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Ford and other manufacturers pursue cheaper energy storage technology prevalent in China

Battery technology prevalent in China is making inroads in the US electric-vehicle market, with manufacturers looking past poorer energy storage characteristics to embrace its cheaper cost and safety.

Lithium iron phosphate technology accounted for about half of the battery capacity of EVs sold in China last year, according to research from consultancy Adamas Intelligence. In the US the technology represented only 9 per cent of capacity in 2022, up from zero the year before.

The US share is about to change, however. This month a start-up named Our Next Energy will begin making lithium iron phosphate, or LFP, batteries in Michigan, expanding next year after opening a new $1.6bn plant. By 2027 ONE intends to supply enough LFP batteries for 200,000 EVs.

Last month Ford announced it would license technology to make LFP batteries for its cars from China-based supplier CATL, citing the need to offer customers a lower-priced option. A senior General Motors executive said in February that the company is exploring the possibility of using LFPs to reduce costs.

The battery industry “certainly has seen the second coming of LFP in recent years, and that wave is starting to move west”, said Ryan Castilloux, founder of Adamas Intelligence.

LFP batteries are a form of lithium ion battery, the main form of energy storage in electric vehicles. The batteries in electric cars sold in the US to date have primarily contained a combination of nickel with manganese and cobalt (NMC) or manganese and aluminium in a battery’s cathode.

Such “nickel-rich” batteries have relatively high energy density, meaning they can store more electricity per unit of weight. This quality allows drivers to travel farther on a single charge — a big plus in a sprawling US landscape where trips tend to be longer. But nickel-rich batteries cost more than LFP technology, on an energy basis.

LFP batteries hold less energy per pound than nickel-rich batteries but can be recharged more times before they wear out. This made them a good fit for taxis operating in Chinese megacities with widely available charging infrastructure. LFP batteries’ lower energy density was less of a problem for cars that weighed less than the trucks and sport utility vehicles favoured by US consumers.

In the US, LFP has been “seen as the lesser-wanted . . . chemistry”, said Chloe Herrera, lead battery analyst at Lux Research. Range has been viewed as too important to US drivers to sacrifice in favour of price.

“In the [US] battery community, if you talked to anyone four years ago, no one would have said you’d get LFP in a vehicle,” she said.

One factor driving new US interest in LFP technology is the higher cost of nickel and cobalt as EVs sales grow.

Nickel’s price has more than doubled in the past three years, jumping a year ago when Russia, a supplier of the metal, invaded Ukraine. The majority of the world’s cobalt is mined in the Democratic Republic of Congo, often under punishing conditions for workers, and the price also shot up between 2020 and 2022 before falling back down to roughly where it was three years ago.

Adding to LFP’s appeal in the US, the technology has also become more affordable as patents on it expire. And the spread of public charging stations — set to accelerate with a boost from federal subsidies — may diminish drivers’ anxieties about dead batteries, said Jeff Chamberlain, who runs Volta Energy Technologies, a venture capital firm that invests in battery companies. LFP batteries are also less likely to catch fire than nickel-rich batteries.

Snarled supply chains and US efforts to loosen reliance on Chinese imports may also boost LFP technology in the US. The Inflation Reduction Act, the flagship US climate law, fosters a domestic supply chain for EVs and discourages carmakers from using suppliers located in “a foreign entity of concern”, such as China.

The subsidies in the law allow new companies to compete with established players on cost as they grow from low-volume to high-volume operations, said Our Next Energy chief executive Mujeeb Ijaz.

“We had a lot of customers that were looking at us, and they’re now changing from interested, curious, to, ‘Show me whether you can scale and actually sign a supply agreement’,” he said. “It’s transitioned a lot of customer activity from the sidelines.”

Tesla has been at the forefront of bringing LFP technology to North America. The largest US EV producer began using lithium iron batteries supplied by CATL in 2020 for cars sold in China, expanding that in 2021 to some cars it sold in the US. Elon Musk, Tesla’s chief executive, told investors on Wednesday that Earth’s mass contains more iron than any other element.

“We’re definitely not going to run out of iron. There’s so much iron it’s insane,” he said.

US sales of EVs totalled 810,000 in 2022, according to Kelley Blue Book, of which 99,500 used LFP batteries, according to Adamas Intelligence. Tesla accounted for the “majority” of the LFP model sales, Castilloux said.

