Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world, and straight ahead on the program, we look ahead to some key inflation and retail sales data here in the US. I'm Tom Busby in New York.
I'm Stephen Carolyn London for We're digging into the challenges facing commercial and residential real estate out of a major conference in the French Riviera.
And I'm Brian Curtis in Hong Kong. We look ahead to earnings from China's contemporarate Apparax technology, number one in its industry. How is it doing in navigating China?
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg. He Love on Free Own, New York, Bloomberg ninety nine to one, Washington, d C, Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Serrius XM one nineteen and around the world on Bloomberg Radio dot com and via the Bloomberg Business App.
Good day to you. I'm Tom Busby, and we begin today's program with inflation. We get key CPI data for the month of February this coming week, which could potentially influence what the FED does at its March meeting. Joining us now is Stuart Paul, Us, economist with Bloomberg Economics. Thank you for joining us.
Thank you for having me. Tom. Yes, we are looking forward to getting our February CPI data, and we are also going to end up getting retail sales data for the month of February in this coming week. And our basic view is that bit of a resurgence in spending helped to create a bit of an inflationary impulse. We are expecting to see the headline CPI index increase zero point four percent month on month for the month of February.
That's the same as what we saw in January, and that is a very hot print and definitely inconsistent with the Fed's two percent target. That's going to hold annual inflation at three point one percent. It's year over year core inflation. We're expecting to register zero point three percent month on month, allowing headline inflation to fall to three
point seven percent year over year. We are expecting to see some disinflation and core goods, with use auto prices declining about two percent during the month, but consumers are still spending and that will support nominal retail sales growth during the month.
All right, So one bright spot you mentioned was use cars a little lower. However, housing gasoline and food, I know they fluctuate, but they have been a little higher than usual. Is that kind of driving a lot of that inflationary pressure.
That's right, So driving the headline really is gasoline prices. On a seasonally adjusted basis. We have gasoline prices rising about four percent during the month, so that's after accounting for the seasonal adjustment factor. Is that typically would account for the increase in gasoline prices In februaries people start driving once again as they clear snow off the streets, for example, so in some places, so not only is gasoline driving headline, inflation is also driving nominal retail sales.
We are expecting to see retail sales growth about zero point eight percent month on month. A big part of that is gasoline, and we need to account for that. If we look at a narrower control group, however, which strips out autos, strips out gasoline, strips out building, materials and food services, which is very heavily influenced by foot traffic, which can be affected by weather, for example, as we
saw in January, very affected by weather. If we focus on that control group, we have a much more modest growth of zero point two percent month on month in February.
Well, are some of the retailers doing better? But then now January, we know that was a very rough month for retail sales. Could have been a hangover from the holiday season. But February you're expecting a little bump ahead, a little bump up, not a decline like we saw in January. Who are the winners in that besides gas stations.
So if we look at credit card transaction data and we look at debit card transactions and just strictly count the number of swipes at credit card processing terminals at the point of sale, we do see big box retailers, We do see some just general merchandisers showing some of the most impressive growth month over month. But we need to be a bit cautious in how we read through from that one month of improved credit card transactions data and what that means for the broader economy. We are
seeing some headcount reductions at retailers. That typically was something that was concentrated just in more high skilled services. But if it's making its way to retailers, that could be a signal of retailers feeling a little bit of the pain or anticipating a slow down and spending, which is actually what we expect throughout twenty twenty four.
Well, let's go back to inflation. Just not even two years ago, the inflation rate was nine point one percent. Right now we're expecting a year of a year rate of about three point one percent.
Or three c three point one percent for the headline three point seven for core.
So we're moving in the right direction. Last week, FED Chair Jerome pal and his semi annual testimony to Congress. He said that central bank no rush to start lowering rates, but he hinted that when policymakers feel inflation is under control, could happen later this year with no firm timetable. Is he being optimistic? Is he looking at the data? It's all data driven according to the Fed. Are we heading toward that now?
I think we are. We're anticipating seeing headline inflation reaching about two point five percent year over year at the end of twenty twenty four, As headline inflation comes down, the balance of risks that the Fed has to weigh between achieving its maximum employment mandate and its price stability
mandate come into better alignment. And so as we see the pace of hiring cooling, as we see the pace of inflation cooling, the Fed has to take its employment mandate a bit more seriously, has to put a bit more weight on it. And so we do expect the Fed to begin cutting rates this summer. Again, economic activity cooling, inflation cooling, and the labor market at cooling would allow for that pivot in policy.
