Tag Archives: Sources
SAN FRANCISCO (Reuters) – When Tesla Inc announced last month a second round of job cuts to rein in costs, one crucial department was particularly badly hit. The automaker more than halved the division that delivers its electric vehicles to North American customers, two of the laid-off workers said.
FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song/File Photo
Some 150 employees out of a team of about 230 were let go in January at the Las Vegas facility that gets tens of thousands of Model 3s into the hands of U.S. and Canadian buyers, they said, in a sign the company expected the pace of deliveries to significantly slow in the near term.
The cuts, which have not been previously reported, could fuel investor worries that demand for the Model 3 in the United States has tailed off after a large tax break for consumers expired last year and the car remains too expensive for most consumers.
Tesla has said its focus this quarter is on supplying cars to customers waiting in China and Europe.
“There are not enough deliveries,” one of the former employees told Reuters. “You don’t need a team because there are not that many cars coming through.”
Delivery of the Model 3 was the company’s key priority in the latter half of 2018, as Tesla tried to supply all buyers wanting the full benefit of the $ 7,500 U.S. tax credit before it was cut in half at year’s end.
The Model 3 is crucial to Tesla’s plans for long-term profitability. The company aims to post a profit in each quarter this year, based on the expectation that it will sell more Model 3s and continue to cut costs.
Tesla declined to comment on the job reductions in the delivery team. The company still has an undisclosed number of delivery personnel attached to other locations.
‘EVERY BEING ON THE PLANET’
Even before the paring back of the delivery team, investors questioned the level of demand for the Model 3 remaining after Tesla’s all-out push to supply buyers ahead of the tax credit cut.
“Given the need for revenue to cover costs and generate cash, the financial community should be focused on the level of demand for Tesla vehicles – in particular the Model 3,” wrote Barclays analyst Brian Johnson in January.
The two former delivery workers said the 2018 sales push has left Tesla’s reservations list plucked clean of North American buyers willing to pay current prices of over $ 40,000 to get their hands on a Model 3.
Chief Executive Elon Musk initially said in 2016 the car would start at $ 35,000 – which sparked a rush of reservations – but Tesla has yet to actually sell any cars at that price, despite two price cuts already this year.
“We sold through just about every car we had on the ground and we called almost every being on the planet who had ever expressed desire to own a Tesla to let them know the tax credit was expiring,” said the other ex-employee.
Tesla workers around the company were reassigned to pitch in, that source said.
“They said, ‘Your job is off the table now, we have to get these cars delivered. Because if we don’t get these cars delivered, you don’t have a job tomorrow,’” the former employee said.
HALF A MILLION BUYERS
At the Model 3 launch in July 2017, Musk said over half a million buyers had put down deposits on the new car. That helped send Tesla shares up almost 15 percent over the following six weeks.
The company delivered 145,610 Model 3s in 2018, but all of them at prices far above $ 35,000. Musk said last week a $ 35,000 version that could be sold profitably was perhaps six months away. Even with two price cuts this year, the lowest price tag on a Model 3 is now $ 42,900.
Musk maintains that Model 3 demand is “insanely high,” but his company has not released any figures to demonstrate that.
Asked about the reservations list last week by analysts, outgoing Chief Financial Officer Deepak Ahuja declined to disclose how many people remained, calling it “not relevant.”
Musk has said Tesla has multiple ways of stoking demand, if it chose to, such as offering leases or boosting marketing efforts.
The Model 3s now rolling out of Tesla’s Fremont, California, factory are going to Chinese and European buyers, Tesla says.
The two laid-off employees said delivery targets for North America – made up of mostly U.S. buyers – this quarter would be 55 percent to 60 percent of what they were in the last quarter of 2018.
If Tesla does not cut prices soon, it risks losing potential customers – and ones already on its reservation list – to a slew of German and Asian competitors whose electric vehicles will hit the U.S. market this year. Each of the new entrant’s first 200,000 buyers will be eligible for a full federal subsidy.
Having met that number already, the U.S. tax credit for Tesla buyers drops in half to $ 3,750 for the first six months of 2019, then falls by half again in the second six months.
Musk said last month his “rough guess” was that Tesla would begin building the $ 35,000 Model 3 in mid-2019.
One of the sources said that could recharge U.S. demand: “If there was a Model 3 for $ 35,000 that was still a really good car, that blows away the competition, I could see demand going through the roof.”
