TheChek News Flow

The second full week of the new year proved to be pretty slow. Just one startup saw a big raise in the nine figures, and a handful saw $75 million — including a trio of biotech firms. Sledding has been tough for big rounds so far this year.

1. Quantinuum, $300M, quantum: Quantinuum locked up a fresh $300 million equity fundraise at a pre-money valuation of $5 billion, as investors are clearly excited about the possibilities of quantum computing. The new funding was led by JPMorgan Chase. The Broomfield, Colorado-based company was spun out of Honeywell in 2021 and merged with Cambridge Quantum Computing. Quantinuum says it has now raised approximately $625 million. Last year, funding to quantum computing startups hit nearly $1.2 billion, per Crunchbase data. That number dwarfed the less than $800 million raised in 2022 — making quantum one of the few sectors to see an increase in venture funding in 2023. While it’s too early to say venture funding will again increase in the sector this year, it is evident investors see the potential in both quantum technology and its ability to produce big financial returns.

2. (tied) Cleveland Diagnostics, $75M, biotech: There have not been a lot of big raises so far this year, but the few we have seen are usually related to biotech. Cleveland Diagnostics is the latest example, locking up a $75 million round led by Novo Holdings. The Cleveland-based biotech is developing diagnostic tests for the early detection of cancers and will use some of the new proceeds to grow the use of its novel IsoPSA prostate cancer test. Founded in 2013, the company has raised $111 million, per Crunchbase.

2. (tied) Comanche Biopharma, $75, biotech: Like we said, there’s been several big rounds in biotech. Concord, Massachusetts-based Comanche Biopharma locked up a $75 million Series B led by New Enterprise Associates. The startup is looking at therapies for preeclampsia, a serious pregnancy complication that affects approximately 10 million women globally each year, according to the company. The issue can lead to complications for both the mother and the baby, including multiorgan damage and seizures. Founded in 2020, the company has raised $111 million, per Crunchbase.

2. (tied) DailyPay, $75M, fintech: Waiting for payday can be a drag. New York-based DailyPay just raised a fresh $175 million so you don’t have to do that. The company partners with employers to allow employees to track, transfer, spend or save their pay as they earn it. The new round was made up of $100 million in an expanded credit facility and more than $75 million in equity financing led by Carrick Capital Partners. The round valued the company at $1.75 billion on a pre-money basis. Founded in 2015, the company has raised $1.2 billion, per Crunchbase.

2. (tied) Tr1X, $75M, biotech: We are not quite done with the big biotech raises yet. San Diego-based Tr1X popped out of stealth this week and announced a $75 million Series A led by The Column Group. The company is developing therapies for autoimmune and inflammatory diseases. Founded in 2018, this is the company’s first round with a disclosed amount, per Crunchbase.

6. Digital Onboarding, $58M, SaaS: Boston-based Digital Onboarding, a customer relations platform for financial services, closed a $58 million investment from Volition Capital. Founded in 2015, the company has raised nearly $63 million, per Crunchbase.

7. Forta, $55M, health care: San Francisco-based Forta, which uses AI to help with access to quality care, raised a $55 million Series A led by Insight Partners. Founded in 2021, this is the company’s first round with a disclosed amount, per Crunchbase.

8. Ratio Therapeutics, $50M, biotech: Boston-based Ratio Therapeutics, a pharmaceutical startup developing radiopharmaceuticals for the treatment and monitoring of cancers, closed a $50 million Series B from various investors including Bristol Myers Squibb. Founded in 2021, Ratio has raised more than $90 million, per the company.

9. SmartLabs, $48M, biotech: Boston-based SmartLabs, which provides laboratory infrastructure and resourcing as-a-service to companies, locked up a $48 million Series C from several investors including Conversion Venture Capital. Founded in 2015, the company has raised more than $400 million, per Crunchbase.

10. Noctrix Health, $40M, biotech: Pleasanton, California-based Noctrix Health, which has developed a wearable treatment to reduce symptoms of restless legs syndrome, closed a $40 million Series C led by Sectoral Asset Management. Founded in 2018, the company has raised $57 million, per Crunchbase.

The biggest deal of the week came from the Red Dragon.

Tech investors and founders were loud and proud about their Gulf money in 2023, after keeping it quiet in the wake of Jamal Khashoggi’s murder.

How do you know when a venture capitalist or founder is in Saudi Arabia looking to get a piece of the country’s piles of petro cash for their latest funds or startups?

A telltale sign is the procession of Mercedes-Benz cars and SUVs weaving through the streets of Riyadh from the city’s Four Seasons Hotel to grand royal meeting rooms where local sovereign wealth fund managers are waiting. Zafer Younis is often inside a vehicle in one of those caravans, accompanying guests from the West. Since 2019, his firm—Silicon Valley Venture and Innovation—has helped broker introductions for U.S. venture capitalists to wealthy investors in the Middle East, packing their days with dozens of pitch meetings in Riyadh, Dubai and Abu Dhabi.

