TheChek News Flow

Electric-vehicle maker provided a record number of vehicles in third quarter amid flagging global auto sales

Tesla Inc. TSLA -0.03% overcame snarled global supply chains to deliver a record number of vehicles in the third quarter.

The Silicon Valley electric-vehicle maker delivered 241,300 vehicles to customers in the three months ending in September, it said Saturday, up from 139,593 vehicles during the same period last year. Analysts surveyed by FactSet forecast Tesla would deliver roughly 227,000 vehicles in the quarter.

The result positions Tesla to easily achieve its full-year goal of increasing deliveries by more than 50% over last year’s total of nearly half a million vehicles. The company has put a total of roughly 627,000 vehicles in customer hands through the first nine months of the year.

That growth comes despite supply-chain disruptions that have constrained vehicle production across the global auto industry, leaving buyers with fewer options and denting sales. It’s also upended the usual hierarchy in the U.S. auto market, where Toyota Motor Corp. outsold traditional standard-bearer General Motors Co. in the third quarter.

The continuing semiconductor shortage is likely to cost the global auto industry $210 billion in lost revenues this year, consulting firm AlixPartners LLP said. In the U.S., the pace of auto sales was expected to fall in September to an annualized rate of 12.4 million vehicles, the lowest rate since May 2020, according to Wards Intelligence.

Tesla Chief Executive Elon Musk nodded to those headwinds in a note to employees last month, in which he said the company worked around shortages by building cars with missing parts that needed to be added later, according to a person familiar with the matter.

Tesla delivered a combined 232,025 Model 3 sedans and Model Y compact sport-utility vehicles in the third quarter, up from 124,318 of those models a year earlier. It was the first full quarter since Tesla introduced an upgraded version of its Model S luxury sedan, dubbed the Plaid.

The company handed over 9,275 of its higher-end models: Model S sedans and Model X sport-utility vehicles. Tesla delivered a total of 15,275 Model S and Model X vehicles during last year’s third quarter.

As of Friday, analysts surveyed by FactSet expected Tesla to report third-quarter profits of around $1.1 billion on revenue of more than $13 billion. That is up from a $331 million profit on $8.8 billion in revenue during the year-prior period.

Tesla meanwhile has been preparing to expand public access to an advanced driver-assistance tool that is designed to help people navigate cities, adding to a suite of features that has mainly been intended for highway driving.

The promise of Tesla’s advanced driver-assistance software has attracted customers and investors, helping to transform Tesla into the most valuable auto maker in the world. Its shares closed at $775.22 Friday.

“[P]otential for further upside for the stock will be defined by Tesla’s success in endeavors outside vehicle sales—specifically on vehicle autonomy,” Credit Suisse analyst Dan Levy wrote in a recent note to investors.

Yet the company has drawn scrutiny from a chorus of transportation officials and safety advocates who have expressed concern about possible misuse of such tools. The National Highway Traffic Safety Administration opened an investigation in August into advanced driver-assistance features offered by the company after a series of crashes involving Teslas and one or more parked emergency vehicles.

CEO Jacopo Venturini and designer Pierpaolo Piccioli are working to transform the Roman brand from the inside-out, reinvigorating the company’s internal culture as well as its commercial offering.

Can a luxury brand change from the inside out? Jacopo Venturini, Valentino’s chief executive officer since June 2020, is betting on it.

In a sector where designer “musical chairs” and radical aesthetic rebrandings have become commonplace, Venturini — who has returned to work at the Roman brand for the third time after a knockout stint as Gucci’s merchandising mastermind — is working to reignite sales momentum not simply by re-animating signifiers like the brand’s emblematic “rock stud,” but through a deeper overhaul of the company’s internal culture.

Alongside Pierpaolo Piccioli, the brand’s sole creative director since 2016 and a 20-year veteran of the house, Venturini is aiming to reinforce Valentino’s positioning as “the most established Italian maison de couture” — defined not as a silhouette or signature pattern, but as a set of values.

“You have to create a culture where humans and creativity are at the centre,” Venturini said, seated alongside Piccioli in Valentino’s plush Place Vendôme salon, which serves as a key base for preparing the brand’s Paris Fashion Week shows, as well as a hub for its haute couture operations. “If we establish this kind of couture culture, there’s an effect that trickles down through the company.”