Reporting by Alexandria Sage in San Francisco; Editing by Greg Mitchell and Bill Rigby
BERLIN (Reuters) – German ministers were due to meet on Wednesday to discuss how to safeguard security in future 5G mobile networks, two government sources said, amid intense debate over whether to shut China’s Huawei Technologies out of the market.
FILE PHOTO: A man walks by a Huawei logo at a shopping mall in Shanghai, China, Dec. 6, 2018. REUTERS/Aly Song/File Photo
Chancellor Angela Merkel has said Germany needs guarantees that Huawei would not hand data to the Chinese state before it can take part in building fifth-generation networks that would link everything from vehicles to factories at far greater speeds.
Dieter Kempf, head of the Federation of German Industry (BDI), threw his weight behind Merkel, saying that ensuring firms like Huawei meet tough security standards would be wiser than a blanket ban on China.
“It makes no sense,” Kempf told Reuters in an interview. “It would narrow the choice of vendors. That could affect costs. More importantly, there would be political consequences – China could be tempted to retaliate against German companies.”
The Handelsblatt daily cited government sources as saying the meeting would focus on whether a security catalog, drafted by the federal network regulator (BNetzA) and cybersecurity watchdog (BSI), along with certification rules and a no-spy pact with China, would be enough to make 5G safe.
Huawei, the global networks market leader with annual sales exceeding $ 100 billion, faces international scrutiny over its ties with the Chinese government and suspicion Beijing could use its technology for spying, which the company denies.
A State Department official said on Tuesday that Washington sees the European Union as its top priority in a global effort to convince allies not to buy Huawei equipment for next-generation mobile networks over espionage concerns.
The German ministers’ session, scheduled after the weekly cabinet meeting, and attended by the interior, economy, finance, and transport ministers, follows a first high-level meeting last week.
At that gathering, attended by Germany’s three network operators, market leader Deutsche Telekom proposed a series of technical and compliance measures to safeguard security.
These included setting up an independent laboratory, under BSI oversight, to scrutinize all equipment used in critical infrastructure before it is deployed in the field.
“I believe the right path would be to make sure we manage our risks when it comes to tenders,” Kempf said.
“We must convey our reservations to the Chinese side and make it clear what we will not tolerate in our legal system.”
Government and industry sources said no decision was expected on Wednesday about whether to bar Huawei from Germany’s 5G auction, which is due to be held in the second half of March.
Sources say the different stakeholders have yet to reach a consensus on what course of action to take. Nor do they agree on whether a decision is needed before the 5G auction, which would provide clarity to operators before they strike deals to upgrade their networks to ready them for the launch of 5G services.
Additional reporting by Riham Alkousaa, Nadine Schimroszik and Michael Nienaber; Writing by Michelle Martin and Douglas Busvine; Editing by Mark Potter and Kirsten Donovan
HONG KONG/BEIJING (Reuters) – The SoftBank-led Vision Fund is in talks to invest up to $ 1.5 billion in Chinese used car trading platform Guazi.com, two people with knowledge of the matter said.
That would mark the latest Chinese deal by the mammoth $ 100 billion investment fund as it looks to expand in the world’s No.2 economy, and would come after it invested 460 million euros in German used car dealing platform Auto1.
The fund is likely to invest up to $ 1.5 billion in Guazi in a deal that would value the firm at $ 8.5 billion before the investment, according to one of the sources, who had direct knowledge of the situation.
The two sources, who were not authorized to speak to media, also said the Vision Fund had in the past few months held talks with Guazi’s direct rival, Renrenche, which is backed by Chinese ride-hailing firm Didi Chuxing.
Guazi, a consumer-to-consumer used car trading platform founded in 2014, is backed by Chinese internet giant Tencent and Sequoia Capital China. Its talks with Softbank were first reported by the Financial Times late on Friday.
The Vision Fund and Renrenche declined to comment. Guazi did not respond to a request for comment. Japan’s Softbank was not immediately available for comment.
The Vision Fund, the world’s largest private equity fund after raising more than $ 93 billion in 2017, has previously made investments in firms such as ride-hailing company Uber Technologies Inc and shared-office space firm WeWork.
China’s used car market has continued to grow even as overall auto sales declined last year for the first time since the 1990s.
Used sales rose 11.5 percent in 2018 from the year before to 13.82 million vehicles. The total value of these transactions was 860.4 billion yuan ($ 127.61 billion), according to the China Automobile Dealers Association.
China’s state planner has said the country would aim to loosen restrictions on the second-hand auto market, with “appropriate” subsidies provided to boost rural sales of some vehicles.
