TheChek News Flow

The Electric-Vehicle Road Test

Eight Reporters, Three Continents, and Hours and Hours of Charging

Dozens of new electric-vehicle models are expected to arrive at dealerships in the next few years. We followed eight Wall Street Journal reporters in four countries to see if they, and the world, are ready to make the switch.

Flying cars like the ones futurists promised are in the works. Can A.I. and other new technologies make them a safe bet for urban commuters? Dan Neil confers with experienced helicopter pilots

A crash like the one that killed basketball great Kobe Bryant, his daughter Gigi, and seven others last week is a mercifully rare event. The average annual fatality rate for helicopters was 0.63 per 100,000 flight hours, according to the FAA; and in 2018, 24 accidents resulted in 55 deaths, according to the U.S. Helicopter Safety Team, a volunteer industry-government panel. Those figures include fatalities in risky low-altitude operations, including firefighting and utilities work.

But rare isn’t enough for the aerospace designers, manufacturers and financiers who are surfing the first wave of urban air mobility, such as Uber Elevate—services that plan to democratize daily heli-commuting in cities like Los Angeles and Dallas, using fleets of exotic electric rotor copters to ferry thousands over densely populated areas.

“Pilots and FAA regulators have to live and breathe ‘zero mortality’,” said Dr. Martine Rothblatt who, in addition to being the founder and chair of United Therapeutics, a biotech firm pioneering organ-replacement therapies, is a crazy helicopter pilot. “I love my Bell,” she said.

‘Cheaper than helicopters, eVTOLs could soon provide a zero-emissions alternative to ground-scraping transportation.’

I happened to meet Dr. Rothblatt last November at Ross Perot Jr.’s ranch near Fort Worth. RPJr. was hosting TexasUP, an invite-only conference for players in the multivariately disruptive, going-to-be-huge field of aeromobility—delivery drones, electrically powered vertical-takeoff-and-landing (eVTOL) vehicles, air taxis, and personal air vehicles, or PAVs. I call them aeromobiles.

These are the flying cars we were promised by futurists such as the recently departed Syd Mead and Norman Bel Geddes. By design faster, quieter, and dramatically cheaper per-mile than helicopters, eVTOLs could soon provide superfun, zero-emissions alternatives to ground-scraping transportation.

This potentially trillion-dollar industry will fly or stay grounded—said practically everybody, one way or another—depending on public perceptions of safety. For air mobility to meaningfully replace automobility, Dr. Rothblatt said, the eVTOL industry has to benchmark the safety standards not of cars or helicopters or private planes, but commercial airliners. For reference, the fatality rate for commercial jet travel globally in 2018 was on the order of one death per three million flights, not flight hours. That’s rare.

Kobe’s crash reminded me of this dinner conversation, shared among a table of expert pilots steeped in the culture of risk management. I must say I didn’t appreciate how challenging flying these machines can be. I told a story about landing on the lawn of the Le Beauvallon hotel in Saint-Tropez, last year, in a narrow opening between towering trees. My 22-year-old pilot confided that the approach terrified him because he had no room to move laterally if he was caught in a downdraft. A lot of solemn nodding around the table. At one point Elan Head, a freelance author and helo pilot who was sitting next to me, mentioned that she had lost five friends in five separate accidents. That rocked me.

The UP conference ran over two days, with TED Talk-like presentations every 20 minutes or so, a dronapalooza. Some of the names were familiar. Daimler has partnered with air mobility startup Volocopter to develop a two-seat, 18-rotor air taxi. Porsche is working with Boeing to conceptualize “premium urban air mobility vehicles.” Would a flying 911 Carrera hold any interest for consumers, you think?

Other car makers jumping into the sky include Toyota, which in January announced a $394 million investment in Silicon Valley-based Joby Aviation; and Hyundai, which has partnered with Uber for the S-A1 air taxi concept seen at this year’s CES. These two, as well as the Bell Nexus air taxi have been drafted into Uber Elevate’s first air armada, with limited service beginning 2023.

That roster might lead you to think that flocks of semi-robotic eggbeaters—assuming they are approved by the FAA—will provide an alternative to cars; but they won’t, at least not at first. EVTOLs will first supplant for-hire, passenger-carrying helicopters like Kobe’s.