Younis often has to remind his clients, whom he declined to identify on the record, that their Silicon Valley swagger might not translate well in the Middle East. “Humbleness is super important” in Middle Eastern culture, said Younis, who has even written a guide for venture capitalists that want to raise money in the region.

Currently, business is booming for Younis. The end of the era of cheap capital has led to one of the grimmest periods for fundraising on record for Western startups and VC firms at a time when a boom in artificial intelligence startups is prompting a voracious appetite for cash. That has prompted many founders and investors from the U.S. to go abroad with their proverbial hats in their hands, especially to regions where high oil prices have swelled the size of sovereign wealth funds. Over 90 investors have asked Younis for help organizing road shows with investors in the Middle East last year, a greater number than ever before.

Silicon Valley’s romance with the Middle East is back with a vengeance. For a time, the two seemed inseparable. In 2016, Uber scored a cool $3.5 billion from Saudi Arabia’s Public Investment Fund, one of the largest sovereign wealth funds in the world, while SoftBank raised $60 million of its $100 billion Vision Fund in 2017 from PIF and Mubadala Investment Co., one of the United Arab Emirates’ sovereign wealth funds. Tech leaders like BlackRock CEO Larry Fink and Virgin Group founder Richard Branson made pilgrimages to the Future Investment Initiative—a conference in Riyadh sometimes called “Davos in the Desert”—to rub elbows with the Saudi royal family.

But the open affair with Saudi money changed suddenly in 2018 with the grisly murder and dismemberment of Jamal Khashoggi, a dissident Saudi journalist who wrote for The Washington Post. Western intelligence services determined that Mohammed bin Salman, Saudi Arabia’s crown prince and prime minister, likely ordered the murder; he denied having done so but ultimately accepted responsibility for it.

The news upended the growing financial relationship between Silicon Valley and the Gulf: Western business leaders canceled their trips to that year’s FII, Branson called off talks for a $1 billion investment from Saudi Arabia in his space adventures, and several prominent tech leaders, including OpenAI’s Sam Altman, stepped down from the board of Neom, the futuristic city MBS—the initials often used to refer to Prince Mohammed—is building in northern Saudi Arabia.

Silicon Valley didn’t entirely stop taking Saudi Arabia’s money: Then-startups including WeWork and Slack happily accepted hundreds of millions of dollars from the Vision Fund, although the recipients didn’t advertise their connections to Saudi Arabia.

But last year, Silicon Valley stopped trying to keep its thirst for Middle Eastern money on the down low. Social Capital’s Chamath Palihapitiya was spotted in the region and suggested Dubai as a potential location for the All-In Summit, a tech conference put on by the “All-In” podcast he co-hosts. Altman was in the Gulf last year fundraising for a new AI chip startup. And Ben Horowitz—whose firm, Andreessen Horowitz, has raised money from Sanabil Investments—last March appeared at a version of the FII conference in Miami, where he lavished praise on Prince Mohammed in almost profuse terms.

“Saudi has a founder,” Horowitz said at the event. “You don’t call him a founder, you call him His Royal Highness.”

For their part, investors in the Persian Gulf are welcoming them back—with caveats. Middle Eastern investors are still eager to diversify their economies away from oil, but they say they’re done with tech firms treating them like piggy banks. Before they’re willing to write checks, many of them are pressuring venture capitalists and startups to put boots on the ground in the region or to localize their products to foster local tech ecosystems.

“Gone are the days of easy, dumb Gulf money,” said Fares Ghandour, a partner at Wamda Capital, a regional venture firm focused on investing in the Middle East and North Africa.

It’s not hard to see why they’re flexing their muscles. According to a new report from the financial data firm PitchBook and the National Venture Capital Association, startups raised $170.6 billion in 2023 from U.S. venture capitalists, down nearly 30% from $242.2 billion in 2022. Likewise, venture firms are raising less money from pension funds, university endowments and other limited partners: $67 billion in 2023, down around 61% from $173 billion in 2022, according to the same report.

In contrast, the Middle East’s megafunds gushed money last year, thanks in large part to sustained high oil prices. Saudi Arabia’s PIF, for example, was the lead state-owned investor, deploying $31.6 billion in 2023 across 49 deals, up nearly 33% from the prior year, according to a report from research firm Global SWF. Along with PIF, Abu Dhabi’s three sovereign wealth funds—Abu Dhabi Investment Authority, Mubadala and Abu Dhabi Development Holding Co.—and the Qatar Investment Authority also earned spots in the ranks of the top 10 most active dealmakers globally, according to the same report.

Much of the investing by those funds is in areas like mining, aircraft leasing and manufacturing. But one of the biggest Saudi deals was the nearly $5 billion acquisition last July of U.S. game maker Scopely by a games division of PIF.

It’s tougher to say how much money from the Middle East is going into U.S. venture funds. Venture firms are usually tight-lipped about who their LPs are, much less how much money they’re getting from each of them. And after the Khashoggi killing, they clammed up even more about whether and how many of their LPs were Middle Eastern.

It was noteworthy, therefore, when the venture arm of the PIF decided to break the status quo by releasing a list of nearly 40 U.S. VC funds it is a limited partner in, including Andreessen Horowitz, Coatue Management, Founders Fund, Dragoneer Investment Group and Greenoaks Capital Partners.

