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Shenzhen-based carmaker and battery group prepares for push into foreign markets

BYD, the Chinese auto giant backed by Warren Buffett’s Berkshire Hathaway, has dethroned Elon Musk’s Tesla as the world’s biggest electric vehicle producer by sales, signalling China’s rising dominance over the sector.

Shenzhen-based BYD sold 641,000 vehicles in the first six months of the year, a more than 300 per cent jump from the same period a year earlier.

That compared with 564,000 vehicles sold by Tesla, which has blamed a tough second quarter on supply chain and sales disruptions in China after its operations were hit by coronavirus lockdowns and travel restrictions.

BYD’s rise underscores China’s strengthening position in renewable energy, boasting scale and cost advantages across much of the supply chain for electric vehicles, batteries and wind and solar energy.

“The performance looks impressive,” said Jeff Chung, an auto analyst with Citi, of BYD’s sales growth.

BYD, which is part-owned by Buffett’s Berkshire Hathaway, has also overtaken South Korea’s LG as the world’s second-biggest producer of EV batteries, behind China’s Contemporary Amperex Technology, known as CATL.

According to Seoul-based SNE Research, BYD has outpaced LG Energy in terms of monthly market share since April. This was in part because of disruptions at Tesla’s Shanghai factory after China’s most populous city was forced into a two-month lockdown to suppress a wave of Omicron coronavirus cases.

Tesla, along with a clutch of Chinese EV makers including Li Auto, Xpeng and Nio, were harder hit by the lockdowns than BYD, which benefited because most of its factories are not based in the regions and cities that suffered the most severe restrictions.

Analysts view the rise of China’s domestic auto industry as a forerunner to a tectonic shift in the global auto market as Chinese EV makers start to sharpen their focus on export markets.

Last year China, the world’s largest car market, exported more than half a million electric vehicles, more than double from the year prior.

Yet about a third of China’s exports into Europe were Chinese-owned European brands, such as Volvo and MG Motor, while just 2 per cent represented Chinese brands, according to researchers at the Mercator Institute for China Studies, a Berlin-based think-tank. Nearly half were from Tesla and the remaining 14 per cent were from European joint-ventures in China.

However, Tu Le, managing director of advisory group Sino Auto Insights, said BYD, was “firing on all cylinders”, with products covering many critical EV market segments.

He also expected BYD would soon challenge foreign automakers on their home turf, especially in the US. “They’re going to make some really aggressive moves to go international,” he said.

A farmer’s case against energy company RWE could shatter precedent on climate-related litigation

For several days at the end of May, an unusual collection of scientists, lawyers and judges from Europe could be found in the Peruvian Andes almost 5,000 metres above sea level, watching as a drone flew up to a huge, but shrinking, glacier.

The setting was spectacular: the bright blue Lake Palcacocha sparkled in the sun in front of a huge wall of rock and ice hundreds of metres tall, the facade of a glacier that extends backwards over the snowy peaks. The beauty of the scene belied its instability; if an avalanche were to crash into the lake, experts warn floodwater could rush down into the city of Huaraz below.

The unlikely group was deep in the mountains to gather evidence in a high-stakes lawsuit brought by a Peruvian farmer, Saúl Luciano Lliuya, against RWE, Germany’s largest utility company.

Since the emissions produced by RWE globally over its 124-year history contributed to the warming that is shrinking the glacier, the farmer argues, the company should help pay for defences to protect Huaraz, his hometown.

RWE has never had any operations in Peru. But it is one of Europe’s 10 biggest polluters, according to an influential 2014 study, accounting for 0.47 per cent of the cumulative global industrial emissions of carbon and methane between 1751 and 2010 — the effects of which do not respect national borders.

Accordingly, in a suit filed in Germany in 2015, Luciano Lliuya said the company should pay for 0.47 per cent of the costs of protecting Huaraz — around €20,000. RWE says the claim has no basis in German law, and that it is judicially impossible to attribute specific local consequences of climate change to an individual company.