Tesla’s “new power train is compatible with any battery chemistry — that will give us great flexibility in battery sourcing”, said Colin Campbell, the company’s head of power train engineering.

No more than 20 per cent of announced battery production capacity in the US is scheduled for LFPs, said Alla Kolesnikova, head of data and analytics for Adamas Intelligence. But the consultancy expects that “all major [carmakers] will gravitate towards LFP for entry-level EV models, raising LFP’s share closer to 30 per cent by mid decade”.

Kore Power, a US battery start-up with a $75mn investment led by a subsidiary of Germany’s Siemens, also anticipates a growing demand for LFP batteries. A plant Kore plans to open in Arizona at the end of 2024 will have two assembly lines, one for NMC and one for LFP. The second phase of construction will add “predominantly” LFP capacity, a Siemens spokeswoman said.

Chamberlain, who formerly headed the battery research programme at Argonne National Laboratory, said that carmakers are not going to switch from NMC batteries to LFP overnight. The market is growing rapidly enough that both will be necessary, and with billions invested in building new battery plants, “they have a lot of sunk capital”.

Creative director Demna is attempting to establish a new direction for the Kering-owned brand in the wake of scandal. The promise of a major reset has helped the house reassert its status as a hot ticket at Paris Fashion Week.

A few weeks ago, some fashion editors were still unsure about covering Balenciaga’s March show: some US and UK outlets in particular were nervous about the risks of associating themselves with the scandal-tainted fashion house.

But since Balenciaga teased plans for a major reset last month, at both owner Kering’s annual results and in an interview that designer Demna gave to US Vogue, the brand at the centre of fashion’s highest-profile scandal since Dolce & Gabbana was frozen out of China in 2018 has reasserted its status as a hot ticket at Paris Fashion Week.

Balenciaga’s Sunday show — which is expected to be a radically pared-back affair, leaning on its archive — will be a key test for whether the brand can bounce back from the crisis that engulfed it in late November after backlash to an ad campaign featuring S&M-inspired products alongside children boiled over, resulting in social media outrage, cable news takedowns, and vandalism and protests at stores.

Ahead of the high-stakes outing, BoF breaks down what happened, what to expect from the show and where one of fashion’s most hotly-watched companies might go from here.

Since Vetements-founder Demna Gvasalia took the creative helm at Balenciaga in 2015, the brand has grown spectacularly, pushing past $2 billion in estimated annual sales on the back of extreme silhouettes, hit streetwear and sneakers, internet savvy-marketing and blockbuster shows laced with socio-political critique. Balenciaga started to rebalance its image, reasserting its luxury credentials with an haute couture revival and red-carpet push. But during ready-to-wear shows the brand continued to issue stunty products like trompe-l’œil leather potato chip bags and, last season, tapped controversial rapper Ye to open its show.

Social media outrage boiled over after a holiday gifting campaign that posed children in intimate settings with adult products including teddy bear bags accessories with S&M-inspired details, like harnesses and padlock necklaces. The brand recalled the campaign, which Demna has called a “big mistake” and a “wrong artistic choice.” But the backlash continued to grow as some claimed to spot pedophilic messages embedded in legal documents in the background of the campaign photos. In another image starring Isabelle Huppert, sleuthers zoomed in on legal briefs from a Supreme Court decision related to child pornography and a book by an artist whose subjects have included disfigured children that were contained in the images. Balenciaga said the content of the briefs was accidental — initially threatening legal action against a production company that provided the props before apologising for this misstep, too.

As the controversy spread, particularly in English-speaking countries, key markets like the US, the UK and the Middle East were the most heavily impacted. (The fallout has been more muted in Europe and hardly noticeable in Asia, where the brand continues to grow swiftly).

Fourth-quarter sales at Kering’s “Other Luxury” division, which includes Balenciaga, fell 4 percent year-on-year, compared to 13 percent growth in Q3. That impact could be more extreme for Q1 this year, as the prior quarter included 2 months of normal trading before the scandal erupted. Kering says it hopes things will start to improve for Balenciaga from the second quarter of this year.

Apart from its repeated apologies, Balenciaga has pulled the plug on nearly all communications since the scandal hit. Throughout the pivotal year-end holidays and Lunar New Year, the brand’s social channels posted only archival videos from the time of founder Cristobál, as well as a few looks from the ultra-classic “Garde Robe” line launched in November.