To human rights advocates, the acceptance of Saudi and UAE state funds back into the fold by tech startups and VC firms is disheartening. Both countries have aggressively cracked down on freedom of speech, arresting—and in Saudi Arabia’s case, sometimes killing—dissidents.

“Any investment coming from Saudi Arabia’s [PIF] is effectively a business deal with the murderer Mohammed bin Salman,” said Sarah Leah Whitson, the executive director of nonprofit Democracy for the Arab World Now. “But, you know, clearly American businesses are into it.”

A spokesperson for the Saudi embassy in Washington didn’t have a comment.

As one founder joked, the days of investors being ashamed of or reticent about taking Gulf money are over. “Once Marc Andreessen took their money—it’s fine,” the founder said.

Spokespeople for Andreessen Horowitz didn’t respond to requests for comment.

Tech leaders jetting to the Middle East for money are finding it’s not the same region many of them left back in 2018.

At that time, the tech scene in the countries of the Gulf Cooperation Council—an economic and political union consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE—was embryonic, with only a few firms writing checks to startups. Since then, the UAE and Saudi Arabia especially have significantly stepped up their efforts to strengthen their local tech ecosystems by creating more tech-focused investment funds, establishing more financial regulations and publishing increasingly aggressive goals for their tech economies.

In Saudi Arabia, two investment firms—Saudi Venture Capital Co. and Jada Fund of Funds—launched in 2018, while the Neom Investment Fund launched last year. Similarly, the UAE launched a $30 billion climate fund with BlackRock, Brookfield Asset Management and TPG late last year. And recently, the country passed a tax law that increases the number of business people who need to be audited,, a move meant to appeal to foreign investors, says Obediah Ayton, director of Dhabi Hold Co., an investment management firm in Abu Dhabi.

“Everybody in the country—for the first time ever in its history—is going to have to submit their books,” he said, saying it will drive sketchy businesspeople elsewhere. “It means that America is going to trust us more and Europe’s going to trust us more.”

In Saudi Arabia, local startups raised a record $1.38 billion in capital last year, up 33% from the $987 million they raised in 2022, according to estimates by financial analytics firm Magnitt. Some of that growth stemmed from funding deals for two Saudi-based fintechs that hit unicorn status last year, Tabby and Tamara.

With signs of life in the startup ecosystems of the Middle East, local sources of money are becoming more assertive about their roles in building them up. In some cases, that means sovereign wealth funds are beginning to cut out the intermediaries. As The Information has previously reported, funds from Qatar, Saudi Arabia and the UAE have told investors they have a new strategic mandate to make more investments directly into startups instead of backing Western VC funds, according to two investors who spoke to these Middle Eastern sovereign wealth funds.

In cases where sovereign wealth funds are still putting money into Western VC funds, those deals are increasingly coming with strings attached to ensure a bigger local impact. For example, Saudi Venture Capital on some deals will require venture firms to invest 1.2 times the amount of money SVC has committed to those firms in Saudi startups, according to two investors who spoke to the firms. The definition of what qualifies as a Saudi startup under SVC’s rules is a bit squishy, though, according to one of those investors: Startups that simply do business in Saudi Arabia can in some cases qualify.

It’s not an uncommon practice among state-controlled investors: Poland’s state fund, PFR Ventures, requires recipients of certain funds to put two times the amount fundraised into Polish companies.

How exactly then does a Western tech investor or founder get a leg up on others when raising money from Gulf investors?

“You have to be serious about deploying staff and your level of expertise” in the region, Ayton said bluntly.

For Kendrick Nguyen, CEO of New York–based private investing startup Republic, that has involved spending the last 12 months proving his dedication to the region. Nearly two months of that has consisted of visits to Doha, Riyadh and Abu Dhabi to build relationships with investors and other startups. This year, he plans to do even more traveling to the region.

Nguyen’s biggest show of commitment so far: Republic plans to establish an international headquarters in the Middle East in early 2024, which hasn’t been previously reported. It is currently choosing between Saudi Arabia and Abu Dhabi as the location for the office, Nguyen said. The company will also create a satellite office in the city it doesn’t select as its international headquarters, according to Nguyen.

Nguyen chooses his words carefully when describing his motivations for establishing a bricks-and-mortar presence in the region. The primary goal, he says, is to help Republic more effectively offer its services to the countries in the Gulf Cooperation Council. At the same time, he acknowledges the move will also likely help him build relationships with sovereign wealth funds in the Gulf.

“Setting up an office just to raise or eventually raise would be too artificial. But if paired with actual business or simply [wanting to have] real business relationships in the region, the office helps,” Nguyen said.

His is not the only startup setting up shop in the region. Revolut, a global neobank headquartered in London, has 100 engineers working in the UAE whom it relocated from Ukraine and Russia due to the war there. It's also hiring a team to work on launching its services in the region this year, a person with knowledge of the company’s plans said. The business, which enables cross-border money transfer, could take advantage of the Middle East’s development as a global hot spot for dealmakers and businesses.