Luciano Lliuya’s action, which has been funded entirely by donations, is about much more than compensation. The dispute, now nearing its final stages, is a landmark case — seen by many academics, campaigners and litigators around the world as a potential watershed moment that could usher in a wave of compensation claims for climate-related destruction.

“If this case is successful I have no doubt that there will be a number, probably a big number, of additional court cases,” says Christoph Bals, policy director of the non-profit Germanwatch, which is supporting Luciano Lliuya.

It is just one of the ballooning number of climate-related lawsuits that have been filed in the six years since the Paris Agreement was signed. The Agreement — in which more than 190 countries agreed to limit global warming to well below 2C — has provided new legal ammunition to activists and environmentalists, as domestic courts are being asked to interpret what the treaty obliges individual countries to do.

Recent wins — such as a French court’s 2021 ruling that the government must do more to cut emissions — have emboldened activists, and funding for climate cases is increasingly available. There is also broadening acceptance in many jurisdictions of the need to curb warming: in a 2021 decision, a court in the Netherlands ruled that oil major Royal Dutch Shell had a duty of care to Dutch citizens and must make steeper emissions cuts.

While the sum Luciano Lliuya is seeking amounts to little more than a rounding error for a company like RWE, which had a turnover of €24.5bn in 2021, a precedent-setting victory would expose other polluters to the risk of similar claims from around the world, potentially for much larger sums.

The judges’ decision will “influence the thinking” of judges elsewhere, who are “seeing climate cases come into their courtrooms and [are] looking for guidance,” says Michael Burger, executive director at the Sabin Center for Climate Change Law at Columbia University, New York.

Even if Luciano Lliuya’s challenge fails, the architecture of the case will exist for others to learn from, at a time when demands from poor nations for climate-related financial support are growing louder. The RWE case is the first transnational lawsuit of its kind to have got as far as it has, and is thought to be the first time a resident of one country has sought compensation from a polluter based elsewhere.

“Eventually there will be a brave court that will order compensation,” says Sophie Marjanac, a lawyer at environmental law charity ClientEarth. It could be “impossible to estimate or put a limit on that liability . . . That’s why [companies are] resisting it incredibly hard.”

The fight reflects a stark reality: those who are most affected by climate change have often done little to cause it, and feel abandoned by big polluters that they say are not doing enough to help them cope with its effects.

“When we took this case in 2015 everybody said we were crazy,” says Luciano Lliuya’s German lawyer, Roda Verheyen. “Science is only working to our advantage . . . I don't think I’ve ever been this optimistic.” Even if the farmer loses, she adds, the issue of who is responsible for the damage caused by climate change is not “going to go away”. 

To have a chance of winning, Luciano Lliuya’s legal team must first show that the threat to his property is significant and imminent. That is what the scientific experts appointed by the regional court of Hamm, Germany were gathering evidence about during the week-long visit in May, watched over by the German judges set to rule on the case.

The scientists took soil samples and noted down measurements. A drone flew up to the ice wall — which was theoretically accessible by boat, but “much too dangerous” to get close to due to the risk of falling ice, says Martin Mergili, a geomorphology expert who has supported Luciano Lliuya’s team.

They worked to the sound of occasional cracking. “It’s not a constant noise, but from time to time . . . small ice avalanches come down,” says Mergili. Sometimes the sound is “shocking”.

According to people familiar with the case, RWE has questioned and tried to discredit the climate science presented to the German court by Luciano Lliuya’s team over the course of the case, much of which is being fought behind closed doors.

In a statement to the FT, the company says it “must be allowed to argue about studies and whether or not they are of relevance for the case . . . We do not deny climate change and that man has been and still is influential on it.”

In addition to proving the threat to his home, the farmer’s team must show that RWE is partly to blame for the risk because of its historic emissions. That is more of a challenge, and something that until recently would have been difficult to prove.

Enter “attribution science”, a rapidly evolving field of research about the extent to which climate change made a natural disaster more likely or severe, and who emitted the pollution that caused warming.