Venturini says he wants everyone in the company to start thinking with a couture mindset, treating colleagues like VIP clients and applying creativity and careful attention to every element of their jobs. In the stores, he’s training salespeople to be better prepared to sell across categories, so that they can stay by clients’ sides and help them assemble their own “made-to-measure” looks. “Any job can be done in a creative way,” he said.

But leaning into couture isn’t just about pampering clients and awakening hidden talents within Valentino’s organisation. It’s also about playing to the house’s greatest strengths: haute couture and red carpet dressing remain the most impactful elements of the Valentino brand, which has won high praise for its runway outings and striking looks for blue-chip celebrity clients.

Piccioli is one of the most respected designers working in couture today, putting out collections that have driven the fashion conversation with their extravagant volumes, bold palette and dreamy, glamorous mood. His casting choices have also pushed the industry forward on diversity, long-neglected in the traditional couture world.

In recent years, red-carpet moments like Lady Gaga’s ostrich feather gown for the Venice premiere of “A Star Is Born” or her periwinkle frock for the Golden Globes pushed awareness of Valentino to new heights. And a new licensing partner L’Oréal, which launched its first Valentino makeup and perfume products in the past year, is bringing added marketing muscle to the brand, keeping Valentino in the spotlight.

But the desirability of the brand’s commercial items hasn’t kept up with its red carpet and couture successes. Interest in the “rock stud,” which drove the business for over a decade, has gradually cooled. While subsequent commercial pushes like “VLTN” streetwear and low-top sneakers had their moments of glory, neither line has captured the broad appeal and staying power of the studs, which tapped into a vibrant commercial niche of women who wanted to be both a little bit rock and a little bit bourgeois.

As the luxury industry became increasingly focused on casualwear, Valentino retained its prestigious reputation for occasion wear, doing big business in upright, ladylike cocktail dresses and high-heeled shoes. Those are categories that have been hard hit by the pandemic, ratcheting up the pressure for Valentino to update its business model. Sales fell 27 percent last year, slightly worse than the industry’s average drop of 23 percent, according to consultancy Bain.

So while Venturini works to make Valentino’s couture approach trickle through the company’s culture, he and Piccioli also need to make quick changes to the brand’s product lineup. “It’s about announcing the creativity, but in a way that better meets the needs of the market,“ Venturini said.

In the past year, the brand has moved to re-energize its family of rock stud products — building out the line with an oversized, more youthful “Roman” stud variation, marketed by actress and singer Zendaya — as well as pushing a line of belts and bags with chunky V-logo hardware.

For the brand’s Fall/Winter collection currently in stores, Venturini encouraged Piccioli to focus more on separates and daywear, with more easy pieces for clients to mix and match, and fewer rigid cocktail dresses.

At a walk-through of the brand’s Rome flagship in September, Venturini pointed out slick boots, big sweaters decorated with ostrich feathers and silk shirt-jackets that were a faithful representation of Piccioli’s chic runways but could still serve as go-to pieces for an elevated casual look. The vibe in the store still felt decidedly dressy, but the items themselves are “much more relaxed than in the past,” Venturini assured me.

Sales have bounced back to pre-pandemic levels, aided by the changes. In the first half of 2021, revenue jumped 64 percent year-on-year, to €574 million.

Retailers see the progress, too. “We can see that they’re injecting a lot of younger elements, with the flats, sandals, oversized shirt dresses and shorter hemline,” said Tiffany Hsu, buying director at MyTheresa. The fun prints, “sharp price point” and lounge-wear inspiration in recent resort pieces are areas the company could further explore. “They have to keep a level of sophistication that’s true to the brand, while still becoming more relaxed to align with customers’ lifestyle today,” added Hsu.

Products aren’t the brand’s only challenge. Competing in the couture arena will also require cleaning up Valentino’s second lines and distribution. The brand plans to phase out its less expensive “Red” sub-brand by 2023 and reduce the share of wholesale from 45 to 30 percent over the next five years. “It’s a journey,” Venturini said of the ongoing effort to reposition the brand. “It’s not something that happens in a day.”

Valentino’s image also needs a lift. Rivals like Chanel and LVMH’s Dior justify their top-end prices (with which Valentino’s $1,200 boots and $5,000 cocktail dresses are broadly aligned) by deploying massive investments in communication and marketing. While Valentino’s red carpet remains highly desirable, the rock stud and VLTN signatures have often been equally visible or louder manifestations of the label, creating a fragmented brand image.