In February, Balenciaga said it was partnering with the National Children’s Alliance, a US-based network of organisations dedicated to fighting child abuse, and signed with a “best-in-class” communications agency to help approve its content creation and approval processes. Kering also named a “brand safety” chief to police content across its brands.

Balenciaga couldn’t lay low forever. Playing an outsized role in the fashion conversation has long been key to the brand’s identity and promise to customers, compared to more conservative luxury brands that trade in trend-resistant signifiers and styles.

Kering has defended its decision not to dismiss Demna or Balenciaga CEO Cédric Charbit, saying its audit of the incident found “no fouls from anyone, just errors of judgement.”

“We found there was no bad intention. We believe people have the right to make mistakes — that’s important to us at Kering. Just don’t make them twice,” said chairman François-Henri Pinault.

But the show comes with significant risk: the event will almost certainly be a target for social media backlash, and may attract protests. But Kering has weighed the potential risks and is taking the chance as a means of testing whether retooling Balenciaga’s approach to marketing and design will allow it to bounce back with the brand’s current team in place.

Balenciaga’s shows often stir up buzz with dystopian sets, and products like $2,000 leather trash bags and bedazzled platform crocs. The approach has provoked delight and distaste in equal measure, helping propel the brand’s message across the internet and fuel rapid growth. But these lightning-rod moments risked tiring some shoppers, as well as making it harder for Balenciaga to convince the public that its recent missteps were accidental. (Demna has repeatedly insisted the campaign controversy was not intended to provoke).

Now, Balenciaga plans to come back with a stripped-back show that will attempt to reset the brand and refocus the narrative on its heritage — and Demna’s clothes.

Fashion insiders know that exploring the architectural, exaggerated silhouettes of Cristobál Balenciaga’s archive has been an interest of Demna’s since he started at the brand. But his experiments in draping and construction were often drowned out by the commercial success of his twisted streetwear, as well as media attention generated by his dramatic shows.

This time around, buyers and critics are expecting a more elevated, traditionally elegant look. The new collection could be more in line with his archive-inspired couture shows or a more runway-ready declination of the ultra-classic “Garde Robe” line.

The show will take place in a central Paris location with a minimal set, covered in white toile, a major shift away from the brand’s pattern of immersive, high-production blockbusters staged at film studios on the outskirts of town. Big-name celebrity guests are not expected to attend.

Firstly, the show will be a key test for whether Demna can still activate Balenciaga’s central role in the fashion conversation without reigniting major social media backlash. The brand is still heavily impacted in key markets like the US, so that’s hardly a given.

Secondly, we’ll see if the brand can reassert its fashion authority and generate buzz through design rather than relying on marketing stunts. A more muted online reaction could still be considered a success if the brand manages to generate strong engagement with key stakeholders like retailers, editors and top clients.

Demna’s hit revamp of Balenciaga was still driving rapid growth before the brand’s PR crisis last year. But some early adopters had begun to tire of the brand’s ironic, streetwear-heavy merchandising and stunty marketing and may welcome a new approach.

Elon Musk says AI is 'dangerous technology' and needs regulating to ensure it's 'operating within the public interest'

(Business Insider)

Elon Musk doesn't think artificial intelligence will help Tesla make cars "anytime soon."

He made the comment at Tesla's investor day on Wednesday in response to a question from a shareholder.

But he reiterated his concerns about the technology. "I'm a little worried about AI stuff. I think it's something we should be concerned about," Musk said.

"We should need some kind of regulatory authority or something, overseeing AI development and making sure it's operating within the public interest."

Musk's thoughts on AI chimed with the views of OpenAI's chief technology officer, Mira Murati, who's said that AI tools should be regulated as they could be used by "bad actors."

Musk described AI as "quite a dangerous technology" in his response to the investor, adding he feared he "may have done things to accelerate it."

Last month, Musk said that unchecked AI could pose a threat to society in an address at the World Government Summit in Dubai. In 2018 he said the two things that most stressed him out were production difficulties with the Tesla Model 3, and the dangers of AI.

Musk cofounded OpenAI, the company behind ChatGPT, the chatbot that has generated much attention since its release last November. People have been using it for side hustles using the AI tool, while others have used it to write cover letters.

