This could be the next gold mine for Tesla and other electric vehicles - MarketWatch

When people think about charging electric cars, the first thought that comes to mind is: “So you are going to put charging stations at gas stations. There will be long lines of people waiting to charge their cars, since it takes much longer to charge an electric car than to fill a car with gas. It will never work.”

Capitalism will take care of building out the charging infrastructure. My prediction: At some point there will be a charging-station mini-bubble as companies raise capital and do a land grab. Grocery stores will use charging stations to attract customers. Charging stations will be in all parking lots, from restaurants to office buildings. Electric vehicle (EV) charging will be a gold rush, while gas stations will be just another relic of a bygone age, like phone booths and cassette tapes. Future EV batteries will have greater range, last longer, and charge faster.

The transition from internal combustion engine (ICE) cars to electric vehicles is a bit like the transition our ancestors went through when society switched from horses to gasoline-powered cars. At first, people wondered how they would “feed” those cars (grass was more plentiful than gasoline), whether they would have decent roads to actually drive anywhere, and whether cars would be crashing into pedestrians and each other. The shift from horses to cars required a completely new paradigm.

The domain of horses came with an ecosystem that was simply not applicable when we switched to cars. Even though both performed the same function — horses got people and goods from point A to point B — the automobile was fundamentally different, and so was its ecosystem.

I imagine the 110,000 U.S. gas stations that keep ICE cars humming along today will look like a rounding error next to the millions of electric “filling stations” that one day will be located in home garages and public parking lots.

Batteries lead the charge

The engine in an EV, though it will incrementally improve over time, is less important than the battery, which is the most expensive single part of the vehicle and a highly complex one, too. The battery in an EV needs to be treated tenderly to maintain its charge and longevity. Your iPhone, for example, is optimized for duration of a charge but not for battery longevity. First of all, Apple AAPL, +0.28%   has an incentive to build planned obsolescence into its iPhone – it wants you to replace it every three years. Second, most iPhones don’t spend much time sitting outside in extremely hot or cold weather; they mostly remain in the comfort of your pocket, at a battery-friendly temperature. Not least, the cost of replacing a battery in your iPhone is less than $100, but replacing the battery in a Tesla TSLA, +1.59%  costs $10,000.

Read: Relax, Tesla drivers — thieves don’t want your electric cars

Plus: Here’s how to capitalize on the electric car revolution — without buying Tesla’s stock

Tesla doesn’t own the battery-cell technology that goes into its batteries; that belongs to its partner, Japanese conglomerate Panasonic PCRFY, +1.53% 6752, +0.09%  . Tesla designed the battery pack the enclosure that houses the battery cells) and the battery management system controller (computer) that routes and manages electricity flow and the microclimate of the battery cells.

The battery is a key technology for Tesla, but at the moment Panasonic is in control of a big part of it. Just as Apple chose to bring development of the CPU that powers its iPhone in-house, Tesla, which is vertically integrated, may eventually increase its control over its battery technology. The company’s purchase of Maxwell Technologies, which has a battery technology that may significantly lower the cost of cell manufacturing, is the first move toward independence from Panasonic.

On the one hand, this strategy has a great appeal because if Tesla is able to produce a better (more durable, lighter, longer-range, faster-charging) battery at a lower cost, it could become a source of a competitive advantage. Today Tesla doesn’t fully control its destiny when it comes to batteries, so if BMW BMW, -1.40%  decides to use Panasonic’s cells, Panasonic will gladly supply it. BMW would still have to develop its own battery management controller, though.

On the other hand, this vertical-integration strategy could backfire. If EV batteries turn into a commodity and the aforementioned features become ubiquitous, then the lowest-cost manufacturer wins. Tesla would argue that vertical integration will ultimately result in lower costs. The company has built a giant battery factory in Nevada that it calls the Gigafactory. When it is fully operational, the Gigafactory will be able to manufacture twice the quantity of lithium-ion batteries produced globally today. Tesla owns the building, and Panasonic owns the cell manufacturing equipment.