One Western investment firm, 500 Global, has taken its commitment to the region to another level. The firm, which started in Silicon Valley, has been investing in the Middle East since 2011. And Khashoggi’s killing hardly spooked it from the region, unlike other Western investors: 500 Global opened an office in Riyadh in 2018, and a month after his death the firm partnered with the nonprofit Misk Foundation, founded by Prince Mohammed, to launch an accelerator aimed at startups in the Middle East and North Africa. In 2021, the firm’s chief operating officer and managing partner, Courtney Powell, went even further when she moved her entire family to Saudi Arabia.

Her relocation was inspired by 500 Global’s own economic research, which showed that Saudi Arabia is one of the fastest-growing economies outside the U.S. and China, she says. “I just viewed it as an incredible opportunity and really a once-in-a-lifetime opportunity to see a massive economy transform,” she added.

The move could have been complicated for Powell as a female investor in Saudi Arabia. While there has been progress on women’s rights in the country—the nation began allowing women to drive in 2018, for example—there is still a male guardianship system in place that requires a woman to get her guardian’s approval to marry. Prince Mohammed’s regime has also imprisoned prominent activists who advocated for increased women’s rights.

But Powell says she’s been comfortable working as a woman in Riyadh. “Over 30% of our portfolio in the Middle East is female founded or co-founded, which is higher than our portfolio within the U.S.,” she said. “I think the old perceptions of Saudi continue to change and you see that women and youth are really empowered here and entrepreneurship has massive support.”

Her firm has been rewarded for its loyalty. In early 2021, 500 Global co-launched a startup accelerator with Sanabil.

Still, not every tech investor believes it’s necessary to sign a local lease in Riyadh or Abu Dhabi to win the financial support of Gulf fund managers.

Some of them enlist intermediaries that help build their relationships in other ways. Several investors who do business in the Middle East say they’ve had conversations with one such intermediary who represents Andreessen Horowitz in the region. Other U.S. venture firms have relied on local representatives to escort portfolio companies, particularly later-stage startups, to sovereign wealth funds and family offices.

For the U.S. investors, it can help their startups score government contracts or get follow-on funding from investors in the Middle East. Meanwhile, the visits build trust between U.S. venture firms and Gulf investors by giving the latter direct access to star startups, one Arab investor said.

Along those lines, Arjun Sethi of Tribe Capital, a venture firm based in San Francisco, said he was not impressed with investors and founders who merely promise to open offices or hire teams in the Middle East, describing those as potentially hollow gestures. Sethi has long been public about his ties to the region, traveling regularly to visit his limited partners and portfolio companies in the Gulf once every two months, but Tribe does not have an office there.

Sethi says he sometimes runs into fund managers in the region, who tell him it’s a relief to see him in the flesh. “Trust is the currency that is earned and takes time for a lot of folks,” said Sethi. “You can’t just set up an office and say, ‘I’ve arrived and I’m going to be successful now.’”

While the memory of Khashoggi’s murder has faded for some, other political tensions have awakened criticism of Silicon Valley’s Middle East relationships.

On October 9, following Hamas’ massacre of about 1,200 people in Israel, venture capitalist Keith Rabois retweeted a post that inaccurately said Saudi Arabia would cease all negotiations to normalize relations with Israel. “This is why it is immoral to raise money from Saudi Arabia,” said Rabois, then a partner at Founders Fund.

Saudi officials subsequently clarified the efforts are on hold until Palestine and Israel can work out a two-state solution. Rabois’ comment was a bit awkward since Founders Fund was among the firms Sanabil listed on its website last year as recipients of its funding. Rabois recently left Founders Fund for Khosla Ventures.

The Israel-Hamas war also cast a spotlight on Qatar for tech investors. In late 2022, the country’s $475 billion sovereign wealth fund signaled that it wanted to be a bigger tech investor when it backed Elon Musk’s Twitter acquisition. In February, Qatar will host the first-ever Web Summit tech conference in the region, a glitzy affair expected to feature beachside afterparties and celebrity headliners like Formula E World Champion Jean-Éric Vergne. But after the war intensified in October, a number of scheduled attendees cut ties with the conference, with VC firms like Coatue Management canceling their speaking gigs.

Some investors and founders say they’re not comfortable doing business with Saudi Arabian funds, but they have no such qualms about taking capital from other countries in the region, such as the UAE.

Last May, Delian Asparouhov—co-founder of Varda Space Industries, a startup that manufactures pharmaceuticals in space—was about to leave for Dubai to meet with potential partners for the company. At the time, he told The Information he was appalled by Saudi Arabia’s abuses against its LGBTQ population.

“My position, if any, is that the UAE is an acceptable capital partner,” he said.

Some human rights advocates, like Whitson of Democracy for the Arab World Now, push back against that argument, saying there’s little difference in the human rights records of the UAE and Saudi Arabia. Freedom House, a nonprofit that grades countries around the world in terms of their repressiveness, assigned a score of 8 out of 100 to Saudi Arabia last year, 18 to the UAE and 25 to Qatar.

