptions — subscriptions which users experiencing a cost-of-living crisis are quick to sever.

With user growth slowing down, Match Group has had to mine the romantic hopefuls still on its apps more than ever:

Data from Sensor Tower showed 2022 represented a four-year low for dating app downloads, per the FT. Tinder's user base specifically dropped 6% year-on-year in Q3 of 2023.
While the user base has shrunk, Tinder has made each remaining lonely heart count for more. In the three months leading up to September 2023, Tinder's overall revenue rose 10% year-on-year.

It'll All End in Tiers: On top of eye-watering subscriptions to join the Tinderati, some of Match Group's apps have tapped into the Netflix method of stratifying their subscription models. Hinge, which markets itself as Tinder's more thoughtful cousin, has offers that range from £2.91 ($3.69) to £24.99 ($31.72) a week in its UK app, per the FT. The lower levels essentially unlock minor features, some of which were previously simply a part of the free app, like unlimited likes on other people's profiles. Some however are newer innovations, such as a feature that lets you filter profiles by height. Please join us in saying a little prayer for short kings.

Written by Isobel Asher Hamilton

Finance Executive Online

Search This Blog