And that will be good news, safety-wise, this table of seasoned chopper pilots agreed. The eVTOLs being prototyped have a number of inherent advantages over helicopters. Most obviously, helicopters lack redundant backup in case of failure in the rotor or mast assembly. Most urban air mobility vehicles will rely on distributed electric propulsion, i.e., multiple rotors. Such vehicles will be able to survive failure of one or more rotors.

Several air taxis in development are designed to operate with or without a pilot on board, remotely piloted or autonomously. Having uncrewed and autonomous machines in the air will require a new kind of air traffic system to keep track of them. An Unmanned Aircraft System Traffic Management—think A.I.-enhanced ground control, all-knowing, instantly adjudicating “dynamic spatial deconfliction” without the delay of humans in the loop—would improve situational awareness for crewed operations, as well.

EVTOLs will fly by-wire and will be algorithmically constrained from exceeding the vehicles’ flight “envelope”—its dynamic capacities—and will automatically self-stabilize. They will be equipped with robust machine vision, sense-and-avoid programming and other AI avionics. Helicopters, and their pilots, are much more free to lose control.

The connection to cars comes to this: As cities, like L.A., grind to a halt in their own daily traffic, more affluent commuters, like Kobe, are resorting to helicopters. But helicopters are too big, too loud, and too expensive to serve a wider audience. And, most of all, their safety won’t scale. Fortunately, there will soon be a better way to fly.

Gaana, which means ‘song’ in Hindi, has used its large library of local music and low prices to beat the competition

NEW DELHI—The most popular music-streaming service in India, the world’s biggest untapped digital economy, isn’t from Spotify Technology SA or Apple Inc. Instead, it is a local rival little known outside the country.

Noida, India-based Gaana, named after the Hindi word for “song,” has used a hyperlocal approach and cut-rate pricing to beat the competition and attract 152 million monthly users. That is more than half of Spotify’s global user base, double Apple Music’s global count and far more than YouTube Music and Amazon.com Inc.’s music services.

Indian consumers are flocking to Gaana, analysts say, because it has been built for them. It has a library of more than 45 million songs, mostly from India and in more than 20 regional languages, including auto-tuned Punjabi-language pop ballads, Hindi hip-hop and devotional tunes for the Hindu monkey god, Hanuman.

While some of its international rivals also boast voluminous libraries of global hits, most lack the depth of regionally specific songs from India that Gaana offers.

“You have to understand the consumption habits by region and even by city,” Gaana Chief Executive Prashan Agarwal said.

Gaana has an edge over international rivals because, he said, its teams have more local knowledge, conducting research across the country to uncover emerging artists and unlikely listening trends.

With only about half of India’s 1.3 billion people online, global tech firms have been scrambling to establish themselves in the world’s biggest pool of new internet users. Hundreds of millions of people are sending their first WhatsApp messages, buying their first items online—and streaming their first songs—as data prices plummet and inexpensive smartphones proliferate.

“Every global player is trying to get a share in India,” said Abhilash Kumar, an analyst at India’s Counterpoint Technology Market Research. “The market is very nascent and not at all saturated.”

Many Indians have an intense relationship with music. It is part of celebrations, religious worship, movies and cultural traditions. Indians spend an average of 21.5 hours a week listening to music, some 20% higher than the global average, according to consulting firm Deloitte.

When the internet became affordable, music was one of the first things that many Indians consumed on their smartphones. This trend explains why the world’s most-watched YouTube channel is T-Series, which shows Indian music videos and has racked up tens of billions more views than any other channel.

Sweden’s Spotify and YouTube Music launched in India early last year and have been advertising on billboards and online. TikTok parent Bytedance Inc. last year chose India as one of two markets, along with Indonesia, to test its first-ever music streaming app, called Resso.

Apple Music and Amazon Prime Music have been available in India for several years but haven’t been able to match Gaana’s popularity.

International growth in emerging markets is key for Spotify. The company has been looking to boost its listener base in new countries like India. Dow Jones & Co., publisher of The Wall Street Journal, has a content partnership with Gimlet Media, a unit of Spotify.

Apple is eyeing digital services such as music streaming as it faces a maturing smartphone market at home.