Powell of 500 Global says her firm believes supporting entrepreneurs abroad can lead to positive changes in their countries. “If you’re talking about wanting to see advancement in terms of an economy or society, we can think of no better way to do that than to invest in incredible founders who are going to create jobs and economic impact,” she said.

Sheridan Clayborne—co-founder of Lendtable, a San Francisco–based startup that gives people cash advances to help them receive 401(k) matches from their employers—had a similarly positive experience in Saudi Arabia. Last month, he visited the country on a trip that combined business with vacation, including a visit to the desert city of AlUla with a group that included members of Gulf royal families and regional institutional investors.

As he stargazed in the desert, an hour from the fast-growing city, Clayborne listened to his Arab companions talk about all of the infrastructure and projects that didn’t exist five years ago and all the futuristic plans for the coming decade.

“These are some of the people who are actually making those changes,” he remembered thinking. “There’s just such a big shift in the country—you get to hear how different this all could be in the next five years.”

Collapsed property empire’s development of Hamburg’s ‘Elbtower’ was once championed by Olaf Scholz

The Signa group’s flagship German development, a 245 metre-high tower in Hamburg championed by Chancellor Olaf Scholz, has gone bankrupt.

The city of Hamburg said on Friday that the company responsible for the “Elbtower” had informed it that it had been unable to secure rescue funding and could not meet its liabilities.

The project, owned by Signa Prime — one of the three main holding companies at the centre of the collapsed Signa group’s luxury property empire — had a gross development value of €1.4bn, documents seen by the Financial Times show.

Signa Prime’s shareholders and creditors are likely to get a fraction of that if anything, highlighting the extent to which the group’s complex, debt-fuelled business model ultimately hinged on over-optimistic valuations and a buoyant commercial property market to support them.

The city of Hamburg said it was considering exercising an option granted to it under the terms of the development to buy the property back at less than the value it had sold it to Signa for — €122mn.

“The city of Hamburg can now assert its right of repurchase, which is secured by the purchase agreement, as well as the assumption of all planning and construction contracts,” said city development senator Karen Pein.

The city is also speaking with private investors, who may still wish to step in to assume Signa’s responsibilities. Among them is logistics billionaire Klaus-Michael Kühne, already a prominent Signa investor.

The Elbtower, which is less than half-complete and sits on a prominent-inner city site on the Elbe river, was feted by Scholz during his tenure as mayor of Hamburg.

Scholz called the project, which was due to be completed in 2025, “a signal of Hamburg’s ambition”.

The chancellor has declined to comment on whether he had met Signa’s swashbuckling founder, Austrian billionaire René Benko, who has gone to ground since Signa’s collapse in the final weeks of 2023.

Shareholders and creditors who once flocked to Benko are still struggling to understand what claim on Signa’s assets they might have — a task complicated by the bewildering network of more than 1,000 corporate entities set up by the Austrian.

None of the group’s accounts are consolidated and the three principal Innsbruck-based holding companies at the centre of the group all have different administrators.

Work on the Elbtower halted more than three months ago when Signa abruptly stopped making wage payments to the tower’s construction company.

Carlos Tavares says price reductions for battery-powered models risk damaging carmakers’ financial health

Stellantis boss Carlos Tavares has warned carmakers cutting electric vehicle prices too fast risked a “bloodbath” in the industry, hours after Ford said it was reducing production of its battery-powered F-150 Lightning pick-up truck because of weaker sales. 

Ford said on Friday it wanted to bring the vehicle’s production in line with customer demand, expecting “continued growth in global EV sales in 2024, though less than anticipated”. 

The F-150 has for years been the best-selling motor vehicle in the US, and the launch of the Lightning model in 2022 was seen as an important moment in the evolution of EVs.

“We see a bright future for electric vehicles for specific consumers,” said Ford chief executive Jim Farley. But the group “has capacity available to scale production of gas-powered and hybrid F-150 trucks based on customer demand”. 

Ford has scaled back plans for an EV battery plant, while General Motors and Tesla have paused some of their EV expansion efforts.

Rental group Hertz, which took Teslas on to its fleet in 2021, has begun selling 20,000 EVs, or one-third of its global electric fleet, to buy more petrol vehicles amid strong demand for internal combustion cars. 

Tavares, whose company owns the Jeep and Ram brands that compete directly with Ford and GM, said that slowing EV demand globally was due to high prices, but warned companies against cutting them on vehicles where they already make very little money.

“If you go and cut pricing disregarding the reality of cost, it’s a race to the bottom and that will end up with a bloodbath,” he said. “That is exactly what I am trying to avoid.” 

Stellantis is one of the biggest EV sellers in Europe through its Peugeot, Fiat, Opel and Citroën brands, and is embarking on an EV “offensive” in the US from this year.

Tavares singled out Tesla, which has cut prices multiple times over the past year to stimulate demand, igniting a price war with Ford, but has seen a slide in its profits at the same time. 

“I know one company that has brutally cut pricing, and their profitability has brutally collapsed,” he said. “When you do that you are jumping in the red ocean, and when you do that things become very difficult in the future.” 