And the next FED meeting the nineteenth and twentieth of this month, So we should not expect any rate cut. But you think we'll get a little more clarity from the Fed about what they're thinking.
I think that we'll get a little bit more clarity on the pace of quantitative tightening, for example. But I expect the Fed to actually maintain a bit of a
hawkish tone in its policy statement. It did remove its quote unquote hawkish bias in its January policy statement, but I expect the Fed to use language that would prevent people from reading too deeply into the idea that rate cuts are imminent, or from expecting rate cuts to be imminent less financial market conditions start easing too swiftly, and the Fed would have to then treat loosening financial conditions, perhaps with more restricted policy or higher for longer policy.
Oh boy, well we'll get ready for that. Well, our thanks to Stuart paul Us economists with Bloomberg Economics, turning now to too closely watched earnings reports that are out this week, which will offer investors a glie limps into the mania surrounding artificial intelligence technology and for more on what to expect from Oracle and Adobe. We welcome Bloomberg Intelligence technology analyst anarag Rana. Thank you for being here at.
RAG Oh I'm happy to be here.
Oh good. Well let's start with Adobe, which may be best known for its Photoshop editing software Acrobat Reader and its PDF but boy as it transformed itself into a cloud computing giant with its generative AI product Firefly. So what are you expecting to see in the first quarter earnings out on Wednesday? And why Yeah?
So you know, when you look at somebody like Adobe that dominate the creative space with the Photoshop and other products that go into it. They also dominate the document cloud business or digital documents with PDF. So those are the two areas where we see strength going into the QUOTO. So document cloud, I think that's done very well. We
continue to expect strong results on that segment. The big discussion is going to be on the creative part of it because there is a lot of chatter around what's going to happen to companies like Adobe when you have products that are you know, launched by companies like open Ai. So I would recommend if anybody hasn't seen the Open Eye's latest demo of their product called Sora, I would
would recommend go to YouTube and check that out. It's a phenomenal product where you just write down the tex stuff. Let's say, you know, two armies fighting in a in a battlefield, it will create a video for you and that's done. I mean, you can use that. Now. There are a lot of concerns about privacy and copyright and other things, but we can you know, that's that could be settled later. But since that video was released, Adobe
has been a lot under pressure. So I think on the conference call, we do expect management to talk a lot about what they're doing with their AI capabilities, et cetera. You mentioned Firefly. Firefly is an interesting product, but it's mostly to pictures, which is text to you can write down a text to say, you know, create a picture of a dog playing piano in the in a forest,
and it'll create that for you. They have done a good job of, you know, rink fencing that issue by launching their own product, Firefly, And on top of that, they actually have agreements with the creative professionals who own a lot of those underlying pictures on which these models are trained. So they're basically telling companies you can use the pictures generated from our system and nobody's going to sue you for it because we have rink fenced it
with copyright issues. So I think is going to be a lot of discussion on that topic. But i Adobe, in our view is on the right path of jen ai and over the next few years we should see significant improvement in their products.
And over those next few years is their main competition going to be the open ais and other AI startups of the world.
It is a mix of open ai and other startups of the world. There is another startup in Australia that has been behind them called Canva. We just had their co founder on our podcast. That's a good product and also it's a slightly cheaper product. So it's going to be hard for Adobe over the next few years to
put in new price increases through their ecosystem. They have been growing well with price increases over the last I would say, a couple of years, but I think it's going to be challenging going forward.
Wow.
Okay, Well, on Thursday we hear from the enterprise software giant Oracle what are you looking for in its Q three report.
Yeah.
Oracles actually a very interesting story because it has two big businesses. One is the application portfolio of software company or software products such as HR software, or customer relationship software or finance software. And the other part is the infrastructure business, which is their database business as well as
they also do a bit of cloud computing. I think they given such strong demand for a cloud infrastructure to run these large language models, the biggest focus for everybody is going to be what happens in their Oracle cloud infrastructure numbers. I think last quarter investors were a little disappointed by the growth rata that and the company came out and said, well, listen, we don't have a problem with demand. The issue we are having is we don't
have that much capacity to run that demand. Whether it's in the reason, could be the data center expansion is a bit slow, or they don't have enough chips from Nvidia to run those workloads. So I think then everything is going to rotate around what's the capacity right now for them to run that work But other than that, I think it should be a normal quarter for them. I'm not expecting any major surprises other than the topic we discussed.
