💲 Businesses are going bankrupt

What’s going on here?

Tesla delivered a few more electric vehicles (EV) than expected last quarter, but a competitor’s well-laid plan meant it beat the OG at its own game.

What does this mean?

Tesla’s a dab hand at drumming up hype, but none of that matters until the EV giant delivers its wares and gets paid for the trouble. That’s why investors keep a keen eye on delivery numbers. This time, the electric maverick wrangled 485,000 deliveries last quarter, a few thousand more than expected. But while the firm’s 1.8 million vehicle deliveries over the year were more than analysts predicted, the number fell well short of Musk’s own best-case projections. That may leave the head honcho a little deflated: Tesla’s trying to prove itself after its disappointing results from the quarter before, all while fending off very capable competition from Chinese EV makers.

Why should I care?

For markets: Tesla versus Buffett’s backing.

Chinese carmaker BYD delivered over 520,000 EVs last quarter, pushing Tesla off its top spot. But it’s not just a seamless driving experience propelling BYD: the firm slashed prices toward the end of the year, enticing any EV-curious customers that were wary of usually high prices. And by selling almost as many vehicles in 2023 as it did over the previous five years combined, BYD proved that the Chinese market is the place to be. No wonder the company’s grabbed Warren Buffett’s attention.

Zooming out: Save the planet – for a price.

EVs don’t come cheap, but US initiatives used to let buyers claim up to $7,500 back in tax credits. But more than half of the EV models on the scheme have now lost their eligibility, all at a time when higher costs are forcing carmakers to inflate their price tags. So with folk facing their own financial woes, budget-conscious drivers may stay away from major brands like Tesla, Nissan, and General Motors.

What’s going on here?

A slew of major companies declared bankruptcy in 2023, and this new year doesn’t guarantee a fresh start for any struggling businesses out there.

What does this mean?

It’s a tough time to be a business owner: higher prices have put folk off shopping sprees, and interest rates have made it more expensive to borrow money from banks. No wonder, then, that a ton of British firms couldn’t afford to keep up with their debts this year, with the Insolvency Service reporting that more folded in 2023 than 2022. The construction and services sectors were particularly hard hit, making up a fifth of the bankruptcies each, while the hospitality and retail sectors both had their fair share of failings too. And with interest rates staying high for now, experts are expecting more dominoes to fall in 2024.

Why should I care?

For markets: New year, new interest rates.

The Federal Reserve is widely expected to trim interest rates next year. Thing is, even if inflation and interest rates nestle into a more modest level, they probably won’t stoop below the lows set during the pandemic. That’ll make loans stay on the pricey side, all while funds like venture capital firms are drying up. Together, that’ll be a blow for companies used to borrowing big and spending bigger to drum up business. (We’re looking at you, tech.)

Zooming out: Tech checks out.

Tech stocks led the market’s charge in 2023, with investors clamoring over the AI trend. But while it’s true that higher interest rates may well hold fledgling tech companies back this year, the Magnificent Seven are a different breed. Huge, cash-rich, and practically rolling in profit, the squad won’t have the same financial problems as their smaller competitors, adding some credibility to their hefty valuations. And take note: if you’re interested in Silicon Valley’s finest, Big Tech companies are currently trading in line with their historical values.