Music-streaming revenue globally hit $24 billion last year, according to Counterpoint. India so far accounts for just a sliver of that, some $200 million in 2019. But streaming revenues in India are projected to climb to $400 million by 2023, according to TechSci Research, and should continue to rise as hundreds of millions of new digital listeners turn to their mobile devices for music.

While Gaana has a head start, it will need to continue to innovate to stay ahead of the competition, analysts say. Another music-streaming service popular in India is JioSaavn, which is controlled by Reliance Industries Ltd., one of India’s largest conglomerates. Many Indian consumers shop around continuously and will abandon services if they find a better deal or juicier offerings elsewhere.

Gaana’s global rivals don’t disclose recent user counts for India but say they are also customizing their offerings for the country. Many have offered plans at substantially lower prices than in developed countries. Spotify, for example, launched a light version of its app that takes up less space on phones.

Spotify says its service is growing quickly and that it aims to appeal to all music lovers in India. YouTube Music says India is one of YouTube’s biggest video-viewing markets, and that the company is seeing good adoption of its music streaming service. Apple Music has worked to localize its offerings for the country. Representatives for Amazon Music and Bytedance’s Resso declined to comment on their user counts or India strategies.

Gaana—which launched in 2011 and is backed by Indian media firm Bennett Coleman & Co. and China’s Tencent Holdings Ltd.—has developed special technical features for users in India. Customers can search for artists or songs by voice, a benefit for those with limited literacy skills or who have difficulty typing on smartphone keyboards in Indic languages.

Gaana also offers price advantages. There is a free version with advertising and paid plans starting at 12 rupees (17 cents) a month for students. Spotify also offers a free version, but its least expensive ad-free monthly plans start at around 80 cents. Apple’s service starts at about 70 cents, while YouTube Music starts at about $1.10.

Gaana can charge less in part because, unlike its global rivals, the service doesn’t have to worry about undermining its product if it charges significantly less in India than in other markets. Gaana’s mostly Indian music is also less expensive to secure rights, analysts say.

While international players are still newcomers, Gaana is leveraging the trove of data it has collected on users’ listening preferences to recommend new tunes, Mr. Agarwal said. That is a bonus for first-time music-streaming consumers who are unfamiliar with the interface.

Harshit Batra, a 20-year-old university student in New Delhi, started using Gaana’s premium service last year. He listens to artists such as Indian composer A.R. Rahman and Pakistani singer Atif Aslam, and said he prefers Gaana because it has a wider selection of music and a simple user interface.

“My subscription expires this month,” he said. “I plan to renew.”

Shareholders love buybacks. But JPMorgan could be hitting the point where they no longer make sense.

Jamie Dimon is facing a Warren Buffett-like problem: a lot of cash and an expensive stock.

Over the past three years, Mr. Dimon’s JPMorgan Chase & Co. has spent most of its profit on share repurchases. That has been a boon for shareholders, since buybacks typically increase a company’s stock price.

The issue now is that JPMorgan shares, trading as they are at records, are getting more expensive. Analysts and investors are starting to ask if that means repurchases will slow.

Chief Financial Officer Jennifer Piepszak said on a conference call last month that the bank would “look at alternatives” to buybacks if the stock continued to rise. “It’s a high-class problem,” she said.

That high-class problem is concerning for some. Banks’ margins and profits are expected to slip this year as interest rates stay low. Slower buybacks could add to the pressure on returns and, therefore, the stock.

“That puts them in a bind,” said D.A. Davidson & Co. analyst David Konrad. “There are a couple headwinds, and one of them is the expectation the buyback starts to decline.”

In a buyback, a company uses its cash to buy its own existing shares, reducing its share count. That means a company’s per-share earnings can rise even if profits don’t. Buybacks can be a self-fulfilling prophecy for the stock price: Since each remaining share gets a bigger piece of the profit and value, that can drive investors to bid up the shares.

Buybacks return profits to shareholders, but they reward investors in the long term only if shares keep rising. There’s a long tradition of executives proving overly confident about future prospects and spending billions to buy stocks that then go south. Big banks, including JPMorgan, Citigroup Inc. C -3.26% and Bank of America Corp., BAC -1.94% had big buybacks in the years just before the financial crisis. Citigroup and Bank of America haven’t yet recovered those prices.