Once a niche specialism, this area of study has advanced rapidly in the 20 years it has been around and scientists are getting better at drawing causal links. Without these advances, proving liability for climate-related destruction would have been much harder, says Delta Merner, who leads the Science Hub for Climate Litigation at the US non-profit Union of Concerned Scientists. The RWE case “would not have been possible 10-15 years ago,” she adds. 

For Luciano Lliuya and his supporters, winning is about “climate justice” — or redressing the balance between big polluters and the communities that have done little to contribute to climate change, but will be worst hit by its effects.

Vulnerable countries are also seeking climate justice, which some of their leaders say should include compensation for the effects of warming — something long resisted by rich countries. Compensation cases are “the holy grail of climate change litigation”, says Marjanac. “There’s no way that the rich countries of this world will voluntarily agree to pay compensation to the global south.”

The issue proved a sticking point at last year’s COP26 UN climate summit, at which rich countries refused to back a proposal by poorer ones for a new financing facility for “loss and damage”, or money to help those most at risk cope with the devastation wrought by rising sea levels, hurricanes and wildfires. Loss and damage is expected to be a major theme at this year’s COP27 meeting in Egypt.

Lee White, Gabon’s minister of water, forests, the sea and the environment, says if he were representing a country at high risk from climate hazards, “I’d be very tempted to take [legal] action . . . even though I know that it would be extremely complex and difficult to prove.”

Some island nations are considering doing just that: last year, Antigua and Barbuda and Tuvalu established a group to discuss the prospect of suing countries for the effects of their emissions, among other things. The Commission of Small Island States on Climate Change and International Law plans to seek legal opinions from international courts and tribunals about whether they could bring such cases.

In the US, meanwhile, more than 20 cases are making their way through courts in states across the country, seeking damages for climate-related destruction. Unlike the RWE case, they are rooted in the idea of deception as the source of liability — that big polluters misled people about the effects of their carbon intensive products.

“As science comes to play an increasingly prominent role in [legal] cases, it’s very likely that fights over the science, and questions over whose science courts should believe, will increasingly become more prominent,” says Rupert Stuart-Smith, a University of Oxford researcher who has studied the glacier at the centre of the case, but is not affiliated with the suit.

Not everyone agrees that litigation is the best way to hold major corporate polluters to account. Some experts say governments and regulators should set out what they expect of companies, rather than allow specific polluters to be targeted for past emissions.

“Companies need to know what their responsibilities are, since they cannot be limitless,” wrote David Pitt-Watson, former chair of the UN Environment Finance Initiative, in 2020.

“If we don’t resolve this, we end up with potentially a very chaotic commercial world in 20 years’ time,” he tells the FT. The rules about a company’s obligations should be set by regulators, and businesses should be sure that if they follow them “in good faith, there is safe harbour and they won’t be sued”, he says.

The growing risk to the corporate world has not escaped the notice of authorities: in May, the Bank of England warned that litigation could affect “the cost and availability” of directors’ liability insurance. “If real-world cases led to payouts, the possible financial costs that could be borne by businesses or insurers are large,” the Bank said.

Thom Wetzer, director of the Oxford Sustainable Law Programme, says part of the reason for the uptick in litigation is the climate “governance gap”. The Paris Agreement lacks an enforcement mechanism to ensure that “countries do what they’ve signed up for . . . As long as these governance gaps persist, we will see more and more litigation to try and plug those gaps.”

There is also no net zero legislation governing what companies can or must do in most parts of the world, he adds.

Despite what’s at stake, and the presence of two opposing sides, those who visited the glacier in May say the atmosphere was amicable and supportive.

“It was very friendly,” with “people sitting around on stones eating their sandwiches and energy bars,” says Verheyen, the lawyer for Luciano Lliuya. “Nobody got sick, at least not very seriously, even though that is a very unusual altitude to be working on.”

The German court must now come to a decision about the risk facing the farmer’s house, before moving on to the second question — whether RWE bears some responsibility and can be held legally liable. A final decision in the case is unlikely to come this year.

