Why One Of The Least Developed Countries In The World Is Going Crazy For Electric Cars

A common concern when it comes to electrification is how electric vehicles will work in countries with less-developed electrical grids. Nepal, nestled against the Himalayas, is considered to be one of the least developed countries in the world. Yet, EV sales are booming in the country. What’s going on is fascinating.

Can we be hopeful today? Let’s be a little hopeful. Let’s celebrate life. May car sales were about as good as they’ve been in the last year as leasing makes a comeback. Is this a blip or are people finally, begrudgingly coming off the sidelines?

Japanese banks are starting to unwind their cross-held shares, especially in Toyota. This is a good thing for smaller investors and consumers. And, finally, we’re gonna celebrate the life of Parnelli Jones, an amazing driver and one tough sumbitch.

Nepal Is A Best Case Scenario For Electrification

Earlier this year we ran a story from a Tesla owner who drove through Nepal, the developing country wedged in between Tibet/China to the north along the Himalayan mountains and India to the south. A mountainous country that qualifies for “least developed” status from the United Nations seems like an unlikely place for electric cars to take off.

There are numerous studies pointing to issues that developing countries have with regard to electrifying their fleets, and about 95% of electric vehicle sales are concentrated in China, Europe, and the United States.

Nepal, a relatively poor and landlocked country with few accessible petroleum resources, would seemingly be a worst-case scenario for EVs. In addition to having Mt. Everest, Nepal is home to incredibly poor air. The World Health Organization says that the air quality in Nepal is 4.9 times worse than what is considered safe, and the WHO also estimates that air pollution is the leading risk factor death or disability in the country.

And, yet, electric cars are selling at a fast clip, recently accounting for one-third of sales in the country (as estimated by value). How?

This is where painting all nations with a single broad brush fails to capture local realities. While the cold and remote mountainous regions of the country might not be ideal for owning a Tesla, the country’s largest population center is the Kathmandu Valley, which has a temperate climate and high population density.

The topography is a boon when it comes to temperatures being ideal for electric cars, but the flip side is that it’s a trap for air pollution from combustion-powered vehicles. The natural geography of the country does provide one big aid when it comes to electrification, as the Associated Press reports:

Nearly all of the electricity produced in Nepal is clean energy, most of it generated by river-fed hydro-electricity. Thanks to that abundant source of power, the country is quickly expanding charging networks and imports of EVs have doubled in each of the past two years, according to customs data.

Nepal has rapidly expanded its hydroelectric power generation capability and extended the grid to more communities, reducing the need for the imported oil it mostly relies on for fueling its fleets. The country is also using import duties to make EVs more attractive, lowering them from 25%-90%, compared to 276% to 329% on traditional ICE vehicles.

EV enthusiasts also include drivers of small public vans who make their living ferrying passengers around the city and beyond.

“It is very easy to drive, there is no pollution, and it’s good for the environment. Not only that, it’s good for the country as the nation’s money does not go to foreign land to buy oil. There are benefits all round,” said Bhakta Kumar Gupta, who has drives people from Kathmandu to southern Nepal and back every day.

Given where it’s located, the market is currently dominated by China’s BYD and India’s Tata.

May Sees SAAR Above 16 Million

The seasonally adjusted annual rate (SAAR) is the best rolling measure of car sales as it adjusts for, well, seasonality. I put my marker down for car sales of 16 million in 2024 and the market has been slightly under that pace for most of the year.

Thankfully for me, May was a little better and SAAR crested above 16 million to 16.08 million, which we’ll just round up to 16.1 million. What’s going on? Obviously, an increase in inventory has resulted in an increase in incentives and more flexible financing from automakers is helping.

Another big factor, as Automotive News points out in its market wrap-up, is that we’re three years out from when the supply chain crisis hit, so there are still a bunch of active leases that are coming to maturity (though that’s going away).