JPMorgan has, and it has also been posting record profits. Its recent buyback spree has been a good deal. The $59.5 billion of shares JPMorgan repurchased in the past three years would now be valued at about $75 billion.

As buybacks have surged across corporate America, they have spurred criticism that companies are failing to think long term and care only about stock prices. Democratic presidential candidates, including Elizabeth Warren and Bernie Sanders, have discussed whether to restrict how much stock U.S. companies can buy back, arguing that the money would be better spent on employee wages instead.

Mr. Dimon says he prioritizes investments in the bank first, then dividends and then buybacks. He says he would repurchase stock only when it was a good value for the company compared with other potential returns.

The bank has increased spending in recent years above competitors, with big bets on technology, new branches and expansions overseas, but is nearing a ceiling and is expected to keep spending near current levels.

JPMorgan has also increased its dividend 10 times in the past nine years. But banks have to hold extra capital if they decide to pay dividends, and shareholders have to pay taxes on them.

What’s left is buybacks. Investors and analysts regularly seek updates on where Mr. Dimon’s ceiling is for them. It has been creeping upward along with the bank’s stock and profitability.

He said in 2012 the math started making less sense when the stock traded above 1.35 times tangible book value, a measure of the worth of a company’s assets. In 2017, he said it still made sense to repurchase around 2 times tangible book. In 2018 he said he wouldn’t do it at 3 times tangible book, though, calling it “crazy.”

JPMorgan’s tangible book value is now at $60.98 a share and the stock has been trading near $140 this year, about 2.3 times the metric. (The stock has slipped recently.) A year like the stock had in 2019, when it gained more than 40%, would likely put it past 3 times.

JPMorgan has paid out $87 billion in buybacks and dividends over the past three years—98% of its profits, roughly in line with rivals. Most of that has been through stock repurchases.

The buybacks have juiced per-share earnings. The bank earned $10.72 a share in 2019. If the share count had stayed flat from the end of 2016, all else being equal, that would have been $9.49.

Investors say they still support repurchases for the same reasons executives have defended them: JPMorgan’s profitability is high and buybacks seem better than other options. By several metrics, JPMorgan and banks broadly remain cheap compared with other stocks.

“They aren’t compromising on any investments,” said Kush Goel, a senior research analyst at investor Neuberger Berman. “I’m not sure it feels too rich to buy back stock at this level.”

Mr. Buffett, who has been buying JPMorgan shares, appears to agree. There’s no more famous example of a company struggling with how to spend billions of dollars than Mr. Buffett’s Berkshire Hathaway Inc., which has failed to find big deals in recent years, lagged its historical returns and come under once-inconceivable pressure for not buying back more of its stock.

Mr. Buffett has said the same value Mr. Dimon described as “crazy” to repurchase shares would be a bargain. The bank is worth “way more,” he told CNBC last year.

Electric carmaker’s share price rise cost those betting against company $5.8bn in January

Investors betting against Tesla suffered record losses of $5.8bn in January after the stock hit a new high, marking a win for chief executive Elon Musk in a long-running battle with short-sellers.

Investors that buy up short positions profit when a stock falls in value and have piled into bets against Tesla over the years. In January, the value of those positions plummeted after the company’s shares surged 55 per cent for the month.

The share price increase was boosted by fourth-quarter earnings on Wednesday when Tesla posted a $105m profit. The share price gain was the highest since May 2013 when the group posted its first profit.

The monthly loss for Tesla short-sellers was the worst on record and the biggest across short positions in S&P 500 companies in January, according to S3 Partners, a data provider. The losses were more than four times the $1.3bn drop in value of short positions in Apple, the second-largest loss for short-sellers in the US stock market for the month.

“This has been quite the run,” said Ihor Dusaniwsky, managing director for predictive analytics for S3 Partners. Many short-sellers will probably hold their positions hoping the stock will drop or slowly exit over time, he said. “It’s going to take a while for this to shake out.”

Mr Musk’s testy sparring online with notable short-sellers, including David Einhorn of Greenlight Capital, has become one of the fiercest rivalries in capital markets.