“Pierpaolo achieved things that are really strong — there’s no question that he’s considered as one of the great designers today. But there’s not an overall coherent message” said Ezra Petronio, the art director and founder of Self-Service magazine. “That specificity we see on the runway needs to expand through all ranges of products and communications.”

As such, the brand is currently working to “resignify” — pushing signature items in ad campaigns and staging major activations in locations like Shanghai and Beijing — in order to raise awareness of the brand’s codes in their current manifestation.

The effort is a challenge for Piccioli who, like Venturini, prefers inside-out solutions and seems loathe to put the brand he leads in a box.

“There isn’t a woman or a man who represents Valentino today, it’s more about a way of being, values that people stand for they can share with us,” Piccioli said. “I never think of Valentino as one print, one flower, one detail from a collection.”

Still, Piccioli is no stranger to the needs of the market. He’s reincorporated the rock stud and its updated Roman stud version into shows, as well as “Vlogo” belts and accessories. And the silhouette in recent collections has more directly referenced the brand’s founding aesthetic, which mixed streamlined ‘60s cuts with unabashedly feminine signatures.

His Paris show Friday will be a new step in “resignifying” the brand’s couture heritage. The collection will include a capsule of revived archival pieces: looks previously worn by famous faces of the brand and reissued for next season (modelled by Zendaya, of course).

“It’s interesting how the codes of the past can be exactly the same, but completely different when they’re worn by different humans in a different way,” Piccioli said.

CEO Tim Cook quietly turned the iPhone company into a superpower in the videogame business. Now he’s fighting rivals in a multiplayer universe.

Apple Inc. AAPL 0.81% doesn’t make hot videogames such as “Fortnite,” or consoles such as the Xbox. But with little fanfare, Chief Executive Tim Cook has turned the maker of the iPhone into one of the world’s largest videogame companies.

The key is the App Store, its digital marketplace, where the company sells and distributes thousands of games by other companies and developers, from Epic Games Inc.’s “Fortnite” to Tencent Holdings Ltd. TCEHY -1.59% ’s “Honor of Kings”—and takes a 30% cut of sales. That explains a lot about the tech giant’s current battles with rivals.

Apple raked in more profits from games than Xbox maker Microsoft Corp. MSFT 2.55% , gaming giants Nintendo Co. and Activision Blizzard Inc. ATVI 1.47% and PlayStation maker Sony Corp. —combined—in its fiscal year 2019, according to a Wall Street Journal analysis of figures released as part of the company’s recent antitrust trial.

Apple’s operating profits from games that year totaled $8.5 billion, according to the Journal analysis, exceeding the other four companies’ combined gaming operating incomes in the same period. The tech giant said operating margins discussed during the trial were flawed and as a result are too high.

Apple’s dominance, however, is under threat. Its position as the gatekeeper to the gaming economy places it at odds with Facebook Inc., Microsoft and “Fortnite” maker Epic Games Inc. as each company prepares for the next frontier in technology: virtual reality.

Many digital activities—from search to social to shopping to live events —could take place inside of games in the coming years. Industry global revenue from videogames is expected to almost double to $198 billion in 2024 compared with 2016, according to estimates by technology consulting firm Activate Inc. The biggest chunk of that growth is from mobile games, which Activate predicts will generate $103 billion in 2024.

The risk for Apple is that its role as the gatekeeper between the gaming world and its more than 1 billion iPhone users as well as the fee it collects as the middleman could be disrupted—whether by legislation, court order or regulatory action. Epic sued the company in 2020, alleging that it stifled competition. Because of Epic’s lawsuit and increased scrutiny of Apple’s sway, lawmakers and regulators from Washington to Brussels are considering ways to potentially upend the company’s power, which some fear hurts rivals.

Another threat to Apple’s profit engine comes from China. New rules in that country aim to decrease the number of hours young people can play games. Three of the top five grossing mobile games in the App Store are from China, including the No. 1 title “Honor of Kings” from Tencent, which generated an estimated $2.5 billion last year from users, according to analytics firm Sensor Tower.

Globally, customers spent a total of $45 billion on mobile games through the App Store in fiscal 2020, according to Sensor Tower. Almost 31% of that money was spent in China while 26% was in the U.S.; Apple’s cut came out to an estimated $13.5 billion or about 5% of Apple’s overall sales that year of $275 billion. Fifty percent of Apple’s revenue came from hardware sales of iPhones.

Apple doesn’t break out revenue from the App Store; instead it includes the business as part of its services category, which it said generated $53.8 billion in sales last year. That category also includes music, iCloud, Apple TV, advertising and extended warranties. It doesn’t say how profitable each of its product categories is but disclosed an overall company operating profit of $66.29 billion during the period.

