What happened in 2024

Oscar Ugarteche[1], OBELA[2]

In the year of the Dragon of 2024, two big technological business problems shook the world. On the one hand, a Boeing vehicle flew to the international station and failed to return, and on the other, Volkswagen announced the closure of two vast factories. These are symptoms of the technological and productivity problem in the West and its inability to compete with the East beyond China. It was a year in which the economies of Asia grew again at rates above 5% and those of Latin America and Europe at less than 2%, with the US at a similar rate. The fiscal deficits of the G7 economies maintained their high trend, and the public debts of these economies continued to run at over 100% of GDP, with no sign of abating. Despite neo-protectionism, the US public debt will continue to rise while its GDP grows moderately and with a massive external deficit. The war in Palestine is the most destabilising factor in the international order because it has shown that the United Nations system does not work. Neither the Secretary-General, the General Assembly, nor the Security Council could prevent the genocide in Palestine, paid for by the USA and carried out with its weapons. The withdrawal of UNHWRA from the area after more than 70 years is a symptom of the power of Israel, a small country with fossil energy interests, within the Washington administration. Finally, the Syrian overthrow impacted oil prices, and President Trump's election produced mixed reactions in the stock and commodity markets. Meanwhile, Asia is growing steadily high despite what the Western press says.

East-West growth

In the face of what continues to be a very long slowdown after the 2008 crisis, neither Europe nor Latin America is managing to lift off the ground, keeping their inflation rates under control and their real interest rates positive, with fiscal deficits at around 2.5% of GDP (not including Venezuela or Argentina due to exchange rate distortions).^[1] The European Union and Latin America are still amid a protracted slowdown.

Source: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD

While the Western press insists on China's problems and accuses the world of a severe debt problem, what seems to exist is a solid growth pattern across Asia, a weak one in Latin America, and the G7 that has not recovered from the blow of the 2008 crisis. Against this backdrop, competition between major powers has intensified, highlighting the aforementioned business problems.

Boeing

The US company Boeing is a global leader in the aerospace industry, developing, manufacturing, and servicing commercial aircraft, defence products, and space systems for customers in more than 150 countries. As a significant US exporter, it sources its inputs from a global network of suppliers, primarily Asian, Middle Eastern, European, and others. Boeing's modern problems began in 2018 when a new 737-800 plane fell due to manufacturing problems, and another one in 2019. Since then, it has lost $33bn, a far cry from profits in the days when its operations were synonymous with US quality. To this must be added the Starliner rocket fiasco to the space station in June 2024 that stranded two astronauts for at least 9 months (until March 2025). The quality problems are patent, and neo-protectionism has been underway since March 2018. It intends to solve it by ceasing to import inputs. Contracts with the US Department of Defence maintain the company.

Automotive sector

The automaker Ford sold the most vehicles in the US in the past year and, together with GM, accounts for one-third of vehicle sales in their country. The rest are Japanese and Korean brands. 16.3 million new cars were sold in 2024 in the US, down 22.5% from the previous year. (https://datosmacro.expansion.com/negocios/matriculaciones-vehiculos/usa). Part of the problem is the lack of supply of electric vehicles. Meanwhile, China sold 30 million vehicles in 2023 and grew by 35% in the first quarter of 2024 compared to the previous year's first quarter. In 2023, sales of plug-in hybrid electric cars grew faster than those of pure battery electric cars. In the first quarter of 2024, sales of plug-in hybrid electric vehicles increased by around 75% year-on-year in China, compared to only 15% for battery electric cars, although the former started from a lower base.

According to the International Energy Agency, more than 250,000 new registrations per week were produced globally in 2023, up from the annual total in 2013, ten years earlier. Electric cars accounted for around 18% of all vehicles sold in 2023, up from 14% in 2022 and only 2% in 2018. Trends indicate that electric car markets are maturing at an accelerated pace. Battery cars accounted for 70% of the electric car fleet in 2023. (https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars/)

The problem for Western manufacturers is the ability to sell at the prices of Chinese producers. Volumes speak of significant economies of scale for Asian manufacturers. In 2023, around 60% of new global electric car registrations were in the People's Republic of China, less than 25% in Europe and 10% in the United States. The sum is 95% of global EV sales combined. In Asians, EVs account for a large share of local car markets: more than one in three new cars registered in China was electric in 2023, more than one in five in Europe and one in ten in the US, and the trend is accelerating. The lag is costly.

According to Milo Mac Bride of the Carnegie Endowment for International Peace, China leads the global production of key technologies for the energy transition, such as electric vehicles, wind turbines, solar modules and batteries, exceeding OPEC's historical levels of market concentration. This dominance benefits the fight against climate change by accelerating emissions reductions but also poses strategic risks for the US, which could be left behind in a global economy based on minerals and clean technologies. These technologies are essential not only for climate sustainability but also for future industrial and geostrategic power. Ford is trying to catch up in the auto industry, but it is more than a decade behind, as is General Motors. The US solution is to impose barriers and tariffs on imports of EVs and Chinese inputs. Federal funds have been banned for purchasing Chinese-made mass transit vehicles, even if fabricated within the US.

In Germany, Volkswagen has been hit hard by the announcement of tariffs on imports of Chinese EVs and vehicle inputs into the EU. They manufacture at their plants in Dalian, Tianjin and Shanghai the 7-speed dual-clutch transmission, which combines manual and automatic transmissions aimed at the Volkswagen, Audi and Škoda brands. SAIC VOLKSWAGEN Powertrain Co. specialises in engines, co-founded by Volkswagen (China) Investment Co., Ltd. and SAIC Motor Corporation Ltd. (SAIC) and is one of the world's most modern engine manufacturers with advanced electrical processes and technology. Finally, it set up a joint venture between Sitech Sitztechnik GmbH (Germany), Shanghai Dongchang Auto Parts Co. (Ltd.) and Jiangsu Etern Investment Co. (Ltd.) for the production of seats for all its vehicles. In other words, the tariffs against these inputs and vehicles imported from China are a very adverse blow to the company. BMW manufactures EVs for the Chinese market and the iX3 for export to Europe in Shenyang, China. From 2025, it will export the Mini Cooper to Europe. Mercedes Benz manufactures in partnership with BAIC in China and has the same problem as the other three.

The US tariff extended to the EU is a blow to the German car industry, which produces cars and inputs in China for the EU and has impacted the industry. In the midst of this, Chinese companies continue to grow and export EVs that, from 2025 onwards, will be held back in their trade with Europe and the US. Given the size of the domestic market and the policy of subsidies for the sale of EVs, external restrictions will not be much of a problem, and marginal costs will continue to fall due to larger volumes of production, ensuring lower prices for these vehicles in the future.

Finally

The year 2024 reiterated the high growth of the Asian economies and the very low growth of the G7 countries, with Latin America stagnating when deducing population growth. There is secular stagnation in economies where the idea of the minimal state predominates, and dynamism is present in those where economic planning and public investment are active roles of the state in the economy. The persistence of fossil fuel vehicles in the US pushes global warming and the continued exploration of new sources. The year 2024 was the hottest year on record and is the third year in a series of this trend. The division between countries without oil resources and countries with oil resources separates those that make the energy transition from those that do not, except Norway.  China leads the way in an accelerated transformation of the automotive industry and the energy sector, with the US lagging far behind. US oil interests have significantly influenced US macroeconomic and political outcomes in 2024.

[1] The IMF's figure of 5% growth for Argentina in 2024 is not credible in the context of massive bankruptcies and must result from a significant exchange rate distortion.