Tesla Ditches Status Symbol Pricing

Plus: Gibraltar drops a rock of regulation on crypto traders. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

April 26, 2023

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TOGETHER WITH

Good morning.

It’s not often that we get to type this, but there’s good news from the FDA!

On Tuesday, the US Food and Drug Administration granted accelerated approval for tofersen, a new drug from Biogen that was developed to treat a rare and aggressive form of ALS. The medication works by attacking a specific protein that, when it reaches toxic levels in the body, causes severe neurological damage common with Lou Gehrig’s disease. After 52 weeks, patients on tofersen experienced increased muscle strength and respiratory function, showing success in breaking down the protein and giving new hope to the roughly 18,000 Americans suffering from ALS.

Morning Brief

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The cost of a Tesla Model Y just got way lower.

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Consumer annoyances turn high-stakes for tech giants.

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Gibraltar’s crypto kibosh.

EVs

Tesla Wants to Start an EV Price War

First, Elon Musk offered the coveted blue checkmark to the masses, now he’s basically handing out Tesla Model Ys.

The leading electric vehicle company is slashing the price of its baseline SUV to below the average price of a new vehicle. It’s the latest shakeup in the EV race and a signal that Musk is going for downmarket share.

Pricing Grand Prix

The Model Y — a crossover SUV — led all EVs in domestic sales last year, moving some 243,000 units to customers (in second place was Tesla’s Model 3, at roughly 200,000, while Ford’s Mustang Mach-E and the Chevy Bolt came in a distant third and fourth at roughly 39,000 a piece). In what can only be described as an electric U-turn, Tesla is making one of the most dramatic price cuts on a mass-produced vehicle in modern history. The Model Y’s cheapest tier will now retail for $46,990, down from $52,630, some $759 less than the average US price of a car or truck. Just last summer, the Model Y cost nearly $20,000 more than the average automobile.

The price slash coincides with Tesla’s first-quarter earnings report, which revealed that gross profit margins, excluding regulatory credits, had fallen from around 21% in the quarter to below 16%. Musk told investors the company is “pushing for higher volumes and a larger fleet… versus a lower volume and higher margin.”

Analysts aren’t in love with the move — Wedbush Securities analyst Dan Ives wrote in a note last week that “margins are now a delicate issue that are keeping Tesla investors up at night” — though the US price changes appear in line with the company’s global strategy. Now, there’s something of a price war brewing:

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After Tesla lowered prices in Europe, Renault’s CEO last week told reporters that the cuts present “a challenge” and that the company is now “analyzing [its] positioning market by market.”

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Ford CEO Jim Farley, meanwhile, said last week that Tesla’s price reductions are “completely rational,” and added “Price wars are breaking out everywhere. Who’s going to blink for growth?”

It appears the first EV maker to blink was General Motors, which announced during its first-quarter earnings report on Tuesday that it would end production of its mass-market Chevrolet Bolt by the end of the year. GM will pivot its focus to producing electric Chevy Silverado and GMC Sierra trucks before sunsetting the Bolt, which was the cheapest EV on the market.

Made in China: Fittingly, sources told Reuters on Monday that Tesla is preparing to sell Model Ys produced in its Shanghai factory to Canadian customers later this year — marking the first time the EV kings will ship cars from China to North America. The Shanghai plant is Tesla’s most cost-efficient. Between cheaper production and less competition, no wonder Elon is moving to make Tesla Model Ys the Ford Focuses of EVs.

– Brian Boyle

Tech

New UK Bill Penalizes Tech Giants For Annoying Consumers

If you’ve ever seen a big charge on your card statement for a trial subscription that you forgot to cancel, and thought “This is criminal!” then you’ll be happy to know some British lawmakers agree.

On Tuesday, the UK announced the Digital Markets, Competition and Consumers Bill (DMCC), which is designed to penalize tech giants for a range of aggravating consumer experiences on their platforms. If it becomes law, companies could be fined up to 10% of their annual revenue.

Biting Off Less

The UK government has long struggled to rein in Big Tech. Its flagship Online Safety Bill, which has been in the works for years, is a tangled yarn ball of policies that takes aim at wildly disparate parts of the internet, ranging from combating scam ads, to age-gating adult content, to basically breaking end-to-end encryption.