Greenlight Capital is a long-time detractor of the carmaker and in its annual letter to shareholders in January revealed that it holds a put option against Tesla. This type of option gains in value if the stock drops, but suffers muted losses compared with a typical short position if the share price rises.

Mark Spiegel, managing member of Stanphyl Capital, will maintain a short bet against Tesla despite the bumper run for the stock but has capped the position to 5 per cent of the portfolio. He points to lower revenue and profit for the second half of 2019 compared with the same period a year earlier as a signal the company’s outlook was weaker than it appeared.

“The only things growing at this alleged hypergrowth company are increasingly profitless unit deliveries and the stock price,” Mr Spiegel said. Greater competition from established automakers in the electric vehicle segment would also pressure Tesla’s stock price in the future, he added.

“The real electric car competition is just beginning. We’re still short and will remain so,” Mr Spiegel said.

Toby Clothier, an analyst at Mirabaud Securities, said the $105m fourth-quarter net profit should be considered a net loss in part because 7,000 cars sold in the quarter were made in the prior quarter, skewing the numbers. The company has also predicted a week-long delay to production from its Shanghai factory because of the coronavirus outbreak.

“If you look at the numbers closely there are things that are confusing,” Mr Clothier said. “Tesla makes no money whatsoever and has quite high capital intensity.”

Tesla did not immediately respond to a request for comment.

Swedish retailer eyes transformation of outlets into logistical hubs for online shopping

Hennes & Mauritz plans to power up its 5,000 stores, using them more as logistical hubs for online shopping, as a new leadership team reshapes the world’s second-largest clothes retailer for digital growth.

The Swedish purveyor of fast fashion has been hard hit, like most retailers, by the move to online purchases and was criticised by investors for continuing to open hundreds of stores even as rivals emphasised internet sales. 

H&M will this year open the fewest stores in decades, adding a net 25 to the 5,076 it ended last year with.

“We think the role of the stores will change,” said Karl-Johan Persson, who has been put forward as the new chairman after being chief executive since 2009. “How can we use those stores even better as logistical hubs for deliveries, for pick-ups, for returns?”

Helena Helmersson, H&M’s first female chief executive, said in a separate interview: “It is one of the things that will be super exciting to understand going forward: how we see stores today with digital growth moving faster. We have a fantastic advantage in terms of our physical store network. It is what we do with it.” 

H&M unveiled its biggest management shake-up in decades on Thursday when Mr Persson was put forward to replace his father, the company’s largest shareholder Stefan Persson, as chairman, while Ms Helmersson, a former sustainability manager and 23-year company veteran, takes operational charge. 

The Swedish group surrendered its crown as the world’s largest fashion retailer to Spain’s Inditex — the owner of Zara — during Mr Persson’s 10 years as chief executive and was seen as slow to adapt to the move by consumers away from physical to online shopping. 

Under Mr Persson, H&M increased the number of stores by about 150 per cent, against just 50 per cent for Inditex. 

But in the past two years, H&M has sought to refresh its physical stores with a variety of trials in shops from Stockholm to Berlin. “We still believe in physical stores,” said Mr Persson. “We want to make them more inspiring and easier to shop in, so we are running tests to make the stores more attractive.” 

H&M will open about 200 stores this year, mostly in emerging markets, but will close 175 in established markets in Europe and North America. 

It offers online customers the ability to collect their purchases in a shop in 14 countries and allows them to return clothes bought on the internet in 16 countries. It is aiming to increase both. 

Mr Persson said the company was working out how many warehouses it needed in each country to supply its physical stores and separately for its online sales. 

Other companies are aiming to combine the two sales channels. Ikea, another global retail chain started in Sweden, is seeking to turn parts of its out-of-town stores into distribution centres from which it can send online orders and serve physical shoppers.

Delivery wars move to neglected retail space as competition heats up

Property developers are building kitchens in empty mall space and parking lots to fill food-delivery orders, a new approach in the fast-growing business of shuttling meals to customers.

The plan to make restaurant food for delivery in former retail space melds two industries that have been upended by e-commerce. Restaurants are struggling to find a cost-effective formula for meeting the growing demand for delivery of online food orders.

Meanwhile, developers say “ghost” kitchens can create new interest in retail and warehouse space vacated by merchants that have struggled to compete with e-commerce.