Companies that consistently lost money “become potential targets for consolidation”, he said, adding he did not rule out further acquisitions by the group in the future. Stellantis was formed by the merger of Peugeot owner PSA — which itself bought lossmaking Opel and Vauxhall from General Motors — and Fiat Chrysler, a business created when the bankrupt Chrysler was sold to Italy’s Fiat. 

EV sales continue to rise across the world, at slower rates than had been expected as mass market customers balk at higher prices compared with petrol alternatives.

The market share of EV sales in both the UK and Europe fell last year, while US growth has slowed. 

A record 1.2mn EVs were sold in the US in 2023, including 317,168 in the fourth quarter, according to data from Kelley Blue Book, a research company owned by data group Cox Automotive. EVs made up 7.6 per cent of the domestic car market last year, up from 5.9 per cent in 2022.

However, “while records were set, the oft-reported slowdown is real”, said Kelley Blue Book analysts. “The EV market in the US is still growing, but not growing as fast.”

Sales in the last three months of 2023 rose 40 per cent compared with the same period a year earlier, moderating from 52 per cent in the fourth quarter of 2022.

With European production in the balance, BASF is preparing for a smaller domestic industry

Germany’s Faustian pact over cheap Russian energy has collapsed. Costs initially soared across the country’s industrial sector last year. Chemical manufacturers are particularly sensitive to the price rises. Economic weakness in China, their biggest source of growth, has further squashed margins as volumes fall. Preliminary results from BASF illustrate the malaise.

Operating earnings at the chemicals conglomerate fell 45 per cent last year to €3.8bn. Not only were figures worse than expected but they deteriorated at the end of the year. BASF has a lengthy cost-cutting plan that spans the next two years.

It has already started selling assets — jettisoning oil and gas business Wintershall Dea in December. With core chemicals markets expected to remain in the doldrums this year, incoming chief executive Markus Kamieth will be under pressure to source more growth when he arrives in April.

There are some positive signs for 2024. European gas prices have stabilised around 2021 levels as imported LNG supplies make up the Russian shortfall.

But Europe’s chemical businesses are hardly humming. Petrochemical plants run at 75 per cent capacity — decade lows, according to Barclays. Weak Chinese volumes mean spreads on commodity chemicals — during the transformation of fossil fuels into petrochemicals such as ethylene — remain near 20-year lows.

If the cycle improves and volumes pick up then more gas demand could push up prices. But without a Chinese recovery, the prospect of this is slim. Cyclical upswings in chemical demand are strongly linked to Chinese credit expansion, notes Jefferies. 

European production is in the balance. BASF is preparing for a smaller domestic industry. A new €10bn Zhanjiang plant in China is expected to start operating in 2025.

Having already scrapped a share buyback programme at the start of last year, BASF’s progressive dividend policy could be called into question. The company said on Friday that it expected 2023 free cash flow of €2.7bn. This would not cover consensus expectations for a dividend payout of €3bn, as compiled by Visible Alpha.

The final figure will be confirmed in February. Even at €2.7bn, BASF would need to dip into debt or cash from divestments to cover the shortfall. This is unlikely to sit well politically amid job losses and plant closures. Tough choices — more asset sales or cost cutting — leave Kamieth little to look forward to when he takes charge.

Europe is again on the front line of the latest geopolitical tensions, a development that threatens to widen the economic gap between it and the U.S.

For the second time in three years, a conflict in Europe’s unruly neighborhood is threatening to weaken an already struggling economy while a more robust U.S. is watching from a safer distance.

This time, attacks by Houthi rebels in Yemen targeting cargo ships in the Red Sea have persuaded more carriers to opt for the safer but longer and more expensive journey around Africa via the Cape of Good Hope.

Those detours are raising freight costs and leading retailers to worry about running out of stock. Some factories have suspended work in the absence of needed parts. Should the threat persist, economists think the decline inflation Europe enjoyed last year could slow down, pushing back a potential cut in key interest rates.

“This is clearly one of the major downside risks to growth, and upside risks to inflation,” said Ana Boata, chief economist at insurer Allianz Trade. “We could talk about a recessionary risk.”

The latest geopolitical flare-up could cement a growing asymmetry between Europe and the U.S. As a large energy producer, the U.S. has emerged arguably stronger from the crisis sparked by the Ukraine war. And while some of its imports transit via the Suez Canal, their share is comparatively small, and the Pacific offers an alternative route for cargo out of Asia.

For now, the interruptions to supply chains are on a modest scale compared with the more widespread blockages seen in 2020 and 2021, and their economic impact is likely to be proportionately smaller. Businesses have also learned lessons from interruptions during the Covid-19 pandemic, and have larger inventories than they did then.

IKEA boss Jesper Brodin said the Red Sea conflict has lengthened its shipping routes by about 10 days or longer though its customers aren’t affected.

“The huge difference at the moment is that we have recuperated after the pandemic,” he said at the World Economic Forum in Davos, Switzerland. “So that means our stocks in our warehouse are in good shape.”