But I want to focus on this quote from Edmunds analyst/pal Jessica Caldwell:

“What we’re seeing is trade-ins that are older than they have been for the last two years, which means that consumers are getting to the point where they have to come in and bring in their cars on trade,” said Jessica Caldwell, director of insights at Edmunds. “I think people are realizing that it doesn’t look like [affordability] is going to magically get better in two months’ time, so if they’ve got good credit and can afford a new car, they’re ready to buy.”

Even with the average age of cars increasing, most people aren’t going to hold onto their daily drivers forever. This also hits home as I’m kind of in this space. I’ve got good credit, I can afford a new car, and I’m obviously over my current car as little stuff starts to lose functionality.

I was expecting to hold onto my daily driver for a couple more years because it’s nice to not have a car payment, but my Forester still has a decent amount of its original value and I think I can get a good price for it. Also, I know a guy who sells cars, so I think I can get a deal. Plus, I have a big service and a new two-year registration coming up, so I can save $500-800 just by selling now.

Next month we get sales data from the automakers reporting only on a quarterly basis, so we’ll see where we are halfway through the year.

Japanese Banks Unwinding Cross-Held Shares In Toyota

Here’s a fun bit of economic history. Post-war Japan created enormous value through giant successful companies like Toyota, Sony, Panasonic, and Studio Ghibli. Not all of this value creation was captured by small investors as Japanese companies, and especially banks, engaged in a process of cross-holding shares.

This means that if big bank Sumitomo Mitsui does business with Toyota, then Toyota will buy some shares in Sumitomo Mitsui and Sumitomo Mitsui will hold shares in Toyota, which also holds shares in its supplier DENSO, which also holds shares in Toyota.

There are a lot of reasons why cross-holding shares is a bad idea, as it elevates a small group of executives above regular investors and makes it harder to hold them accountable, which is bad for corporate governance. Cross-held shares have also led to price-fixing, which is bad for consumers.

The Japanese government has pushed hard to end this practice, resulting in the announcement this week that massive banks Mitsubishi and Sumitomo Mitsui divesting about $8.5 billion in Toyota stock. They aren’t the only ones. That DENSO thing wasn’t really hypothetical:

Toyota is also unwinding cross-shareholdings within its network of manufacturing partners. In November, the carmaker announced plans to lower its stake in electric parts maker Denso Corp. to 20% from 24%. Prior to that, Toyota committed to selling some of its stake in telecommunications company KDDI Corp. for ¥250 billion. While the sales serve the purpose of freeing up money that can be used to fund Toyota’s shift to electric vehicles, they also be used toward buybacks.

The unwinding of cross-shareholdings “means gradually turning them into viable assets,” Masahiro Yamamoto, chief officer of Toyota’s accounting group, said at the company’s results briefing in May.

Unsurprisingly, the Nikkei has done quite well since cross-held shares have started to go away.

RIP Parnelli Jones

https://www.instagram.com/p/C74oKWSvIUc/?hl=en&img_index=6

I was sad to hear of the passing of the legendary racer Parnelli Jones earlier this week. If you watched pretty much any kind of racing in the second half of the 20th century in the United States then you’ve heard his name.

There are some racers who are specialists and become famous for winning often at one kind of racing. Then there are drivers like Parnelli Jones, who managed to win in just about everything he drove. Jones nearly won the Indy 500 on his first try and then won a couple more as a driver, followed by wins as a team owner. He won a bunch of NASCAR races, was Trans-Am Champion during the most competitive classic years of that series, won his class at Pikes Peak, and also won the Baja 1000 twice.

I love this quote captured in the New York Times obit:

Jones was once asked if there had ever been anyone better than him.

“I don’t think so,” he told Car and Driver magazine in 2013. “You can teach somebody how to drive, but you can’t teach them that will and desire and kick-butt attitude.”

RIP to a real one.

What I’m Listening To While Writing TMD

You know it was coming. The new Charli xcx album is out and it’s a big departure from her last album, “Crash.” It’s a bit more Sophie, a bit more hyperpop, a little smaller, and a little faster. AG Cook is back. I’m digging it.

The Big Question

Who is the GOAT when it comes to racing? Who is the best to ever do it?