All the while, and for the seven long years since the case was filed, the possibility of disaster hangs over Huaraz. “The situation is hazardous, it’s not something which is purely theoretical,” says Mergili.

In 1941, when Lake Palcacocha was much smaller, it brimmed over and the city was hit by flooding that killed over 1,000 people. Serious ice and rock avalanches also occurred in the Peruvian Andes in 2010 and 2020, and large mass movements in high mountain areas have become more common.

Luciano Lliuya and the local community want additional protection measures, such as a new drainage system. The authorities have already placed hoses in the lake to lower the level of the water, which is used by the local population, and the city has a well-signposted evacuation route.

But like the Pacific Island nations threatened by rising sea levels, Luciano Lliuya also wants to raise the profile of those at risk and find an answer to the climate justice question. “I’m very happy that I’ve been able to show people what’s happening,” he said at a press conference at the end of the site visit in May.

Some countries are “far more responsible for the pollution, and others far more affected by the consequences”, says Payam Akhavan, legal counsel to the Commission of Small Island States on Climate Change and International Law.

“The idea is not to litigate all of these issues, but pressure states to start addressing loss and damage in the [UN climate] negotiations,” he says. “But if necessary, yes there could ultimately be litigation against specific states.” 

If RWE loses the case, “they’d have to pay this very small, symbolic amount of money” towards the cost of defending Huaraz, says Noah Walker-Crawford, an external consultant on climate litigation for Germanwatch.

“But of course it’s about much more than that,” he continues. “The whole point of bringing these kinds of cases is that not enough has happened on a political level. Really, it shouldn't be necessary.”

Higher exposure to digital assets leaves owners vulnerable to downturn

The widespread losses caused by the cryptocurrency crash are even broader among black investors.

A quarter of black Americans own cryptocurrencies, compared with only 15 per cent of white investors, according to a survey by Ariel Investments and Charles Schwab. Black Americans have been more than twice as likely to purchase cryptocurrency as their first investment.

The value of those investments has imploded. The total market capitalisation of cryptocurrencies has plunged below $1tn from more than $3.2tn last year. The fall in digital assets comes alongside a bear market in US stocks.

Black Americans’ higher exposure to cryptocurrencies has left them more vulnerable to the financial downturn, even as their households on average hold less wealth.

The attraction of building wealth, amplified by marketing, drew many black investors into cryptocurrencies. The dollar price of bitcoin rose by 9,300 per cent in the five years to its peak in November.

Jefferson Noel, 27, said he gained his first exposure to crypto in January 2019 when he accidentally invested $5 in bitcoin while using Cash App, a payment service.

“I had no idea what it was, and I don’t even remember doing it,” he said.

By last May his unintentional investment was worth $70. The astronomical gain inspired him to take a friend’s advice to plough $20,000 of his savings into other cryptocurrencies, such as dogecoin, over more traditional investments such as index funds.

“[Black Americans] do not want to be left behind again,” Noel said. “As far as I can tell, the black community sees crypto as a way to even the playing field and get in the game before the gatekeepers prevent others from participating.”

But he is now rethinking that decision. Persistent losses have wiped more than 20 per cent from his crypto investment. He is researching mutual funds on the advice of his uncle, but still buying more crypto.

Historically, black investors have tended to be conservative, investing more of their money into low-risk assets such as insurance and savings bonds. Black Americans are less trusting of the stock market and financial institutions than white Americans, according to the Ariel-Schwab survey. Further research has tied their apprehension to decades of discrimination in the financial system.

Jatali Bellanton, the author of a personal-finance curriculum geared towards young black Americans called Kids Who Bank, sees cryptocurrencies as a way to make up for wealth-building opportunities that were historically unavailable in housing and stock markets.

“We do not like to get left behind when it comes to new technology,” she said.

The promise of cryptocurrencies as a wealth builder has been supercharged by celebrity endorsements, sponsorships and advertising.