Discount retailer Pepco said conflict in the Red Sea has had a limited effect on product availability, but could hurt supply in the coming months if it continues. The discount retailer—which houses Poundland in the U.K. and Dealz and Pepco in continental Europe—said Thursday that Houthi attacks on vessels were leading to higher spot freight rates and delays to container lead times.

But coming in the wake of a global pandemic and the largest European war in eight decades, the escalation of the conflict that began with an attack on Israel by Hamas in early October is a reminder that the outlook for the global economy is increasingly shaped by developments beyond the reach of economic policymakers.

Ships traveling through the Red Sea carry about 40% of the goods that are traded between Europe and Asia. The Houthis initially claimed to target Israeli ships or those bound for its ports but in practice, their attacks have been indiscriminate. That has prompted more operators to divert their traffic around the Cape of Good Hope.

Last week, Tesla said delays in delivery of components caused by the rerouting of ships would force it to suspend production at its only large factory in Europe, the GigaBerlin plant outside Berlin. Volvo Cars, the Chinese-Swedish automaker, said gearboxes needed to build conventional combustion vehicles at a plant in Belgium were delayed, forcing the company to halt production for three days.

Volkswagen, Europe’s largest carmaker by sales, said its plants hadn’t been affected, but that it continued to monitor the situation in close contact with its suppliers. VW said it was rerouting shipments, which was causing some delay.

Oxford Economics estimates that a ship traveling at 16.5 knots from Taiwan to the Netherlands via the Red Sea and the Suez Canal takes about 25½ days to complete the journey. But this rises to about 34 days if the journey is diverted around the Cape.

Extra traveling time reduces the annual capacity of each ship, and can have a knock-on effect on freight costs on other routes, including those between Asia and the U.S. According to the Freightos Baltic Index, the average cost of transporting goods in a container across the globe doubled between Dec. 22 and Jan. 12.

Those times could lengthen even further if diverted ships have to wait to take on additional fuel to complete their unplanned journeys at overstretched African ports, of which South Africa’s Durban is the largest.

“We haven’t seen tremendous congestion in Durban,” said Ami Daniel, CEO of shipping consulting firm Windward.

For Europe, the impact of the crisis would largely depend on the extent and duration of the disruption. Economists at Allianz Trade calculate that a doubling of freight costs sustained for more than three months could push the eurozone’s inflation rate up by three-quarters of a percentage point and reduce economic growth by almost a percentage point. With the eurozone’s economy already weakened, that could push it into contraction during 2024.

Paolo Gentiloni, the European Union’s top economic official, told reporters on Monday that the situation in the Red Sea “should be monitored very closely” because it could cause energy prices and inflation to rebound.

There are several reasons why the crisis’s impact on Europe’s economy might be less severe than previous episodes of surging freight costs. For one, businesses have been through a number of supply-chain disruptions over recent years and believe they are better prepared.

“We are affected by the crisis,” said Matthias Zink, CEO of Schaeffler Automotive Technologies. “But it’s under control. Maybe the explanation is that we have a lot of experience now in this resilience or in the reaction to these crises.”

Stellantis, the French-American-Italian maker of Fiat, Peugeot and Jeep, said it was compensating for delays in rerouted ships “by using some limited airfreight solutions,” adding that the delays had “almost no impact on manufacturing to date.”

Patrick Lepperhoff, a consultant with Inverto, a unit of BCG, said past crises had made companies better prepared for sudden shocks. Many companies invested in IT to gain better visibility on their supply chains and got closer to their main suppliers, he added.

In addition to greater preparedness, the economic environment is also different from during the pandemic—a global event affecting supply chains around the world. The current crisis is local, leaving suppliers with more alternatives and many businesses now hold bigger inventories than they did before the pandemic struck. In Europe, weak consumer demand has padded this cushion.

“The Red Sea is not as dangerous to global trade as the events were a few years ago,” said Lepperhoff.

Offshore wind turbines are proving too risky for many utilities

U.S. power companies raced to get in on the offshore wind boom a few years ago. Now some are rushing to get out.

Already, utilities have unloaded pieces of a planned New Jersey wind farm and a yet-to-be-built seabed off Massachusetts. Now, “for sale” signs sit on stakes in four developments aimed at electrifying hundreds of thousands of homes in New York, Connecticut, Rhode Island and Virginia.

The pullback is adding to the turmoil in a new industry at the center of the U.S.’s renewable-energy ambitions. Developers behind projects totaling 8.5 gigawatts of electricity—more than a quarter of President Biden’s 2030 goal—canceled or are expected to cancel state-approved power contracts to propose deals with new terms, according to Intelatus Global Partners. Two projects have been nixed outright.

US legislators say Swiss group not sufficiently addressing concerns

US lawmakers have accused ABB of failing to address “alarming” vulnerabilities in China-made cranes that use its technology, saying the Swiss industrial conglomerate’s ties with Chinese state-owned companies could jeopardise national security.

ABB disclosed on Friday it had received a letter from the US House of Representatives committees on homeland security and on China that complained it had “failed to sufficiently answer” questions about “cyber security risks, foreign intelligence threats and supply chain vulnerabilities at seaports in the United States”.