But while the new DMCC bill also covers multiple fronts, it also narrows its focus down to the kind of low-level but pervasive frustrations experienced by many online consumers. Professor Victoria Nash, Senior Policy Fellow at the Oxford Internet Institute, told The Daily Upside the new legislation looked promising as it takes a narrower approach than the Online Safety Bill. This more pragmatic approach is also potentially more worrisome for tech companies:

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The bill would create a new division inside the UK’s competition watchdog, and give it the power to take swifter and more decisive action on things like failure to take down fake reviews, so-called “subscription traps” (i.e. when companies make it unnecessarily hard to stop a subscription), and pressure-selling.

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That said, it would only apply to companies with annual global revenue exceeding £25 billion, or £1 billion of UK-based revenue. If it passes through Parliament, it’s expected to go into force next year.

Nash said in an ideal world, the more granular DMCC would co-exist with some over-arching legislation akin to the Online Safety Bill — albeit more future-proof. “The big swing is necessary because there is something fundamental about the business models underlying these companies,” she said.

Garden Problems: Meanwhile, tech giants still reign supreme in America. Mostly. Apple emerged largely victorious over Fortnite maker Epic Games this week in the companies’ legal battle over the iPhone maker’s so-called “closed” App Store policy, though Epic did get in one last shot. The court ruled against Apple’s anti-steering rule, which says app developers can’t direct customers away from the App Store to pay for in-app purchases, sidestepping the 15-30% cut Apple takes on those purchases. Between that and the EU forcing it to bring back the USB-C charging port, Apple’s walled garden is going to need some serious weeding.

– Isobel Asher Hamilton

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Crypto

Gibraltar Puts a Big Freeze on Crypto in Search for Missing $43 Million

(Photo Credit: Kanchanar/Unsplash)

Maybe we should rename it The Blockchain of Gibraltar.

The British Overseas Territory of Gibraltar froze the assets of some of the world’s largest crypto exchanges Tuesday in an attempt to locate $43 million in missing funds from a now liquidated trader. The crackdown comes as the Iberian peninsula tries to re-establish itself as a crypto city upon a hill.

(Not) Solid as a Rock

In case you missed it, 2022 was not a good year for crypto. Bitcoin dropped 60% in value, multiple lenders filed for bankruptcy, and of course, there was Sam Bankman-Fried and FTX. But apparently, that wasn’t all. The Financial Times reported that Globix, a little-known and unlicensed crypto trading platform based in Gibraltar, closed its doors to investors last June as the sector faced massive headwinds. Last month, the company’s director and only shareholder, Damian Carreras, put Globix into liquidation and it’s still on the hook for $43 million owed to investors.

Despite Gibraltar introducing crypto regulations in 2018, making it one of the first to do so, Globix somehow slipped through the cracks. Now the government is scrambling to correct the situation:

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A court injunction ordered Binance, Crypto.com, Bitstamp, and Kraken to reveal the identities behind certain crypto wallets associated with the Globix platform, the FT reported.

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Thanks in part to the Globix blunder, Gibraltar was placed on the Financial Action Task Force’s “grey list.” Think of it like Santa’s naughty list for countries that didn’t properly address money laundering schemes and terrorist financing.

Nails in the coffin: Minimal regulation has always been both the greatest appeal and greatest risk of crypto from the start, but with governments addressing the decentralized chaos of recent months by clamping down on the sector, crypto prophets are losing faith in digital currencies. Tech investor Chamath Palihapitiya, a prominent bitcoin bull who once proclaimed it would replace gold, has fully changed his tune and is now claiming that, thanks to overzealous regulators, “Crypto is dead in America.” But how does he feel about SPACs?

– Griffin Kelly

Extra Upside

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Hail a flying cab: Joby wins $55 million Air Force contract for air taxis.

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They’re lovin’ it: McDonald’s sales grow even with higher menu prices.

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Sky high: Google’s cloud business finally turns a profit.

Just For Fun

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Die hard fans.

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