Well, you said that supply not demand may be an issue. Does that mean also businesses are still spending, still growing.
Yeah, it's a very good question. I think by and large, businesses are stabilized in the downdraft of it spending that has been going on for two years, which means it's not getting worse, but it's also not getting faster at a quicker rate. The one area that's not you know, in that bucket is anything that's spent on AI. So they are spending a lot on AI, but they may not be spending on other areas such as you know,
sales automation or marketing, advertising, et cetera. Those software products, but as far as AI products are concerned, there is a pickup and spending.
Well, a lot to look forward to and our thanks to Bloomberg Intelligence technology analyst anurag Rana, and coming up on Bloomberg day Break weekend, we'll dig into the challenges facing commercial and residential real estate ahead of a major conference on the French Riviera. I'm Tom Busby and this is Bloomberg. This is Bloomberg day Break weekend, our global look ahead at the top stories for investors in the
coming week. Tom Busby in New York. Up later in the program will look ahead to earnings from a couple of key tech manufacturers in Asia. But first, the real estate world, both commercial and residential, has been struggling under the weight of high interest rates, and the cracks are seeping into the financial world as well. Flexible working has changed demand for offices, while many European countries are struggling
with a shortage of housing. All these issues and more will be in focus at a major real estate conference on the French Riviera in the coming days. For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Stephen Carroll tom.
It's a subject that has huge political and economic importance real estate. High interest rates have created cracks in the commercial property market that are now rippling into the financial world. Home Buyers are also dealing with higher borrowing costs, while at the same time facing a shortage of housing In many major cities in the UK. The latest data from morgus Lander Halifax shows a continuing small rebound in house
prices despite higher rates. We spoke to Kim Kenny heard from Halifax about the risks that she sees in the market this year.
I think mortgage rates clearly are focusing everybody's minds. We've seen real volatility in them, and we saw significant rate increases over the course of last year. We're starting to see that ease now and as we've said, there's bier confidence beginning to return. I think I would say, you know, more broadly, it's just we still remain in a fairly uncertain economic climate, so I think there are lots of
things that we need to be thoughtful about. At the moment, we're seeing really good wage inflation, we're seeing low unemployment rates, and those are good indicators for us in terms of the long term performance of the market. But I think we've learnt over the last eighteen months or so that there is still uncertainty in the marketplace. So do you see the instability for the housing market in the next few months?
Is that the prediction to the end of the year.
As we're kind of facing into this year, I think, as we said, we think that house prices could by up to two percent. But clearly what we have seen in the last five months is consecutive growth, so that should be seen as a real positive and we hope that continues to grow and also that we can teach to see stability.
So that's Kim Kennyhard from Halifax on the situation in the UK for home buyers from an investor's point of view. We've also been speaking to Michelle Scriminger, who is CEO of Legal and General Investment Management. She's been talking to us about the opportunities in the drive to build more homes in the UK, particularly affordable homes.
We operate in different sectors of the market, so we are a house builder. We operate in the build to rent sector, we operate in the affordable homes sector. We also invest into commercial real estates on behalf of multiple investors. We also learned as part of what we do here in the UK. We're not just doing it in the UK. But I think what we definitely see is continuing to
see opportunity and that for us is super important. And as the regulations are changing, so Solignty two is a very big thing for Legal in general, and the ability for us to be able to deploy more capital we want to unlock the capital to invest means that we're going to be continuing to do that around the UK. So we think there is opportunity. Of course, the rates
environment is it part of that. So you know, as rates become more stable then I think that does start to make people more confident and let's point to that as a point of resilience here for the UK on which we can leverage. But individuals are still being impacted by those high rates in terms of mortgages and fixed rate mortgages are a challenge, so that there is a balance, but longer term we do see a lot of potential here.
That was Michelle Scomjo, CEO of Legal and General Investment Management, speaking to Bloomberg's Caroline Hepger that all of these issues are in focus at the MIP and real Estate conference that's happening in can on the French Riviera in the coming days. Our real estate reporter Jack Sitters will be there and he's been telling us about the big subjects up for a discussion.