Traditional ICE automakers that are tiptoeing into EVs have taken a more conservative strategy and are relying on suppliers (LG Chem 051910, -2.63%    , Samsung SDI 006400, -2.22%  , and others) to produce a complete battery for them.

One of the biggest differences between the Tesla battery and the batteries used in other companies’ EVs (like the BMW i3, Chevy Volt GM, -3.66%  , and Jaguar i-PACE) is the metals they put in the cathode. Traditional car companies chose the NMC (nickel, manganese, cobalt) combination, while Tesla ended up making a less conservative choice of NCA (nickel, cobalt, aluminum). NCA offers long battery life, quick charging, and great performance. NMC, on the other hand, produces slightly less energy but is less volatile and withstands larger ranges and variations of temperature.

Tesla chose a more potent and more volatile cathode chemistry and elected to control its volatility by trying to manage the macroenvironment of the cells by a special design of the battery enclosure, in order to cool or warm the battery cells as needed. Each battery pack comes with an incredibly sophisticated battery management system that tracks the voltage and temperature of each cell and orchestrates which cells the Model 3 uses.

Lithium-ion batteries are a technology of the late 1980s. This was improved in the 1990s and the early part of this century at a somewhat slow pace (especially compared to semiconductors, which have followed Moore’s law, doubling in speed every 18 months). The rate of improvement has accelerated over the past decade (in large part thanks to Tesla), and the cost per kilowatt hour (kWh) declined to $127 in 2018 from $446 in 2013. The Tesla Model 3, for example, comes with a 75kWh battery, meaning the approximate cost of the battery has declined to $10,000 from $33,000.

From the perspective of how much it will likely evolve over the next decade or two, EV battery technology is still in its infancy. As we transition from ICE cars to EVs, the value of the prize will explode; tens if not hundreds of billions of dollars will be poured into improving the battery. Tesla, for example, has already gone through three reformulations of its battery. My $50,000 Tesla Model 3 has the latest version, which charges faster than the $90,000 Model X or the $80,000 Model S that Tesla sells today.

While in the short run battery technology is going to be an important differentiating factor, in the long run the EV battery will likely become a commodity and the differentiating factors will be in software and self-driving capability. An EV is a giant computer on wheels, and historically as computer hardware is commoditized, most of the remaining value is in the software.

How does one invest in this overvalued market? Our strategy is spelled out in this fairly lengthy article.   

Vitaliy Katsenelson is chief investment officer at Investment Management Associates in Denver, which has no positions in any of the companies mentioned. He is the author of “Active Value Investing” (Wiley) and “The Little Book of Sideways Markets” (Wiley). Read more about how EVs will disrupt the auto industry, including whether Tesla and traditional automakers will survive in the long run, and who's right in the Tesla bull vs. bear debate.

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Read: 7 tips for buying your first electric vehicle

More: The best EVs and plug-in hybrids

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2019-10-02 09:20:00Z
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In Opioid Settlement, Johnson & Johnson Agrees To Pay Ohio Counties $20 Million - NPR

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Akron fire medic Paul Drouhard shows a box containing Naloxone Hydrochloride, a drug carried in all their department emergency response vehicles to treat opioid overdose patients. Keith Srakocic/AP hide caption

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Keith Srakocic/AP

Johnson & Johnson and two Ohio counties have reached a tentative $20.4 million settlement that removes the corporation from the first federal lawsuit against opioid manufacturers, scheduled to begin later this month.

In a statement released Tuesday, the healthcare giant said the agreement with Cleveland's Cuyahoga and Akron's Summit counties allows it "to avoid the resource demands and uncertainty of a trial." However, the terms stipulate that Johnson & Johnson makes "no admission of liability."

"[The] Company is open to identifying an appropriate, comprehensive resolution of the overall opioid litigation. At the same time, the Company remains prepared to defend its actions," the statement said.