Reporting by Julie Zhu in Hong Kong and Yilei Sun in Beijing, additional reporting by Junko Fujita in Tokyo; Editing by Joseph Radford
BRUSSELS (Reuters) – EU governments voted on Tuesday to impose duties on Chinese electric bicycles to curb cheap imports that European producers say benefit from unfair subsidies and are flooding the market, EU sources familiar with the case said.
The European Commission, which is investigating on behalf of the 28 EU members, has proposed that definitive or final tariffs of between 18.8 and 79.3 percent should apply for all e-bikes coming from China.
The anti-dumping and anti-subsidy duties are the latest in a series of EU measures against Chinese exports ranging from solar panels to steel, which have sparked strong words from Beijing.
Unlike the United States, the European Union has not launched a trade war against China, but it shares U.S. concerns about forced technology transfers and Chinese state subsidies.
The electric bicycle imports are already subject to the duties set on a provisional basis in July. Definitive duties typically apply for five years.
Taiwan’s Giant, one of the world’s largest bicyclemakers, which has factories in China as well as in the Netherlands, would be subject to a rate of 24.8 percent.
The Commission found Chinese exports of e-bikes to the European Union more than tripled from 2014 until September 2017. Their market share rose to 35 percent, while their average prices fell by 11 percent.
It has also said Chinese producers benefit from controlled aluminum prices as well as advantageous financing and land rights conditions and tax breaks.
EU producers include Dutch groups Accell and Gazelle, Romania’s Eurosport DHS and Germany’s Derby Cycle Holding.
Reporting by Philip Blenkinsop, editing by Robin Emmott
HONG KONG/SHANGHAI (Reuters) – China’s Meituan-Dianping, an online food delivery-to-ticketing services platform, is bringing its sizable initial public offering (IPO) to Hong Kong, where it aims to raise over $ 4 billion, three people with knowledge of the deal said.
The firm filed plans late on Friday for the city’s second multibillion-dollar tech float this year after smartphone maker Xiaomi Corp’s blockbuster IPO of up to $ 6.1 billion. Meituan-Dianping is also – after Xiaomi – the latest company with a dual-class share structure to file for a Hong Kong listing, under the city’s new rules designed to attract tech companies.
The Beijing-based firm, backed by gaming and social media company Tencent Holdings Ltd (0700.HK), was valued at around $ 30 billion in a fundraising round last year.
It is aiming for a $ 60 billion valuation with the IPO, though industry insiders said it may have difficulty reaching that target as it is still money-losing and relies on a cash-burning business model to boost growth.
The firm is likely to list in October, said the people, who declined to be identified as the information was not public.
Meituan-Dianping did not detail the amount of funds targeted or a time frame. It declined to comment on its planned IPO when contacted by Reuters.
Founded in 2010 by serial entrepreneur Wang Xing, Meituan, likened to U.S. discounting platform Groupon Inc (GRPN.O), in 2015 completed a $ 15 billion merger with Dianping, akin to U.S. online review firm Yelp Inc (YELP.N). It offers a broad range of services including movie ticketing, food delivery, hotel and travel booking as well as ride-hailing.
Competitors include food-delivery platform Ele.me, backed by e-commerce firm Alibaba Group Holding Ltd (BABA.N), and leading ride-hailing firm Didi Chuxing, backed by Japan’s SoftBank Group Corp (9984.T).
In its draft prospectus, which gave investors the first detailed look at its financial health ahead of the IPO, the company disclosed a 19 billion yuan ($ 2.9 billion) loss for 2017, steeper than in the previous two years.
Its adjusted net loss – which excludes the impact of fair value changes of convertible redeemable preferred shares and other items – was 2.85 billion yuan, smaller than losses of 5.35 billion yuan in 2016 and 5.91 billion yuan in 2015, the prospectus showed.
Revenue rose to 33.9 billion yuan in fiscal 2017, sharply higher than the 12.99 billion yuan made in the prior year.
Meituan-Dianping’s other backers include venture capital firms Sequoia Capital and DST Global, Singapore sovereign wealth fund GIC Pte Ltd and state-owned investment company Temasek Holdings (Private) Ltd, as well as the Canada Pension Plan Investment Board.
Currently, Chief Executive Wang Xing owns 11.4 percent of the company, while Tencent owns 20.1 percent and Sequoia Capital 11.4 percent. Wang will remain controlling shareholder after the listing, the prospectus showed.