The letter said that in one instance ABB’s response to a request for information from the committees made in July was “troubling” and implied it might have complied with the Chinese Communist party’s “authoritarian national intelligence, cyber security, or national security laws”.

The letter to ABB’s chief executive Björn Rosengren, a copy of which has been seen by the Financial Times, highlights increasing scrutiny by US legislators of international companies with operations or interests in China.

The letter cited a particular concern about ABB’s work with state-owned Shanghai Zhenhua Heavy Industries (ZPMC), which it said installed the Swiss group’s software systems on ship-to-shore cranes sold to the US.

The committees said they had engaged “in a good-faith effort to work with ABB to remedy the alarming security vulnerability created by the installation of ABB equipment and technology by ZPMC engineers in China”.

ZPMC’s installation of that equipment was “unacceptable and must be remedied without any further delay”, committee chairs Mark Green and Mike Gallagher said in the letter, which was first reported by Swedish broadcaster Sveriges Radio.

ABB said it had been engaging with the committees since July to “respond to their requests with care” in a timely manner and was “operating in line with all relevant US regulations”.

“ABB’s crane software technology is supplier-independent and installed on cranes manufactured by major crane builders including Chinese companies,” it said. “These cranes are bought by US ports from Chinese and other companies, not from ABB.”

ZPMC offices in China and Europe did not immediately respond to requests for comment.

The US is ABB’s biggest single market, followed by China. The group’s shares fell 3 per cent on Friday morning.

The committees’ letter called on Michael Gray, ABB country holding officer for the US, to testify before them in an upcoming public hearing “in light of the breakdown in good faith negotiations and to better understand how ABB is securing its software and hardware on US ship-to-shore cranes”.

The letter added that it was vital that ABB explained its relationships with Chinese state-owned enterprises “and whether ABB should be trusted to continue working on behalf of US government agencies”.

The FT reported last week that the House China committee had asked the chief executives of US chipmakers to testify before Congress as part of its intensifying scrutiny of companies with interests in China.

The committee sent letters to Intel, Nvidia and Micron summoning their chief executives to testify, according to several people familiar with the situation. The panel has not previously held hearings with CEOs from any industry since it was created to strengthen Congress’s focus on possible threats from China.

New law cuts time that applicants must live in the country and lifts ban on dual nationality for those from outside EU

The German parliament has passed a law that will make it easier for foreigners to acquire citizenship, as Berlin looks to immigration to solve a dire shortage of skilled workers.

Under the law, passed by 382 votes to 234, people will be able to apply for citizenship after living in Germany for five years, rather than eight as at present. Those who have made a particular effort to integrate — for example by becoming proficient in German or doing voluntary work — can apply after three years.

It also lifts a ban on dual nationality for people from non-EU countries.

“We have to make an offer to skilled people from all over the world, just like the US and Canada do,” said Nancy Faeser, interior minister. “We must show our appreciation for the people who come to this country and contribute to keeping our society going.”

Reem Alabali-Radovan, the government’s integration commissioner, said the law would enfranchise millions who were not yet full members of society. Official statistics show that about 10mn people living in Germany do not have a German passport, and 5.7mn of them have lived in the country for at least 10 years.

“Anyone who is an integral part of our society should be able to vote and be elected,” Alabali-Radovan said. 

The measure sets Germany apart from other countries in Europe that are tightening naturalisation criteria. Under an immigration law passed by the French parliament last month, children born in France to immigrant parents will no longer automatically acquire citizenship but will have to request it between the ages of 16 and 18.

Alexander Throm, domestic policy spokesman for the opposition Christian Democrats, said the new law “devalues citizenship” and “goes in completely the wrong direction”, adding: “While other countries such as France, after painful experience, are toughening their rules for naturalisation, we are massively reducing the requirements.”

The legislation came a day after parliament passed a law making it much easier to deport foreigners.

The combination of the two measures underscores the delicate balancing act western governments are being forced to tread: on one hand trying to attract more foreign workers to solve demographic deficits while on the other taking a tougher line on illegal immigration — one of the drivers of surging support for rightwing populist parties such as the Alternative for Germany (AfD).

The AfD has been under pressure after it emerged that politicians from the party met rightwing radicals in November to discuss plans to deport from Germany millions of people with an immigrant background, including those with German citizenship.

The deportation law passed on Thursday simplifies procedures for removing people who have no official leave to remain. People facing deportation often go into hiding in Germany, and the new law gives the authorities the power to detain individuals before their expulsion for up to 28 days, compared with 10 days before.

“Anyone who has no leave to remain in Germany must leave Germany,” Faeser said on Thursday. “That is a precondition for ensuring that immigration is accepted by society and integration works.”

Under the new law, police looking for deportees will be able to enter the rooms of third persons in migrant hostels, which was previously illegal. The law also stipulates that the timing of repatriations must no longer be announced to deportees in advance. In addition, it creates more grounds for deportation, including entering the country with forged papers or committing antisemitic acts.