In a deal which must be approved by a federal judge, Johnson & Johnson agreed to pay the counties a total of $10 million and to reimburse them for $5 million in legal fees. An additional $5.4 million would go toward programs to fight opioid addiction in the two counties.

In 2017, Ohio had the nation's second highest per capita rate of fatal opioid overdoses, with 46.3 deaths per 100,000 people, according to the Centers for Disease Control and Prevention. West Virginia had the highest rate at 57.8 per 100,000, the CDC said.

Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson, made two opioids that were distributed in Cuyahoga and Summit counties. Johnson & Johnson says the drugs were "responsibly marketed" and "accounted for less than one percent of the total opioid prescriptions in the United States."

In August, the drug maker was ordered to pay $572 million in a case in Oklahoma, which blamed Johnson & Johnson for helping fuel the opioid crisis in the state. The company has appealed the ruling.

Judge Thad Balkman, who presided over the Oklahoma case, said the pharmaceutical giant "caused an opioid crisis that is evidenced by increased rates of addiction, overdose deaths and neonatal abstinence syndrome" in the state.

The case involving the Ohio counties is the first federal case to be brought against pharmaceutical companies and is therefore seen as potentially setting precedent for how similar suits will be handled.

Four other drug makers have already settled ahead of the Oct. 21 trial, but McKesson Corp., AmerisourceBergen, Cardinal Health, Teva Pharmaceutical Industries Ltd., Walgreens Boots Alliance Inc. and Henry Schein Inc. are still listed as defendants, according to Reuters.

The maker of OxyContin, Purdue Pharma, which filed for Chapter 11 bankruptcy last month, has reached a tentative settlement in the Ohio suit worth some $12 billion.

Johnson & Johnson, like the other drug makers, still faces some 2,000 other suits in various states related to the opioid epidemic.

Early next year, a similar case brought by West Virginia's Cabell County and the city of Huntington — which have the highest opioid overdose rates in the country — is set to be taken up.

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2019-10-02 09:41:00Z
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‘Customer set a telco really wants’: Telus's $700M buy of ADT Canada logical for a bundle of reasons - Financial Post

Telus Corp. announced Tuesday it is buying ADT Canada for $700 million, a move that will bolster the telecom’s suite of product offerings, but also bring it into direct competition with tech giants such as Amazon and Google.

ADT Inc. will still operate in the United States, but Telus is getting around 500,000 customers and 1,000 employees in the security services business across Canada with the acquisition. In announcing the deal, Telus noted that it already has about 100,000 home and business security customers.

Scott Young, principal research advisor with Infotech Canada, said the move makes sense for Telus and boils down to one word: “Stickiness.”

Faced with increased competition in their wireless and internet businesses, and cord-cutting on the television side, telecoms have been trying to hold on to customers and grow revenues by bundling services together.

“This adds another 500,000 to (Telus),” Young said. “That’s 500,000 potential people that also did not necessarily have other Telus services, that they can now try to come in from that angle too to try and offset any other losses.”

There are a lot of reasons home security services in particular are alluring to telecom operators, and Tuesday’s acquisition is just the latest in a series of moves.

Rogers launched home monitoring services back in 2011, and in 2017 Bell Canada acquired AlarmForce for $182 million. Bell then turned around and sold the western Canada portion of AlarmForce to Telus in early 2018 for $66.5 million.

The deal for ADT this week is much larger, but National Bank of Canada analyst Adam Shine noted that on a per-subscriber basis the AlarmForce and ADT deals are in the same ballpark.

“We view this as a good transaction for the company. Security and automation clearly represent areas that can be monetized as part of a bundle for businesses but also consumers in the context of health and home,” Shine wrote in an investor note. “Related solutions will find their way into smart cities, buildings, and enterprise with coming 5G serving as the great enabler to all these things.”

Related solutions will find their way into smart cities, buildings, and enterprise with coming 5G serving as the great enabler to all these things

Adam Shine, analyst, National Bank of Canada

That idea of bundling is the most alluring part of home security, according to Nigel Wallis, vice-president of industries and IoT with IDC Canada.