I'm fascinated to get out there because I guess if we wind back twelve months, I was there in can and at the start of the week, Silicon Valley Bank had just gone, and I was anticipating, you know, talking to investors about that all week, And by the end of the week, Credits Fist has gone as well, and so it was just it was incredibly chaotic, but also incredibly interesting revealing to be there with all those investors and get to see the wides of people's eyes and
sit down with them as this madness was unfolding. Here we are twelve months later, and although that US regional banking situation has maybe calmed down somewhat or bit we'll see what happens with New York Community Bank or but the issues haven't gone away for real estate, and if anything, they'd come to the form more. It's such a slow moving asset class. Prices take a long time to correct.
That means issues with over indebtedness take a long time to emerge, and then banks maybe take even longer to actually do something about it. What are the issues, Well, it's how much distress is really out there, how a lender's going to respond, how tough are they going to get with borrowers? What's that going to mean in terms of forced asset sales? You know, are we seeing funds that are under pressure with people trying to pull their
money out. So I'm anticipating, you know, the mood is likely to be as dour as real estate ever gets because I'm yet to meet anyone who property yeah, who isn't an internal optimist. So I'm definitely sure every broker I meet will tell me that we're right around the corner for good times and that you know, the market's going to bounce back, And to be fair to them, there is a good argument that maybe people like me will be focusing on some of the more painful distressed elements.
That there's definitely this sense that with interest rates having peaked and cuts on the way, that there could be quite a big bounce back. So for those with capital to deploy, you know, they'll be out there looking to do deals they'll be excited to start deploying that capital.
Because prices have come When you think about commercial estate, prices have come down significantly. I mean, where where are the bargains to be found for those.
That do have the money?
Yeah?
Absolutely, Well, I guess it's a global event, but I guess it's dominated by by European investors. So if we if talking about Europe, the UK is probably corrected the most and the most quickly, which is what we normally see, and it's to do with sort of nuances around valuation approaches and whatnot. So you know, London, for example, prices have come down sharply and the issue really is about
availability that that bid ask spread has narrowed. What what often happens at the start of a correction as you just get this huge bid ask spread. As you know, nobody wants to sell at a discount. They've got their sort of backward looking book valuations, but buyers want to pay a price that reflects where the risk free rate is now. Anyway, that process has sort of been unfolding in the UK for the last well almost two years now. So yeah, so the conditions are there potentially for a
bit of a bounce back in terms of activity. Debts may be a little bit more available than it was, it's a little bit less costly than it was, so it can be a creative for some buyers. And that's you know, that's so important in real estate. If we look across other markets, I'd say Germany is probably the other end, and that's the other really big market in Europe that is at the other end of the spectrum. It things are still really great, see their huge gap
between buyers and sellers. But we are seeing you know, more insolvencies, there more administrations and that will inevitably force transactions.
Does that mean that we will actually see more deals activity? Are we picking up off a base there?
Yeah?
Off a base is the phrase.
It's the space if you keep looking down.
Yeah.
I mean we're talking about in almost every market at least the lowest transaction volumes since the global financial crisis. I mean, I think actually London recorded one quarter that was the lowest since about two thousand, So you know, it did get really quite extreme in the sort of aftermath of Russia Ukraine and as they say that bit are spread opening. But yes, it is coming back. We've seen volumes increase sort of quarter on quarter over the
last few quarters. And again, you know, it's you always have to take a pinch of salt with the brokers who you know, whose bread and butter is transactions. They need those deals to make their fees. But if you talk to them, they and they are the closest to the market, they will tell you that, yes, it's going to be a quiet first half, but they can see the conditions there and their report boughting on potential sales.
They try to persuade investors to come to market for the second half of the year and they see a bounce back there.
Okay, so you're expecting a strong sales pitch at this event as ever. Yeah, and what about the question of demand post pandemic. We're shifting into sort of what looks like a more stable dynamic in terms of flexible working. When we think about demand for officers, how much is that playing into the picture given the kind of weak financial backdrop.
It's a huge question for real estate, you know, offices being the biggest sort of asset class within commercial real estate.