That such a large part of Apple’s business comes from the gaming world is almost a fluke. After releasing the iPhone in 2007 and seeing developers hack their gadgets, it designed the App Store so users could download third-party software to their phones under Apple’s control. Apple’s late co-founder Steve Jobs and his team came to realize that the store could be a new gold mine.

In 2008, the year the App Store launched, it had 500 apps, many of them games. Apple’s profits from gaming got bigger as the app economy expanded. The shift became even more important under Mr. Cook as he looked to combat stagnating iPhone sales.

In a nod to how important hard-core gamers are to the company now, Apple introduced its new iPhone 13 Pro last month with upgrades to the screen aimed at giving a smoother video experience. The feature is particularly attractive to those who use it for gaming.

Apple is appealing to a rather small group. Just 6% of App Store game customers in 2017 accounted for 88% of all the store’s game billings for the year, according to court records. On average they spent more than $750 annually. The biggest spenders, who made up 1% of Apple gamers, generated 64% of billings and spent on average $2,694 annually.

Blockbusters include “Honor of Kings,” which allows users to battle as historical Chinese characters and was the top grossing game last year in the App Store, according to Sensor Tower. Other top money generators are “Pokémon Go,” an augmented reality game based on the popular Japanese anime, and “Candy Crush Saga,” a puzzle game where users match clusters of jelly beans and gumdrops.

Bri Thomas, a 38-year-old human resources professional from Dallas, likely fits into the medium-high category of spenders who accounted for 3% of gamers and generated 20% of billings in 2017. On average that group spent about $373 each year.

She said she typically spends as much as $50 each month. The convenience of having the iPhone in her pocket means it is easy to spend money to access special perks in mobiles games such as “Empires & Puzzles,” a puzzle game.

“It’s very convenient,” Ms. Thomas said. “You can get carried away really easily.”

By Mr. Cook’s own admission, he is not a gamer. He said so during an appearance before a judge in the antitrust case that consumed Apple’s attention for much of the past year.

In August 2020, “Fortnite” maker Epic filed a lawsuit against Apple claiming the company held an improper monopoly over distribution of software on its mobile devices and forced developers to use its in-app purchasing system. They went to trial in May.

Apple vehemently denied the claims, pointing to everything from Google devices to the XBox as alternative ways for users to play games and arguing that its fees were in line with the industry and fair. U.S. District Judge Yvonne Gonzalez Rogers mostly agreed with Apple in an early-September ruling.

That doesn’t mean Apple is out of danger. The judge ordered the tech giant to let developers inside their apps advertise alternative, cheaper payment methods that exist outside of Apple’s App Store. That raises the possibility that game developers could deny Apple money for those games.

The case lifted the veil on Apple’s gaming business. The company, which has long prized secrecy as it seeks to draw users to new products and services, keeps under wraps the extent to which gaming is at the center of its profits and business.

Apple said records introduced during the trial purportedly showing profitability of the digital store weren’t correct, and Mr. Cook testified in court that the company doesn’t do such analysis. But Judge Gonzalez Rogers, who reviewed Apple’s records under seal, contradicted this assessment.

She wrote that Epic’s claims that Apple generated operating margins of more than 75% from the App Store are, in fact, correct and characterized them as “extraordinarily high.”

App sales may be small in comparison with overall revenue but court documents suggest they are almost pure profit for Apple. As part of the legal battle, Apple handed over millions of internal documents to Epic. Using those materials, an expert witness for Epic named Ned Barnes, a forensic accountant, calculated that Apple’s App Store generated a 79.6% operating margin—a measure of profitability that subtracts costs from revenue—during both the 2018 and 2019 fiscal years.

The late discovery of an internal report sent to Mr. Cook supported that assessment. The report, according to court records, included the company’s own calculations for the store’s operating margin of 74.9% and 77.8% for fiscal 2018 and 2019, respectively.

“Mr. Barnes made appropriate adjustments based on sound economic principles to reach his conclusions,” the judge wrote. “Apple’s protestations to the contrary, notwithstanding the evidence, shows that Apple has calculated a fully burdened operating margin for the App Store as part of their normal business operations.”