“Once they can prove themselves there, then potentially they can offer more of a whole-home solution, which might include a smart-home thermostat, might include digital flood warning in your basement, potentially even moving into something like smart irrigation systems for people who have gardens,” Wallis said.

“I don’t anticipate it happening this year, but over the next three years I think we will start to see all the telcos following what you see out of Comcast and Verizon (in the U.S.) trying to add, not like a geek squad, but a home squad.”

Home security customers are particularly alluring, too, because those customers tend to be higher-income individuals, Wallis said.

“That’s a customer set that a telco really wants, because they’re going to buy the extended cable package,” he said. “They’re much more likely to be on the list of people who want to get Apple iPhone 11. Those are much more likely to be higher-margin customers who are buying the home security devices.”

But there’s a problem for telecoms getting into the home security business, or really, there are two problems: Amazon and Google. Through their Ring and Nest brands, respectively, both companies are eager to sell smart locks, smart doorbells, camera systems and an array of other security services all knit together by the Alexa and Google Assistant platforms.

Those are higher-margin customers

Nigel Wallis, vice-president, industries and IoT, IDC Canada

Wallis downplayed this concern, saying that the market will probably segment largely along generational lines, with more affluent baby boomers and Gen X customers tending toward traditional home security systems, and millennials preferring the Nest and Ring options.

Wallis said because of this, the ADT Canada acquisition will probably pay for itself for Telus, but it’s unlikely to be a huge growth area.

“You’re looking to milk the existing customer-base who are going to be the same people you already work with for home residential TV and home phones and internet,” he said. “The people who are most likely to have gone to over-the-top (streaming) and not have home TV anymore are also most likely to go to digital-native companies like Amazon and Google.”

But Werner Goertz, a personal technology analyst with Gartner, was more skeptical, saying that the rise of Google and Amazon in recent years has changed the home security landscape. He said he was a bit surprised to see Telus making the acquisition right now.

“Large utilities across the globe were basically engaged in smart-home activities. They built their own subsidiaries and they made huge investments a couple years ago,” Goertz said.

“Ecosystems and incumbencies have developed on behalf of Amazon and Google to a much greater degree compared to two or three years ago, so now the barrier to entry has been raised, and I think that’s why we’ve seen less of a flurry of M&As.”

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October 02, 2019 at 05:20AM

Canada's economy stalls in July as oil and gas extraction contracts - The Globe and Mail

Pumpjacks pump crude oil near Halkirk, Alta., on June 20, 2007.

The Canadian Press

Canada’s economy was unexpectedly unchanged in July – after four months of growth – as the country’s mining, quarrying and oil and gas extraction sectors contracted, Statistics Canada data showed on Tuesday.

Analysts in a Reuters poll had predicted an increase of 0.1 per cent in July after a 0.2-per-cent increase in June. Over all, 12 of the 20 industrial sectors monitored expanded on the month, while eight declined, the national statistics agency said.

The Canadian dollar weakened to $1.3290, or 75.24 US cents, after the July GDP miss.

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Canada is in the midst of a national election set for Oct. 21 where economic issues, such as the cost-of-living, have played a central role on the campaign trail. Meanwhile, the Bank of Canada has held interest rates steady since last October as it monitors Canadian economic data.

“Today’s data are consistent with the [Bank of Canada’s] view that growth over the second half of the year is likely to be slightly slower than the first half,” said Josh Nye, a senior economist with RBC Economics, adding there were “few signs of a broader slowdown.”

“That gives the central bank time to be patient in assessing whether a bit more accommodation is needed to offset external headwinds,” Mr. Nye said in a note.

Statscan said goods-producing industries were down 0.7 per cent in July as outputs from all sectors – excepting utilities – declined. Services-producing industries were up for the fifth consecutive month, rising 0.3 per cent as the majority of its subsectors grew.