Being holders of Class A shares, Wang and two other co-founders, Mu Rongjun and Wang Huiwen, will be beneficiaries of a weighted voting rights structure, or dual-class shares, which give greater power to founding shareholders even with minority shareholding. Each Class A share has 10 votes while each Class B share has one vote.
Reporting by Adam Jourdan in Shanghai, Julie Zhu and Fiona Lau of IFR in Hong Kong, Aaron Saldanha in Bangalore, and Matthew Miller in BeijingEditing by Christopher Cushing and Edwina Gibbs
BEIJING/SHANGHAI (Reuters) – China is yet to approve U.S. chipmaker Qualcomm Inc’s (QCOM.O) proposed $ 44 billion acquisition of NXP Semiconductors (NXPI.O), three people close to the talks said, dismissing an earlier media report that said Beijing had already greenlit the deal.
Chinese clearance would remove a long-running roadblock to the deal that has become entangled with broader trade tensions between the United States and China. The acquisition has already got a nod from eight of the nine required global regulators, with China being the only hold-out.
Hong Kong-based South China Morning Post reported on Friday morning that China had given its go-ahead to the deal, citing people with knowledge of the matter, driving up shares of the U.S. firm in extended trade.
But Reuters sources, who are close to the Qualcomm-NXP deal, said they were not aware of any Chinese approval. One of them said planned U.S. tariffs on Chinese goods expected to be unveiled later in the day could impact the process.
Qualcomm did not have an immediate comment on Friday, while NXP did not respond to a request for comment.
China’s State Administration for Market Regulation, the regulator which reviews merger deals, did not immediately respond to a faxed request for comment.
Qualcomm met with regulators in Beijing last month in a bid to secure a clearance, but sources at the time said an approval would depend on the progress of broader bilateral talks and the U.S. government lifting a crippling supplier ban on telecoms equipment maker ZTE Corp (000063.SZ)(0763.HK).
Washington and Beijing have struck a deal to help ZTE back into business. However, trade talks remain in the balance with U.S. President Donald Trump expected to unveil “pretty significant” tariffs on Chinese goods on Friday.
Analysts said a Chinese approval would be significant as it would remove the last major barrier to the NXP deal, which is seen as key for Qualcomm to diversify its business and make a push into new areas like smart cars.
Qualcomm initially announced its bid for Dutch semiconductor company NXP in October 2016.
Reporting by Michael Martina and Matthew Miller in BEIJING, Adam Jourdan in SHANGHAI and Nikhil Subba in BENGALURU; Editing by James Dalgleish, Grant McCool and Himani Sarkar
BEIJING (Reuters) – Washington and Beijing are nearing a deal that would remove an existing U.S. order banning American firms from supplying Chinese telecommunications firm ZTE Corp, two people briefed on the talks told Reuters.
The people, who declined to be identified because the negotiations were confidential, also said the deal could include China removing tariffs on imported U.S. agricultural products, as well as buying more American farm goods.
ZTE, hit by a seven-year ban in April which effectively crippled its operations, would gain a major reprieve after the world’s two largest economies stepped back from the brink of a fully blown trade war following talks last week.
The company did not immediately reply to requests for comment.
White House advisors have said publicly that the ban against ZTE is being reexamined, but that the firm would still face “harsh” punishment, including enforced changes of management and at board level.
One person told Reuters there was a “handshake deal” on ZTE between U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He during talks in Washington last week that would remove the U.S. Commerce Department’s ban on American companies selling to ZTE in exchange for the purchase of more U.S. agricultural products.
The second person said China may also eliminate tariffs on U.S. agriculture products it assessed in response to U.S. steel duties as a part of the deal, and that ZTE could still be forced to replace its corporate leadership, among other penalties.
Both sources said the deal, while not yet cemented, was likely to be finalised before or during a planned trip by U.S. Commerce Secretary Wilbur Ross to Beijing next week to help finalize a broader trade agreement to avert a trade war.
The company, publicly traded but whose largest shareholder is a Chinese state-owned enterprise, had been hit with penalties for breaking a 2017 agreement after it was caught illegally shipping U.S. goods to Iran and North Korea, in an investigation dating to the Obama administration.
Reporting by Michael Martina; Additional reporting by Se Young Lee and Adam Jourdan; Editing by Muralikumar Anantharaman
NEW YORK/LONDON (Reuters) – Federal prosecutors in New York have been investigating since at least last year whether Chinese tech company Huawei Technologies Co Ltd [HWT.UL] violated U.S. sanctions in relation to Iran, according to sources familiar with situation.