If you look at what happened to retail, which you know, probably twenty years ago, used to be the sort of glamour sector within commercial real estate, these huge shopping centers worth you know, potentially multi billions, totally upended by e commerce, huge amount of value destruction that's actually now finally found a floor, and you know, these those things as trading very cheaply, but at least the rents have kind of
hit a bottom and they're starting to grow again. All sorts of concern about you know, we are we on the same journey now with office having been sort of disrupted by well, initially by we working before the pandemic in the way that we work and what people expect from an office, and then accelerated by the pandemic. I think, as ever, with these things, there's a lot of nuance required, the sense that you know, the good quality stuff in
the best locations, the greenest stuff. There's still going to be a lot of demand for that, and actually there's more demand than there is availability because there hasn't been enough of it built. And I think that'll be another big theme at miip HIM, like the lack of construction
that's been going on. But yeah, the older stuff, you know, your regional office buildings, your suburban office buildings, especially those that you know, maybe aren't the greenest, they probably don't have a viable future as an office, and then you're starting to think about, well do the economics actually work to turn them into something else? So these things just need to get bulldozed.
Yeah, the couple of interesting points there. I mean that idea of making buildings greener essentially more energy Fishing is another big challenge facing the sector too, because there are building regulations that are affecting how the future life and also how the new projects are going to be shaped.
Yeah.
Absolutely, and and again that'll be a big theme at mip HIM. It's an interesting event because it always attracts a lot of politicians, a lot of policymakers, and to some degree they are not necessarily the main event. The reason everybody goes there isn't the thing works, is because
it attracts the investors. So you've got all the biggest sovereigns will be there, all the biggest private equity firms, and if they're there, then their brokers are there, their bankers are there, and then the developers are there, and you know there's this ecosystem, this chain, and the politicians as well. They're there because they want to attract these
people to come and invest in their cities. This time there may be to a greater extent some of the investors listening quite carefully to what the policymakers have got to say around some of these sustainability issues, because it is going to be potentially a huge influence on you know, things like that office market. How stringent are these rules going to be in you know, in the UK they just talk of offices not being allowed to be rented out unless they're what's called EPC A or B by
twenty thirty. You know, you're talking about the majority of the office market being illegal to rent in six years time if that were to actually come in, So they will have a huge impact on the market. So I think there'll be maybe a bit more of a two way dialogue. It sometimes is.
What about the question of housing? Of course, not as much of concern around building as there is around commercial real estate, but still a sector that there's a lot of political and policy kind of perspectives We had.
On Yeah, absolutely, and you know, someone who's been going to mip him for ten fifteen years now, it's interesting how much more prominent housing is at the event. It's a huge part of it now, and I guess there's a couple of dynamics there. One, you've got the fact that really across Europe there's almost no city that doesn't have a shortage of good quality housing, and they're all
grappling with it in different ways. Some places it's planning, some places it's rent control that are barriers, and so that's lots of issues there to be grappled with by policymakers and by potential investors. The other thing is that you know, we talked about the kind of obsolescence in
shopping centers and maybe what's happening now to offices. What you've seen investors do is that money that maybe they used to invest in retail or they used to invest in offices, and now increasingly they want to invest it in living very broad so that can be rental apartments, it can be senior housing, nursing homes, whatever you like,
but living broadly. The difficulty that they have is actually deploying that capital because there isn't the existing stock to go and buy it and building it is very difficult because the rules wherever you look in Europe are complicated and they make it hard. So again that's a huge focus. All this money that wants to get into European housing of various forms, but so many barriers to it.
Thanks to Bloomberg's real estate reporter jacket sitters. I'm Stephen Caroll in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe, but getting at six am in London and.
One am on Wall Streets. Tom, Thank you, Steven. And coming up on Bloomberg day Break weekend and look ahead to earnings from a couple of key technology manufacturers in Asian I'm Tom Busby, and this is Bloomberg. I'm Tom Busby in New York with your global look ahead at the top stories for investors in the coming week. This week, two big companies will be reporting earnings. We'll take a look at how the EV market is performing through the
lens of previewing battery maker Catl's earnings. But first we'll talk about one of the major Apple suppliers, Han Hi, also known as Fox KHN. For more, let's get to Bloomberg day Break Asia co host Doug Krisner.
Tom.