Canada’s mining, quarrying and oil and gas extraction sector dropped by 3.5 per cent in July, the largest decrease since May, 2016, Statistics Canada said. Support activities for those same industries slumped by 11.5 per cent, the largest decline since December, 2018, after three consecutive months of growth, as drilling and lower rigging services contracted.

Oil and gas extraction (except oil sands) fell 4.7 per cent, the biggest monthly decline seen in a decade, the agency said – thanks, in large part, to a shutdown of some offshore production facilities in Newfoundland and Labrador because of maintenance issues.

Declines were also reported in the construction sector, which dropped by 0.7 per cent. Manufacturing fell for the second straight month, falling 0.1 per cent, while the transportation and warehouse sector contracted by 0.5 per cent on slower rail transportation. Real estate and related industries increased 4.2 per cent, while utilities rose by 1.5 per cent. Wholesale trade jumped 1.1 per cent, the sixth increase in seven months, Statscan said.

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October 01, 2019 at 07:53PM

Juul ends attempt to overturn San Francisco anti-vaping law - CBC.ca

Juul Labs Inc. announced Monday that it will stop supporting a ballot measure to overturn an anti-vaping law in San Francisco, effectively killing the campaign.

The largest U.S. maker of e-cigarettes said it will end its support for Proposition C after donating nearly $19 million US. It was virtually the only financial backer of the measure.

"Based on that news, we have made the decision not to continue on with the campaign," Yes on C said in a statement.

However, the proposition will still appear on the November ballot.

Proposition C would have allowed the sale of vape products to adults, partially overturning the city's June ordinance that as of next year would ban sales of e-cigarettes and vape products not reviewed by the U.S. Food and Drug Administration.

The move was part of a broad review of company policies in the wake of a leadership shakeup.

"I am committed to seeing that Juul engages productively with all stakeholders, including regulators, policymakers and our customers," newly appointed chief executive officer K.C. Crosthwaite said in a statement. "This decision does not change the fact that as a San Francisco-founded and headquartered company we remain committed to the city."

However, Larry Tramutola, who directs the No on Prop C campaign, was skeptical, noting that about $7 million in Juul's campaign donations remain unspent.

"This could very well be yet another of a series of lies and exaggerations from Juul and Big Tobacco," he said in a statement.

"Until they return the $7 million unspent dollars that is in their political account, until they suspend their mail, their advertising, their paid phone calls and lay off their consultants we do not believe them."

The move came as a 14th U.S. death linked to vaping was reported in Nebraska. Hundreds of people have suffered lung ailments tied to vaping, although no major e-cigarette company has been linked to them and many patients said they vaped products that included THC, the intoxicating chemical in marijuana.

Even so, critics contend that vaping products are being marketed to minors through the use of social media popular with teens and the production of candy- and fruit-flavoured vaping capsules.

Last month, India banned the sale and import of electronic cigarettes, warning of a vaping "epidemic" among young people and dashing plans of companies such as Juul and Philip Morris International to sell products in the country.

Juul had aimed to launch its e-cigarette in India in late 2019 and had hired several senior executives in recent months, Reuters has previously reported.

Washington announced Tuesday it is joining several other states in banning the sale of flavoured vaping products amid concern over the mysterious lung illness that has sickened hundreds of people and killed about a dozen across the country.

Michigan, New York and Rhode Island also recently banned flavoured vaping products. President Donald Trump has said that the federal government would act to prohibit thousands of flavours used in e-cigarettes because they appeal to underage users.

Juul has said it doesn't market to young people, and its products are meant to be an alternative to smoking. However, the company's advertising is under federal investigation, and the company recently announced it will stop advertising its e-cigarettes in the U.S.

E-cigarettes have been largely unregulated since arriving in the U.S. in 2007. The Food and Drug Administration has set next May as a deadline for manufacturers to submit their products for review.

Health experts generally consider e-cigarettes less harmful than traditional cigarettes, because they don't contain all the cancer-causing byproducts of burning tobacco. But there's virtually no long-term research on the health effects of the vapour produced when e-cigarettes heat a liquid with nicotine.