The prosecutors have been investigating alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said on condition of anonymity.
The probe, first reported by the Wall Street Journal on Wednesday, is being run out of the U.S. Attorney’s office in Brooklyn, the sources said. John Marzulli, a spokesman for the prosecutor’s office, would neither confirm nor deny the existence of the investigation.
The Department of Justice in Washington declined to comment.
Huawei, which makes handsets and telecommunications network equipment, said it complies with “all applicable laws and regulations where it operates, including the applicable export control and sanction laws and regulations of the UN, US and EU.”
News of the Justice Department probe follows a series of U.S. actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp (000063.SZ) to the U.S. economy amid allegations the companies could be using their technology to spy on Americans.
In February, Senator Richard Burr, the Republican chairman of the U.S. Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called “counterintelligence and information security risks that come prepackaged with the goods and services of certain overseas vendors.”
Republican Senators Marco Rubio and Tom Cotton have introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or ZTE, citing concern the Chinese companies would use their access to spy on U.S. officials.
U.S. authorities last week banned American companies from selling to ZTE (000063.SZ) for seven years, saying the Chinese company had broken a settlement agreement related to Iran sanctions with repeated false statements – a move that threatens to cut off ZTE’s supply chain.
The ZTE ban was the result of its failure to comply with an agreement with the U.S. Commerce Department reached last year after it pleaded guilty in federal court to conspiring to violate U.S. sanctions by illegally shipping U.S. goods and technology to Iran.
In 2016, the Commerce Department made documents public that showed ZTE’s misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.
In a 2016 letter to the Commerce Department, 10 U.S. lawmakers said they believed F7 to be Huawei, citing media reports.
In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.
Reporting by Arjun Panchadar in Bengaluru, Karen Freifeld in New York, Eric Auchard in London; Editing by Frances Kerry and Paul Simao
MILAN (Reuters) – Italian state lender CDP intends to buy shares in Telecom Italia (TIM) on the market or in block orders, a source told Reuters on Thursday.
CDP, which is controlled by Italy’s Treasury, does not currently hold any shares in TIM, the source, who is close to the matter, added.
The decision on the share acquisition, including its size, will be taken at CDP’s board meeting on Thursday.
Reporting by Stefano Bernabei, writing by Giulia Segreti; Editing by Kim Coghill
(Reuters) – Cloud storage company Dropbox Inc’s [DBX.O] initial public offering was oversubscribed, two people familiar with the matter said on Monday, indicating healthy demand for the first big tech IPO this year even as tech stocks opened the week on sour note.
While investor appetite looked encouraging with three days to go before final pricing, it was not clear if that would be strong enough to lift the deal above of the initial range of $ 16 to $ 18 a share that Dropbox set last week. The offering is expected to price Thursday, and the stock will start trading on the Nasdaq on Friday.
“It is early to predict the pricing. But what I can say is that from the conversations it seems the market is interested in it and IPO seems to be bright,” a separate source told Reuters. The three sources asked not to be named as the IPO pricing process was still underway.
Dropbox’s IPO comes in what is sizing up to be a challenging week for stocks, with the U.S. Federal Reserve set to raise interest rates on Wednesday, a day before the Dropbox deal is set to close.
Tech shares also fell hard to open the week, with Nasdaq down more than 2 percent on reports of Facebook Inc’s (FB.O) latest data privacy problems.
Dropbox’s IPO also comes on the heels of an upsized deal last week from cyber security firm Zscaler Inc (ZS.O) and is being watched as a barometer of investor enthusiasm for tech unicorns – young companies valued at more than $ 1 billion – after Snapchat owner Snap Inc’s (SNAP.N) shares cratered following a much-touted IPO a year ago.
Dropbox is selling 36 million shares, and the offering could be increased by 5.4 million if underwriters exercise their right to buy more stock. At the high end of the indicated pricing, it could raise nearly $ 650 million, making it the largest tech IPO since Snap hit the market just over a year ago.
The current price range suggests the San Francisco company, co-founded in 2007 by Andrew Houston and Arash Ferdowsi, will hit the public market valued at roughly $ 7 billion, a hefty discount to the $ 10 billion implied by its last funding round in 2014.
Reporting by Sweta Singh, Nikhil Subba and Diptendu Lahiri in Bengaluru, Editing by Dan Burns and Saumyadeb Chakrabarty