In the coming week, we'll get fourth quarter earnings from the world's largest contract electronics maker, Han high precision industry. This company is known internationally as fox KHN. It's a major assembler of iPhones and other Apple devices. In fact, Fox Cohn gets more than half its revenue from Apple. To help us preview the Fox Cohn earnings, I'm joined from Taipei by Jane Lanhi Lee, Bloomberg Tech reporter. Jane,
thanks for being with us. So we know already that fourth quarter revenue was down by nearly five and a half percent. And I saw that figure and I'm wondering how much of it reflects the challenges that Apple is faced.
Oh, it absolutely reflects Apple's challenges. Fox Con makes about seventy percent of the iPhones for Apple. A lot of that is manufactured in China, and if China sales aren't doing well for Apple, then that'll reflect immediately for fox
Con as well. And the problem we're going to see going forward is that Apple iPhone sales we reported last week dropped twenty four percent in the first six weeks of this year, and that's according to Counterpoint Research, and that already puts Apple behind Vivo, that's the number one
selling brand in the first six weeks of this year. Huawei, which is considered China's tech champion, and they came out with a new phone, the May sixty pro late last year, and that has been selling gangbusters because there's a wave of patriotic buying. And then Honor, which is Huawei's previous brand, which kind of split off, and then Apple now which used to be the top selling brand in China is in fourth place. That will have an impact on fox
con sales. And during the earnings call on the fourteenth, investors and analysts are going to be focusing on outlook figures and outlooks or a color coming from the company on how much of an impact that's going to have.
So we know that Apple is facing a lot of challenges as you just said, in terms of the China market, and we know at the same time that the company is moving to try to set up manufacturing operations in India. Is this something that fox Con is involved with the Indian facilities?
Oh?
Absolutely. Fox Con has been announcing almost every week or every other week. I'm sitting here picking up announcements on the Taiwan Stock Exchange about hundreds of millions of dollars that fox Con is moving to India to get those facilities.
Going.
Bloomberg report did late last year that fox Cohn has won approval to invest up to two point six billion dollars in India. That hasn't yet shown up in a reduction of investments in China, but going forward, the percentage of Apple products that fox Con manufacturers outside of China will grow for sure.
Do you think fox Con right now is beginning to sense the need for greater diversification. I know they're involved in the production of other electronic components and the networking equipment as well. Are they moving more aggressively to try to diversify away from being so reliant on Apple?
Well?
I mean that two point six billion dollar India investment is already a clear signal that it is diversifying. Fox Con is the top electronics company in Taiwan. There are other major Taiwanese contract MANUFAC, and all of them are in fact diversifying away from China. The Taiwanese government is
supporting that as well. So there are places like in addition to India, Thailand and Vietnam, other Southeast Asian countries are seeing an influx of investments, and Bloomberg last year also sort of graft out the move of suppliers, and there's a clear increase in Apple suppliers in Southeast Asia.
Well, wasn't Fox Cohn involved in developing electric vehicles? If that's the case, are we likely to get an update on that movement sometime during the course of this analyst call on the fourteenth.
It's possible. There's a lot of interest in Fox Cohn's electric vehicle business. In fact, some analysts say Fox Cohn is trying to reposition itself as an EV company going forward as it diversifies away from just being the iPhone maker. But you know, the iPhone still make up for a big chunk of its sales and EV really it's in its infancy and there have been several missteps in the last year or two as it tried to get its
EV business going. So that's still a big question mark and we'll have to see this year if it gets any big business. I'm keeping an eye on the US to see if there are any US brands that might decide to manufacture evs with fox Conn. Investors will definitely be looking out for that.
Jane, thank you so much for helping us preview their earnings from Fox Cohn. Jane Lonhie Lee is Bloomberg Tech reporter joining from TYPEI. Now let's get to the other co host of Daybreak Asia, Brian Curtis.
Doug Contemporary Amparex Technology or CATL, is set to deliver fourth quarter results in the coming week. Bloomberg Intelligence expects to see solid revenues and cost control at the battery maker, and it says that will offset lower battery price and the slowing Chinese economy. Putting it all together, BI suggests that the company will deliver resilient results. Now, of course, when we look at catl's business, a lot of other
issues come to mind. The health of the EV industry in China, stiff competition among EV makers, there US China relations, EU China relations, carbon reduction targets, as well as industrial overcapacity in China, and even mandates for the use of electric heavy duty trucks. Well, to unpack all of this, we have Bloomberg's transport reporter Danny Lee with us here in our studios in Hong Kong. So, Danny, how is CATL managing through these many crosswinds that we have at the moment in China.