Insider's Adam Rogers wrote about how ChatGPT, or other similar AI tools like Microsoft's Bing, are "bullshit engines" and why they shouldn't be trusted.

March did come in like a lion — at least compared to last week. Startups in cyber, defense and biotech all saw some large rounds in a week that for once was not dominated by artificial intelligence. Five VC-backed companies all saw nine-figure rounds this week, a strong start to the last month of the quarter.

1. Wiz, $300M, cybersecurity: Cybersecurity startup Wiz graduated to decacorn just this week, as the company based in the U.S. and Israel raised $300 million in fresh capital at a valuation of $10 billion. The Series D funding was led by Lightspeed Venture Partners. Founded in 2020, Wiz has now raised a total of $900 million, according to Crunchbase data. The funding for the cloud security startup came with other news; Wiz announced it won’t move any of that money to Israel due to ongoing unrest about proposed reforms to the country’s judicial system. Some fear the proposed judicial system reforms would undermine Israel’s democratic foundations and grant unchecked power to the government.

2. Skydio, $230M, drone: Drone startup Skydio locked up a $230 million Series E at a $2.2 billion valuation led by Linse Capital — more than double its valuation from just a couple of years ago. The new round comes almost exactly two years after the company raised a $170 million Series D at a valuation of more than $1 billion. Skydio produces drones for the consumer, enterprise and government sectors. Its drones are used by every branch of the U.S. Department of Defense, by over half of all U.S. State Departments of Transportation, and it now has more than 1,200 enterprise customers. Founded in 2014, Skydio has raised $562 million in total, according to the company.

3. Cargo Therapeutics, $200M, biotech: A couple of biotech startups rank pretty high on the list this week. The first is Cargo Therapeutics, which closed a $200 million Series A co-led by Third Rock Ventures, RTW Investments and Perceptive Xontogeny Venture Fund. The San Mateo, California-based company is developing CAR T-cell therapies for cancer. The startup is in phase 2 clinical trials for its treatment of large B-cell lymphoma. Founded in 2021, this is the biotech firm’s first outside funding, per Crunchbase.

4. Chroma Medicine, $135M, biotech: The second biotech firm with a nine-figure raise this week is on the opposite coast. Cambridge, Massachusetts-based Chroma Medicine locked up a $135 million Series B led by GV (formerly Google Ventures). The startup’s gene editing platform does not rely on cutting or nicking DNA — which introduces risks — to regulate gene expression like most other therapeutic programs. Founded in 2021, the company has now raised $260 million, according to Crunchbase.

5. (tied) Kindbody, $100M, health care: Companies offering fertility health care benefits are becoming more commonplace in the U.S. Kindbody is one of those startups that partner with companies to offer employees family-building benefits, and this week the New York-based firm raised $100 million in capital from Perceptive Advisors. The new cash values Kindbody — founded in 2018 — at $1.8 billion. Kindbody, which owns and operates fertility clinics, has now raised more than $290 million in debt and equity, per the company.

5. (tied) Paratus Sciences, $100M, biotech: Bats have kind of been put through the ringer the past few years, what with the pandemic and all (although the new DOE report may dispute that). However, maybe they can also help human health. New York-based Paratus Sciences launched with a $100 million Series A co-led by Polaris Partners, ARCH Venture Partners, ClavystBio, EcoR1 Capital and Leaps by Bayer. The startup is looking at what bats and other animals can tell researchers about human health. Paratus is focusing on developing human therapeutics in areas like inflammation.

7. Bitwise Industries, $80M, education: Fresno, California-based Bitwise Industries, which attempts to bring coding skills to historically underrepresented minorities, closed an $80 million round led by existing investors Kapor Center and Motley Fool. Founded in 2013, the company has now raised approximately $158 million, per Crunchbase.

8. Wunderkind, $76M, marketing: New York-based marketing tech startup Wunderkind raised a $76 million Series C led by Neuberger Berman, TechCrunch reported. Founded in 2012, the company has raised nearly $152 million, per Crunchbase data.

9. Temporal, $75M, software: Seattle-based Temporal, whose platform helps in application development, raised $75 million in a Series “B-Prime.” Greenoaks joined existing investors in the round. Founded in 2019, Temporal has raised more than $200 million, per the company.