Retail developer Simon Property Group SPG -2.42% and hotelier Accor SA AC -0.67% said Sunday that they are working with hospitality company SBE Entertainment Group to develop some 200 commissary kitchens to cook up restaurant-quality food for customers at malls and hotels as well as delivery for people nearby. The first of those are planned for New York, Chicago, San Francisco, Los Angeles and Miami, said Sam Nazarian, chief executive of SBE.

The companies say that a 5,000-square-foot ghost kitchen in a Brookfield Properties development will provide delivery for the nearby Hudson Yards and surrounding areas in Manhattan. The group will also develop delivery-only locations in mall parking lots, storage areas and unused retail space.

The group has also signed four leases with CloudKitchens, the delivery-kitchen venture of former Uber Technologies Inc. CEO Travis Kalanick, to open additional delivery locations at some SBE properties in Los Angeles, executives said.

“It’s relooking at all real estate that is obsolete,” Mr. Nazarian said. SBE is the biggest stakeholder in a consortium that it, Simon and Accor are calling Creating Culinary Communities. Accor, owner of 5,000 international hotels, has a 50% stake in SBE.

The companies declined to say how much they are investing in the partnership.

Delivery now accounts for roughly 9% of the $282 billion U.S. fast-food sector and is growing faster than dine-in and drive-through sales, according to a recent Bernstein analysis.

Restaurants are expanding their delivery offerings to generate sales despite the impact those orders often have on their operational efficiency and profits. The remote kitchens can reduce their real-estate costs while expanding their reach.

Wendy’s Co., Chick-fil-A Inc. and Sweetgreen are among chains turning to remote kitchens that don’t serve customers to move delivery orders outside their existing restaurants.

“It’s about unlocking additional demand,” Sweetgreen CEO Jonathan Neman said in an interview.

Some property developers and startups are seizing the opportunity to build and lease those “ghost” or “dark” kitchens.

The SBE-led consortium plans to build kitchens in empty space it owns at properties such as Pennsylvania’s King of Prussia Mall, one of the biggest shopping centers in the U.S., along with Lenox Square in Atlanta and the Sanderson London hotel.

Some restaurants and chefs that already operate at SBE properties, including Umami Burger and Masaharu Morimoto, will design menus for the kitchens, the companies said.

The group aims to open 85 kitchens this year and at least 100 more by the end of 2021. They anticipate spending about $60,000 on upfront costs at each location and reaching profitability in about six months if a kitchen manages to fill around 125 orders averaging $30 each a day, Mr. Nazarian said.

He said the kitchens will rely on established delivery companies to carry food to customers, such as Uber Technologies’ Uber Eats, DoorDash Inc. and Postmates Inc.

Mr. Kalanick’s CloudKitchens, Kitchen United and other venture-backed companies build delivery kitchens and sublease them to restaurants. Delivery companies, particularly Uber and DoorDash, are also creating their own leasable kitchens or online-only restaurants.

A 230-square-foot CloudKitchens site can be built in as little as two weeks at a cost of around $30,000, according to an investor presentation viewed by The Wall Street Journal. A traditional 3,500-square-foot restaurant can cost $1 million to outfit, the presentation said.

Venture-capital firms have invested nearly $5 billion in companies operating virtual kitchens since 2018, according to an analysis by data firm PitchBook. Investors include Sequoia Capital and SoftBank Group Corp., both of which are also invested in food-delivery companies.

Some in the restaurant industry are skeptical of ghost kitchens. Kitchen Fund, a restaurant investor group, predicted recently that the model will only be profitable for big brands that can generate high order volumes at more than one mealtime.

Some restaurants, such as Fat Brands Inc., are testing separate delivery-only operations at existing restaurants.

The company is preparing and delivering food for its Hurricane Grill & Wings brand out of some existing Fatburger locations. That is generating an average of $1,000 in additional sales at those stores each week, adding around 5% to overall store revenue, Fat Brands CEO Andy Wiederhorn said in an interview.

Those deliveries are helping generate sales outside the standard lunch and dinner rushes, he said. “We need to generate money all day. You can’t just sell burgers at lunch,” Mr. Wiederhorn said.