Well, what we're going to see in its upcoming fourth quarter full year results is not just resilient sets of results, but one that could also be a record on the net income line. Particularly when it comes to the full year, it's very robust, as they have before the gain from the benefits of the past three quarters, but even on the fourth quarter, at the final quarter of the it's looking very very strong and they've given a wide margin
for potentially what could be a record quarter ultimately. And so despite the falling prices of lithium and nickel, for example, these raw material prices actually are a good thing for someone like CATL as they can become even more price competitive on its batteries and also just to sell at much lower price and.
Not only a leader in China, but maintaining a top position really in the global market. In the month of January. Just looking over some research from sn Research out of South Korea, CATL with roughly forty percent share of the worldwide battery market in January. It supplies automakers like Tesla, BMW, Mercedes, Benz and Volkswagen. The number two is BYD. It's a
big competitor and obviously a big make of evs. But let's talk about catl's position vis a v competitors and whether or not we might seach some sort of consolidation coming.
There is a question and that always has been in the recent years over consolidation not just amongst battery makers, but even across the auto space, across the whole brands which have launched running out of money. But when it comes to the battery space, you see this concentration even amongst the top two c ATO and BYD, and therefore it's very hard for other suppliers to really gain ground,
gain market share. And so when you have someone who's financially strong and as robust as c ATO in particular, they can use their financial muscle to squeeze margins and squeeze suppliers on costs and also just to get that edge over other smaller supplies who cannot be as financially flex as c ATL.
Is it generally considered to be a really well managed company.
It is, indeed, and when you look at what it has been doing to lay the groundwork, it has made long term bets, even during this period of instability and weakness in the EV market where clearly not many people are confident about the near term demand. But Ultimately, they've made bets, they've invested, and they've put themselves in a position where they've conquered China, just like byd has in the battery space for cars. They are now pushing very
much abroad. But clearly there are headwinds when it comes to its reputation and how it's perceived and how it wants to be a supplier across the world.
It does actually seem Danny that the glide path for c ATL globally, while as you said, fraught with some difficulties over geopolitics, so it's pretty good because the pricing is not quite so competitive elsewhere as.
It is in China, right, Yeah, absolutely, I mean with China and with someone like c ATL, they really have a lot of advantages when it comes to being able to sell batteries at much lower prices, and thanks to the falling prices of raw materials, they can continue to
lower its prices. And when you do have other battery players around the world who are still just starting up or they've still got higher costs that they need to factor in, so there's not a lot of room to maneuver for competitors, and for someone like c ATL, this is their moment to say going for the kill rather, but they really are able to show their dominance and show not just their dominance, but how good their products are, because what we have seen over the past couple of
years is then putting out even better performing products, which whether they be faster charging or have longer range, these are things which gives them an edge on all fronts frankly compared to its piers.
So you talked about the input materials being down and that leads to the ability to lower battery prices. What are some of the key factors behind this fall in battery price?
It is a good question, and I think it's just we've seen with the speculation and the rush for these raw materials over the years, it has really helped push up prices. And again when you see the concern about the long term supply that's all being locked into over recent years, that has helped push up prices. And we've seen the general demand for electric vehicles come down and so therefore naturally prices for the raw materials that also
coming down. But we haven't really seen a flaw yet in the price, you know, pulling back from near record levels. But ultimately what we are seeing is the supply chain for evs being laid out nicely, and we are seeing more sales. Still growth, but maybe not as good as it once was, but we are least seeing a normalization, which is I guess good for everyone from companies to consumers.
All Right, Danny, thanks so much for joining us. Bloomberg's transport reporter Danny Lee with us here in our Hong Kong studios. I'm Brian Curtis along with Doug Krisner. You can catch us every weekday here for Bloomberg day Break Asia, beginning at eight am in Hong Kong and eight pm on Wall Street.
Tom, thank you, Brian. That does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Buzzby. Stay with us. Top stories and global business headlines are coming up right now.