Another view of how much Apple collects from its App Store—and gaming—comes from Sensor Tower, the analytics firm. It estimated that Apple received $15.9 billion in revenue from the App Store in fiscal 2019, with 69% of that amount coming from games. Using Apple’s operating margin calculation described in court records, the company’s App Store had an implied operating profit of $12.3 billion that year—or nearly one out of five dollars of the company’s overall operating profit.

Gaming alone would have earned $8.5 billion, according to a Journal analysis. That is $2 billion more than the operating profit generated in the sector during the equivalent 12-month period from gaming giants Sony, Activision, Nintendo and Microsoft, according to company filings from the first three and an analyst estimate for Microsoft.

Apple said Friday the disputed operating margins come from an analysis that doesn’t include many joint costs for the App Store and results in margins that it describes as being too high because it includes all revenue but only a fraction of the costs. During the trial, Apple vehemently denied the accuracy and during public court testimony Mr. Cook took issue with the margins as well.

Under questioning from Apple’s lawyer, he said the company had never tried to determine the specific profitability of the App Store as a stand-alone business and that he couldn’t put an exact figure on how profitable it might be. The practice of not tracking business-unit profitability, he said, dated back to a desire by Mr. Jobs to encourage cooperation across the company’s various units. The internal document that calculated operating margin, which wasn’t made public, was a “one-off presentation,” he said.

Nevertheless, Mr. Cook said he believed the App Store was profitable even without calculating it. “We haven’t done that, but, you know, I have a feel—if you will,” Mr. Cook said. While being questioned by the judge, Mr. Cook said a majority of App Store revenue came from games.

The judge ruled that Apple wasn’t a monopoly in part because the mobile gaming market is evolving so quickly, including the nascent streaming game services. Similar to how Netflix Inc. offers movies, Microsoft, chip maker Nvidia Corp. and others are pushing subscription game services that could be accessed on iPhones through websites. That allows them to bypass the App Store.

As for Apple’s gaming economy, it is unclear what happens next. Epic plans to appeal the judge’s ruling, and some legal observers said Apple will appeal the order to stop prohibiting developers from communicating cheaper alternatives to the App Store. The company said it is reviewing the matter.

President appears to drop deadline pressures after meeting Pelosi and House Democrats

Joe Biden insisted that Democrats would pass his ambitious domestic spending agenda despite internal party feuding that has stymied its passage through Congress, saying “we’re going to get this done” after a rare Capitol Hill visit to lobby lawmakers.

Biden’s party is split over the two pillars of a sweeping legislative agenda on which he has staked his presidency: a $1.2tn infrastructure bill with bipartisan support and a $3.5tn spending package to improve America’s social safety net, which is opposed by Republicans and will need to pass both chambers of Congress with Democratic votes alone.

Nancy Pelosi, the Democratic Speaker of the House of Representatives, was due to bring the infrastructure bill to a vote this week but has repeatedly pushed back a self-imposed deadline amid divisions over whether to link its passage to the larger package.

After a 45-minute closed-door meeting with Pelosi and House Democrats on Friday, Biden appeared to lift the deadline pressures and rejected any suggestion of a tight timeline for passing the legislation.

“It doesn’t matter when. It doesn’t matter whether it’s in six minutes, six days or six weeks,” Biden said as he left the Capitol. “We’re going to get it done.”

Lawmakers were asked to surrender their phones before entering the private meeting, but members of Congress said afterwards that Biden had acknowledged that the $3.5tn bill would need to be pared back in order to pass the Senate.

The driving forces behind shrinking the larger package are two of the most conservative Democrats in the Senate, Joe Manchin and Kyrsten Sinema, who wield outsized power in an upper chamber that is divided 50-50 between Democrats and Republicans, with vice-president Kamala Harris able to cast a tiebreaking vote.

“[Biden] said what we all know is true: the [$3.5tn] has to come down,” said Peter Welch of Vermont. “We’ve got to get 50 votes in the Senate, we’ve got 48 right now . . . this is everything everybody knows and he was acknowledging.”

Manchin, who represents West Virginia, said on Thursday that he was unwilling to support a budget bill with a price tag of more than $1.5tn, while a Sinema spokesperson said the senator from Arizona also objected to the cost of the $3.5tn bill.

Members of Congress said the president on Friday explicitly acknowledged that the bipartisan infrastructure bill would not pass the House without a tandem agreement on the budget measures.

“He was really clear that we need to get both bills done, and that’s what we’re going to do,” said Pramila Jayapal, the Democratic congresswoman who chairs the House progressive caucus. “He was very clear: the two are tied together.”