10. Shef, $67M, retail: San Francisco-based Shef, a chef-to-consumer marketplace, closed a Series B led by CRV that included $66.5 million in equity and $7 million in debt. Founded in 2019, Shef has raised more than $100 million, according to the company.

Very surprisingly, the top nine rounds all occurred in the U.S. this week. The only large raise this week to crack the top 10 was:

Speed up those steps to boost longevity and burn more calories

The market is so picked over today by analysts that there are few areas where an active manager can find mispriced stocks to beat an index fund. Biotech is one of those areas, and now is a good time to be investing in it.

Consider that the potential for most biotech companies isn’t what their current earnings or valuations are. It’s whether they will have positive test results for a potential blockbuster drug, and then whether the Food and Drug Administration will approve the drug for sale. That isn’t easily discernible by quantitative screens seeking companies with cheap valuations, or by the average Wall Street analyst trained to read income statements and balance sheets.

Andy Acker, manager of the top-performing Janus Henderson Global Life Sciences fund (ticker: JAGLX), illustrates the importance of specialized knowledge in the sector: “We have 10 senior investment professionals [on our healthcare team] with a combined over 140 years of experience, including three Ph.D.s and an M.D. who are here to help us really differentiate between the drugs that are likely to work and those that are likely to fail.”

Today, that kind of expertise is crucial. The broadly diversified SPDR S&P Biotech exchange-traded fund (XBI) is down more than 50% from its February 2021 peak of $174 a share, to $83 a share, after two brutal years for the sector. Biotech dropped in 2021 because, after the Covid crisis caused all healthcare stocks to surge in 2020, there was an excess of dodgy biotech initial public offerings, which subsequently collapsed. But rising interest rates in 2022 only made matters worse. Many biotech companies need to borrow money to keep their research operations going while they’re in the drug-development stages.

But now valuations are attractive, rates could be close to peaking, and opportunities are plentiful—if you can find the right stocks.

“Last year was a year of positive [drug clinical trial] data, and this year could be the year of new product launches,” says Acker. “The FDA has 75 new medicines pending approval decisions. So this could be the year of the most new-product approvals of all time, as the previous high was 59 drugs back in 2018.”

Acker points to Sarepta Therapeutics (SRPT), which has a muscular dystrophy gene-therapy treatment, the first of its kind, scheduled for possible FDA approval this May. “[Muscular dystrophy] is a huge unmet medical need that affects children,” he says. “Patients typically end up in a wheelchair in their teens, and typically will die in their 20s.” Stock of the company is up 59% in the past 12 months, while SPDR S&P Biotech ETF is down 8%.

Yet Acker would be hesitant to pound the table for the entire sector: In biotech, “90% of the drugs that begin human clinical testing ultimately fail,” he says.

After two brutal years, small biotech stocks are due for a recovery

Skilled management and the wide dispersion in biotech stock returns is one reason that AlphaCentric LifeSci Healthcare (LYFIX) managed to lose only 0.8% in 2022 while the entire market collapsed. In 2023, the fund is up 13%. Manager Mark Charest has a doctorate in chemical biology from Harvard University and is a co-inventor on eight drug patents. His advisory firm, LifeSci Fund Management, is also a business affiliate of LifeSci Partners, a biotech/pharmaceutical consulting group.

A key driver of Charest’s outperformance is knowing which kinds of biotech companies large drug companies want to acquire. Though he doesn’t invest solely with mergers and acquisitions in mind, of “the last 30 M&A deals in biotech that were of a greater-than-$250 million takeout value, we’ve owned 16,” he says.

One company that Charest thinks has acquisition potential is BioCryst Pharmaceuticals (BCRX), which already has a drug approved for hereditary angioedema—a condition characterized by severe swelling. “[Biocryst] will do more than a quarter-billion dollars in revenue this year,” Charest says. He thinks the fact that the company already has a commercial product, and is still trading cheaply after last year’s selloff, could lead to an acquisition.

Other healthcare managers believe that acquisitions will continue to drive the performance of the best small biotech companies, as patents for many blockbuster drugs—such as AbbVie ’s (ABBV) anti-inflammatory treatment Humira and Merck ’s (MRK) top-selling cancer medicine Keytruda—are expiring soon. “We have massive patent-cliffs exposure across the pharma industry,” says Kyle Rasbach, a senior analyst at the Eventide Healthcare & Life Sciences fund (ETAHX). “So the need to acquire innovation is exceedingly high.”