With files from Reuters

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October 01, 2019 at 11:20PM

Should Markets Worry About Falling Saudi Oil Inventories? - OilPrice.com

Bloomberg is reporting that Saudi Aramco has restored oil production levels at the crude-processing plants at Abqaiq and at the Khurais oil field. Multiple reports that Saudi’s production would be back online quickly have helped push oil prices back down to where they were prior to the September 14 attacks.

Maximum production capacity still isn’t at pre-attack levels, and Aramco said that won’t be restored until late-November. Presently, Abqaiq capacity has been restored to 4.9 million barrels a day (BPD), versus a pre-attack capacity of 5.5 million BPD. Khurais is operating at 1.3 million BPD, versus a pre-attack capacity of 1.5 million BPD.

Aramco has reportedly continued to supply its customers, in part by drawing down its oil inventories. The inventory draw has been reported upon by Ursa, a geospatial intelligence company. I recently spoke with Ursa’s global energy analyst, Geoff Craig, who explained the company’s capabilities and findings.

Ursa measures tank levels from space using Synthetic Aperture Radar (SAR) satellites. The data is then processed with a machine learning algorithm. The company also reports on flaring activity. These two pieces of information can provide a picture of Saudi Aramco’s activities. Related: This Could End The World's Dependence On Oil 

Geoff explained that three sites — Ras Tanura, Yanbu and Khafji — contain most of Saudi Arabia’s domestic crude oil inventories. In the month prior to the attack, inventories were relatively stable. But the two weeks following the attacks saw inventories at these three sites fall by more than 20 percent.

Saudi crude inventories at Ras Tanura, Yanbu and Khafji.

In addition to drawing down inventories Aramco has reportedly been sourcing crude oil from nearby countries like Kuwait, and it has been offering some customers heavy crude instead of the light crude they normally receive.

What are the implications? The oil markets seem to have already discounted the geopolitical risk. Falling inventories don’t seem to have concerned the market either, although Ursa’s latest measurement showed that inventories finally increased at Ras Tanura and Yanbu.

Market intelligence provider Wood Mackenzie told the Wall Street Journal this week “In the past the Saudis have always been able to step up to the plate and meet what’s missing. This is a different situation because the country with the greatest spare capacity is the one hampered.” They added on Twitter “If there are any other outages, we are up a creek without a paddle, as they say.”

That heightened risk certainly isn’t reflected in the current price of oil.

By Robert Rapier

More Top Reads From Oilprice.com:

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October 02, 2019 at 05:00AM

Johnson & Johnson reaches settlement with Ohio over opioid crisis - BBC News

Johnson & Johnson has agreed to a $20.4m (£16.6m) settlement with two counties in the US state of Ohio.

The healthcare giant said it was made to avoid a trial on allegations of fuelling opioid addiction in the state.

Johnson & Johnson said in a statement that the deal was not an admission of liability for the state's epidemic.

It is the fourth drugmaker to settle claims in Ohio amid more than 2,600 lawsuits by state and local governments against painkiller manufacturers.

Tuesday's announcement comes after a landmark ruling in August which ordered Johnson & Johnson to pay $572m (£468m) for its part in fuelling Oklahoma's opioid addiction crisis.

In a statement, Johnson & Johnson said it would pay $10m to Cuyahoga and Summit counties, and another $5m to cover their legal expenses.

Another $5.4m will be given to charities involved with opioid-related programs in the counties.

What is the opioid crisis?

Opioids are a group of drugs that range from codeine, to illegal drugs like heroin.

Prescription opioids are primarily used for pain relief. They can be highly addictive.

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On average, 130 Americans die from an opioid overdose every day, according to the US Center for Disease Control and Prevention.

Opioids were involved in almost 400,000 overdose deaths in the US from 1999 to 2017, according to its research.

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2019-10-02 07:06:50Z
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