Pelosi had promised moderate Democrats a vote on the bipartisan infrastructure bill on Monday, and then again on Thursday, but postponed the make-or-break vote after several days of crunch talks with members of her own party, the president and White House officials.

In a letter to Democrats sent late on Friday, Pelosi said “while great progress has been made in the negotiations . . . more time is needed to complete the task”.

“Our chairs are still working for clarity and consensus,” she added. “Clearly, the bipartisan infrastructure bill will pass once we have agreement on the reconciliation bill.”

Biden has this week participated in the negotiations behind the scenes. But his trip to Capitol Hill on Friday highlighted a shift in tactics by the president towards more public interventions.

Democrats in Washington fear that a failure to pass either piece of legislation could hurt the president’s party in a governor’s race in Virginia next month, as well as next year’s midterm elections, when control of both chambers of Congress will be up for grabs.

New Jersey congressman Tom Malinowski said voters “did not give a damn” about the infighting on Capitol Hill, but were counting on the policies being signed into law.

“All they care about is: are we going to build the roads, the bridges, the tunnels and create the jobs and deliver the broadband, to pay for the childcare, and keep these middle class tax cuts that we put into place?”

Progressive Democrats in the House have said they will not sign on to the infrastructure bill — which would invest federal funds largely in roads, bridges and tunnels, as well as broadband — until they receive assurances that the bigger bill will not be watered down in the Senate.

The internal party divisions over Biden’s legislative agenda come as the Democratic party also confronts a looming crisis over the debt ceiling.

Democratic and Republican lawmakers in the Senate remain locked in a stare-down over lifting the borrowing limit, with Republicans refusing to sign on to raising the debt ceiling.

Algeria plans to shut down pipeline that passes through Morocco to Spain

Sitting in a snug European home, one can sip organic tea in the evening and watch dystopian American politics play out on television.

Much more sad, of course, if the lights and television were to go off and the tea kettle stay cold. That is not a distant risk, thanks in part to Europe’s energy geopolitics. By now, everyone has heard about a squeeze on European gas supplies benefiting Russian group Gazprom and the Moscow’s influence.

Less discussed is how conflicts in north Africa are likely to reduce Spain’s winter gas supplies, while potentially adding to upward pressure on power prices for the rest of Europe.

On October 30, Algeria plans to shut a pipeline transporting Algerian gas to Morocco, Spain and Portugal. This is part of a long simmering feud between Algeria and Morocco that arguably began with the former’s independence from France in 1962.

Morocco is angry with Algeria for its support of the Polisario Front, which wants independence for Western Sahara. Morocco insists that it has sovereignty over the long-disputed territory. Relations deteriorated further this summer when Algeria accused Morocco of having a role in starting several serious forest fires on its territory.

The tensions have reached the European Court of Justice, which this week handed a legal victory to the Polisario Front, ruling that a broad economic treaty between the EU and Morocco could not be automatically extended to cover Western Sahara.

Spain is the European country most affected by the CJEU decision. Western Sahara is a former Spanish colony. Some Polisario members have Spanish passports. And, in recent decades, the Spanish fishing fleet has come to depend on Western Saharan waters (and Moroccan licenses) for up to a third of its catch.

European ties with Morocco extend far beyond fish. There are migration flows, European investments including auto manufacturing, sometimes-rocky security arrangements, tourism, and the supply of Moroccan vegetables to European tables.

France and Spain have special legal relationships with Morocco that extend beyond the scope of other EU treaties. Algeria also has many ties to Europe, but it stands a bit apart. Its colonial-era struggle for independence from France is part of its national identity. Its armed forces buy a lot of kit from Russia and China.

And Algeria sells a lot of gas to Italy, Spain and Portugal. The gas to Italy goes directly through an undersea pipeline. The gas to Spain and Portugal has been flowing through two other undersea pipelines. The first, built between 1996 and 1997, passes through Morocco, which uses some of the gas for its own generators. The second, commissioned in 2011, goes directly from Algeria to Spain.

This is where EU and Spanish foreign relations now get even more problematic, especially in a tight international gas market and with insufficient European energy storage ahead of winter.

On September 29, the day the CJEU decision on Western Sahara was announced, Josep Borrell, the EU’s foreign policy supremo, issued a joint statement with his Moroccan colleague reaffirming a strategic partnership. They also vowed “to take the necessary measures to ensure the legal framework” for trade relations. This might antagonise Algeria and harden its resolve in its dispute with Morocco.