Prominent black Americans including the musicians Jay-Z and Snoop Dogg, the boxer Floyd Mayweather, the actor Jamie Foxx and the film-maker Spike Lee have promoted crypto to their communities.

Lee appeared in commercials for crypto ATM operator Coin Cloud last year, saying that “old money is not going to pick us up; it pushes us down” and “systematically oppresses”, whereas digital assets are “positive, inclusive”. 

Last month, Jay-Z announced a partnership with former Twitter chief executive Jack Dorsey to launch a “Bitcoin Academy” literacy programme in the Brooklyn public housing complex where he grew up.

Such celebrity endorsers have faced heavy criticism for getting paid to sell high-risk investments to people who may not have the resources to weather crypto’s volatility.

“Ninety-eight per cent of these cryptocurrencies were not designed to do anything other than extract money from people’s bank accounts,” said Najah Roberts, a former financial adviser and the founder of cryptocurrency education centre Crypto Blockchain Plug.

“This is not ‘get rich quick’,’’ Roberts added. “There are massive targeting ads that are targeting our community.” 

Bellanton said it is not adverts but the prospect of financial freedom, a lack of the investment minimums common for mutual funds, and a feeling that the blockchain distributed ledger is more transparent than big banks that draws in first-time investors.

“The reason that minorities at a higher rate than others are adopting crypto is precisely because if you’re not already rich, it’s way cheaper to send [USD Coin, a stablecoin asset] than to send a wire,” said Brian Brooks, chief executive of blockchain company Bitfury, at the Aspen Ideas Festival last month. “It’s just cheaper. The entire system is cheaper and faster. It doesn’t have all these entry barriers where you can only get it if you’re already rich.” 

Despite the risk of losses, many black investors are staying invested in the market. Dennis McKinley, 41, has been buying the dip against the advice of his financial adviser. He said his crypto coins now constitute roughly 30 per cent of his overall portfolio, held alongside equities.

“Young black America is just now getting to a point where we have the amount of freedom to have the opportunity to invest in alternative strategies besides just real estate,” said McKinley, a small-business owner in Atlanta. “I think that it’s important to learn and get out there.”

The company that was so inflation-resistant, it shattered a mega-deal

KKR was two days away from bagging a bargain.

Alongside Australia’s Macquarie Group, the private equity giant was preparing to buy Britain’s largest electricity distributor, UK Power Networks, for £15bn.

For a buyouts industry that has been pushing into infrastructure funds, through which it can hold a company for a decade or more — and benefit from all of the associated fees and dividends in that time — it was a dream deal.

UKPN is not a glamorous, high-growth proposition. It gets its revenue from residents of south-east England paying their electricity bills — the kind of steady, sticky revenue you can comfortably borrow against to fund payouts to investors.

Better still, it stands to be a winner in an inflationary world, at least relatively. Like other privatised parts of the UK’s infrastructure, its returns are set by a regulator and are linked to a price index — meaning they rise with inflation. And because the business is not labour-intensive, that advantage typically outweighs the extra costs that inflation brings.

On top of that, a chunk of regulated utilities’ debt has interest payable in nominal terms, as Lex points out. That means payments on those bonds will not rise, further enhancing the returns from inflation-pumped revenues.

The company was so inflation-resistant, it turns out, that it ultimately crashed the deal.

As talks entered their later stages last month, UK inflation hit 9.1 per cent. That led the electricity distributor’s owner, billionaire tycoon Li Ka-shing’s CK Infrastructure Holdings, to increase the price just as a deal was about to be inked, the FT’s Gill Plimmer revealed.

KKR, Macquarie and the other bidders in their consortium decided the asking price was too high, and walked away.

DD reckons the buyers’ advisers Rothschild, Citigroup and Nomura were less than thrilled: due diligence had been going on for a year, one person close to the bidders said.

It’s easy to see why CK wanted a higher price.

But it must have been a significant mark-up to make the buyers back out at the eleventh hour — the person close to the bidders described the increase as “massive”.