Eventide mainly specializes in small biotech companies. But most active managers, like Acker, include in their portfolios other kinds of healthcare companies, such as insurers, medical-device makers, and hospitals.

There are advantages and drawbacks to both strategies. Well-diversified healthcare funds like Janus’, T. Rowe Price Health Sciences (PRHSX), and BlackRock Health Sciences Opportunities (SHSAX) held up better during the past two years of volatility than pure plays like Eventide, Fidelity Select Biotechnology (FBIOX), and Franklin Biotechnology Discovery (FBDIX).

Ziad Bakri, manager of the $15.4 billion T. Rowe Price Health Sciences fund, has about 30% of his portfolio in biotech, although more traditional pharma, a 16% weighting, overlaps with it. He thinks that biotech valuations are “reasonable” today and expects more M&A activity, but says there needs to be some “high-profile clinical trial and big commercial successes to lead to a real bull market.”

When that happens, the small-fry biotech funds will triumph again.

An accident at the Fukushima nuclear plant in Japan 12 years ago led countries around the world to question the safety of nuclear energy. But atomic energy has been re-embraced by some nations since then. And the potential loss of uranium supplies from Russia, after its invasion of Ukraine a year ago, served as a wake-up call to many who had lost confidence in the power source.

Uranium prices peaked at nearly $64 a pound in April 2022, as “heavy financial buying and other demand pushed the market up quickly” following Russia’s Feb. 24 invasion of Ukraine, says Jonathan Hinze, president at nuclear-fuel consultancy UxC.

Russia is a “major player in both uranium conversion and enrichment,” and the market has seen a “bifurcation” between the West and Russia, says Justin Huhn, publisher and founder of Uranium Insider. This situation has “large implications in the fuel cycle, and especially for uranium demand in the coming years.”

A long-lasting ramification of Russia’s aggression in Ukraine is that Western utilities will be highly unlikely return to the same level of business with Russia as they have had historically, Huhn says. The West could also sanction the import of Russian uranium fuel or fuel services, and Russia may decide to cut off the West.

The U.S. gets about 15% of its physical uranium and 24% of its enrichment of uranium from Russia, says Huhn, while Europe relies on Russia for about 20% of its uranium and almost 30% of its enrichment needs.

On April 18, 2022, uranium hit its highest weekly price since just before March 11, 2011, when the Fukushima Daiichi power plant in Japan was hit by a tsunami caused by a massive earthquake, Hinze notes. Fukushima was the worst nuclear disaster in a quarter-century.

The high 2022 uranium price didn’t hold. But “thanks to improved equity markets that have allowed financials like the Sprott Physical Uranium Trust (UUT.Canada) and Yellow Cake (YCDA.UK) to raise new money, demand for spot uranium has increased in January and February, leading to prices now nearing $52,” after starting out the year around $48, Hinze says.

“It is amazing how far the industry has moved past the Fukushima accident,” he says. The 2010s were “mostly a lost decade for the nuclear markets.” But since 2020, there has been a “clear rebirth in this sector as countries are pushing for net-zero carbon emissions.”

Huhn says the majority of the public in Japan are now in favor of restarting nuclear plants, showing “just how dramatically sentiment around nuclear energy has shifted in recent years.” He points out that “in terms of human fatalities per unit of energy produced, nuclear energy is the safest form of energy ever conceived.” Nuclear energy also produces an “incredibly small amount of waste relative to the immense amount of energy created,” with that waste highly regulated and safely stored.

Huhn expects to see further upward pressure on uranium prices, products, and services this year and beyond, with increasing volume in the long-term uranium contract market likely to continue to move long-term uranium prices higher.

The uranium spot market will see an “outsize positive influence by virtue of secondary demand from financial interests”—in particular, the Sprott Physical Uranium Trust, says Huhn. Uranium Insider, which has a position in the trust, sees it as an “attractive, unleveraged way to play the upside potential” in uranium prices.

The present market is tight, with a deficit in the annual amount of uranium consumed versus annual production, accompanied by the start of a “robust long-term contracting cycle for nuclear utilities,” Huhn says. “The table is set for many years of a supportive environment for rising uranium prices.”