Tellingly, the next day the Spanish foreign minister and energy secretary landed in Algeria for meetings with their counterparts on, among other topics, the imminent 25 per cent expansion of the direct Algeria-Spain gas pipeline’s capacity. Even with the additional gas, Spain will struggle to import gas supplies this winter through its LNG terminals.

Spanish consumers are already enraged by high power prices. This has prompted Madrid to make a €3bn raid on profits of Spanish energy companies, like renewables star Iberdrola.

With the pipeline shut down, Morocco will have to find ways of doing entirely without Algerian gas, though its energy sector has already been planning for this contingency. It has coal power plants it can use, and could switch to other imported fossil fuel sources for its gas generators.

Europeans would be mistaken to think that Algeria and Morocco frame this dispute around economic and technical factors. There are profound sentiments about sovereignty, military balance, and culture at work here. It will not be easy for the EU to navigate such an environment to secure supplies.

Despite new AI-powered technology, catching counterfeits in the second-hand market remains in the hands of a few skilled professionals

Graham Wetzbarger knows what fake tastes like. “Tiffany & Co counterfeits can be coated in aluminium. If you taste it, it’s like a soda can, it has a metallic taste that sterling silver doesn’t have,” he explains.

Wetzbarger, a US-based luxury goods expert and former chief authenticator at consignment site The RealReal, is a firm believer that the art of validating a luxury object, be it a work of art or a sneaker, relies on the use of multiple senses. Although, he admits, taste is very rarely used. “You smell a lot; there is a lot of glue in counterfeits.”

Spending on second-hand luxury goods climbed from £20bn in 2017 to £28bn in 2020, according to Bain, outpacing growth in the overall luxury goods market by a significant margin. Online marketplaces and consignment sites including The RealReal and Vestiaire Collective have made it as easy to buy and sell second-hand as new — would-be shoppers no longer have to spend hours trawling bricks-and-mortar consignments stores in search of a coveted handbag or dress.

In this burgeoning environment, fakes have proliferated. Fashion archivist Greg Chester of One of a Kind in London says handbag counterfeiters have become so skilled that the store has started to avoid the category altogether. “It’s not worth the risk for us,” he says. The RealReal has previously been accused of failing to spot fakes.

Human authenticators are expensive, and tech-powered solutions designed to improve — and perhaps ultimately replace them — continue to evolve. In April LVMH, together with Prada and Richemont-owned Cartier, launched Aura Blockchain Consortium, a global platform that gives unique digital identities to products, allowing customers to ensure their purchase is the real thing. Authentication company Entrupy claims a 99.1 per cent accuracy rate after training its image-recognition technology on a self-built database of hundreds of thousands of items.

These systems are still in their infancy however. Image-recognition technology needs to be trained on databases of images that are still being built. Humans are needed to ensure that the visual references fed to the machine are of genuine products.

Blockchain, on the other hand, is usually applied at the source, when a product is first created. When applied to vintage products, the items need to be certified first, bringing us back to human authenticators. For the most part, industry professionals view technology as a helpful addition to a job destined to remain largely human-based for the foreseeable future. “It’s still a hands-heavy skill,” says Wetzbarger. “Ninety-plus per cent of the entire industry is human.”

Back to taste, smell and touch it is. When a trunk made of a very unusual metal arrived at Christie’s in 2018, Rachel Koffsky, the auction house’s senior specialist for handbags and accessories, had a feeling it could be a rare Louis Vuitton piece from the end of the 19th century, made of aluminium. At the time, only one was known to still exist, stored at the Louis Vuitton Foundation in Paris. Seeking scientific confirmation, Koffsky brought the trunk to the National History Museum, where it was analysed in a basement lab.

The trunks that were made in the late 19th century were created for explorers travelling across the world, and they needed to be very lightweight. Aluminium had just been invented and it was a very expensive material, known as the white gold of Napoleon,” she explains. “Making sure that it was aluminium was critical to ensure that this was the historic piece that we had a feeling that it was going to be.” The trunk sold at auction for £162,500 in December 2018.

Details such as where the manufacturing label and brand label are positioned, as well as the construction of the garment itself and, in the case of a Chanel bag, the number of stitches between two quilted sections, can help authenticate an item. “It’s like learning a language,” says Chester, who keeps detailed timelines for each brand, recording details such as changes in finishing techniques or manufacturing labels. “Once you have dealt with certain designers for so long if something doesn’t look right it sticks out like a sore thumb.”

Counterfeiters make a profit by selling cheaply made items at inflated prices, so finishing techniques are where they often fall short of the real thing. For both Chester and Wetzbarger, turning a garment inside out is essential. “Counterfeiters will spend 99 per cent of their time on the exterior of an item to fool the eye, so it’s when you get to the guts of the pieces that you start to see errors,” says Wetzbarger.

Hardware elements such as buttons, studs and fasteners are also key indicators. When it comes to zippers, for example, luxury brands rarely use Japanese brand YKK, the world’s largest zipper manufacturer by sales, and instead opt for Riri or Lampo zippers, which Wetzbarger calls the BMW and Mercedes of zippers. Anything that is designed to improve management and inventory control, including serialisation numbers, date stamps or fabrication tags, can be leveraged by authenticators to trace the style and date of a garment. “All of those itchy things against your sides that a lot of people end up cutting out — that makes our job harder,” says Wetzbarger.

Luxury authenticators come from a variety of backgrounds and learn much of the trade through direct experience, shadowing other authenticators, as there is no formal path into the field. Wetzbarger says many of his best recruits were previously luxury sales assistants who had already been trained to spot and appreciate craftsmanship, often by brands themselves.

Relying on seasoned authenticators to teach the trade to newcomers might have worked when second-hand luxury was a niche market but, as the sector continues to expand and attract new players, the demand for skilled authenticators has far surpassed availability. Wetzbarger says that basic training can be done in six months, but it takes a couple of years of autonomous work for an authenticator to be considered an expert. He laments the lack of a trade organisation or a third-party authenticator guild that could provide a shared industry standard.

“Companies are all training their own armies of authenticators because everyone is fighting for market share,” he says. “There are industry standards, but they are not really [formally] agreed upon.”

Solving these issues is critical for the second-hand luxury market’s success, says Bain partner Claudia D’Arpizio who, despite the promise of blockchain, sees humans remaining at the core of the profession. “You have to have the human touch there.”

Big Pharma comes to the pandemic rescue one more time.

In what is rare good news these days, Merck and Ridgeback Biotherapeutics said Friday that their Covid pill molnupiravir reduced hospitalizations by about half. They plan to apply to the Food and Drug Administration for emergency use authorization, but the shame is this potential wonder drug could have been available months sooner.

Since the beginning of the pandemic, doctors have been hoping for an oral antiviral that could prevent recently infected patients from getting sicker. The FDA approved Gilead’s remdesivir for emergency use in hospitalized patients last spring, but the intravenous drug isn’t available to those not sick enough to be admitted.

The National Institutes of Health prioritized development of monoclonal antibodies, which have helped many patients. But they are difficult to produce and distribute. Demand this summer exceeded supply, so the feds have rationed treatments. The FDA and NIH missed the chance to accelerate antivirals like molnupiravir, which creates errors in the machinery of the virus copying code.

An early stage trial this spring showed that molnupiravir rapidly reduced the amount of virus in patients. Based on that promising result, the Biden Administration in June signed a $1.2 billion contract for 1.7 million courses. Critics of Big Pharma complain the government is paying $700 per treatment, but Merck is spending to develop the treatment and scale up production at its own risk.

Merck has also signed licensing agreements with generic manufacturers to accelerate the pill’s availability world-wide. Manufacturers in low-income countries don’t need special expertise and supervision to produce the pills, unlike with the Covid vaccines. Molnupiravir can be easily distributed in poorer countries.

An Indian generic manufacturer in July announced positive results from its own molnupiravir trial, and Canada in August began a rolling review. But the FDA has been reluctant to authorize Covid treatments without Phase 3 trial results, and it may have felt less urgency this summer because vaccines were widely available. But what about the unvaccinated?

Molnupiravir would have been enormously helpful during this summer’s Delta surge that has swamped some hospitals. Preliminary results released Friday from the Phase 3 trial showed 7.3% of at-risk patients who received molnupiravir were hospitalized, and none died within 29 days of treatment. By contrast, 14.1% of placebo recipients were hospitalized or died.

Evidence also indicates that the drug is effective against different variants and is unlikely to produce viral resistance. The pill could make Covid more manageable in low- and middle-income countries while countries expand vaccine manufacturing and distribution. It may also help reduce transmission and the severity of breakthrough infections.

The government throughout the pandemic has overlooked the pressing need for a Covid pill, but the FDA can help make up for this mistake by now fast-tracking molnupiravir.