The Dangers of Musk's Flirty, New Chatbot
Grok's latest character, Ani, will likely bring in some much-needed cash for Musk. But at whose expense? Bloomberg Opinion columnist Parmy Olson explains the dangers. (Source: Bloomberg)
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The seeds of this crisis were planted in early April, when Beijing cut off exports of critical minerals, such as terbium, yttrium or samarium, usedin missiles, satellites and fighter jets — and implemented a far more restrictive system to oversee their release. China holds a quasi-monopoly over the mining and processing of many critical minerals, and the country's ability to choose winners and losers has nudged leaders in Brussels towards an alarming realization, according to people familiar with their thinking: Europe's ability to protect itself relies heavily on China. 'Companies and politicians view this topic differently, and governments obviously have to look at the bigger picture,' said Jakob Kullik, a researcher studying metals supplies at the University of Technology in Chemnitz, Germany. 'That's why I would be careful about what companies report, because the market figures tell a different story.' There isn't a quick fix to securing Europe's critical mineral supply. While European Commission chief Ursula von der Leyen has vowed to respond firmly to what she has described as blackmail by China, a longer-term plan requires substantial investment and political will — neither of which the 27 member states are able to generate easily. Under the new licensing system, Beijing holds veto power over which countries and sectors can access its rare earths. Like other nations that supply dual-use materials, it also requires applicants to fill out questionnaires certifying what they will ultimately be used for. Since April, China has approved a total of 1,500 six-month licenses to individual companies, and rejected an EU request to grant multi-year licenses, according to European officials. While Chinese officials have eased off on export restrictions somewhat since a squeeze in April, that's still not enough to offer confidence to their European counterparts. EU officials have described the new system as cumbersome and unsustainable, and asked Beijing to eliminate its questionnaires, which could be used to gauge the contents and size of military arsenals. But they concede that little is likely to change. When EU and Chinese officials meet in Beijing this week to celebrate 50 years of diplomatic relations, rare earths will be a top agenda item — although expectations of any grand resolution are low. Some fear that China might use access to critical minerals as a way to extract concessions from the bloc on pending trade investigations or tariffs on electric vehicles, the people said. That's in part why some officials are pushing the EU to threaten China with restrictions on exports of French aircraft parts or semiconductor equipment from the Dutch chip equipment company ASML Holding NV, they added. But a tougher approach faces a multitude of challenges. There's no consensus within the bloc on how to counter China or how far possible retaliation should go, and the EU commission has also been undermined by member states negotiating directly with Beijing to secure deals for their own industries, the people said. Countries striking out on their own are following a trajectory set by the US, which decided to conduct its own talks with Beijing after rare earth imports came to a halt. That culminated in a trade truce in June, with the US agreeing to lower tariffs and remove export controls on chip design software, aircraft parts and ethane shipments in order to keep imports flowing. Total mineral exports rose to 3,188 tons in June, according to Chinese data, more than double the 1,238 tons in May. Some defense companies have started stockpiling components, while others have expressed confidence that their supply chains are sufficiently diversified. Yet some industry experts believe that firms are downplaying the situation or are failing to fully grasp how serious it may be. A more structural solution — such as getting companies directly involved in extracting and processing raw materials — remains risky and requires a kind of expertise that is all but lost within Europe. In the meantime, Chinese officials, aware that they have the upper hand, have adopted more blunt rhetoric towards their European and American counterparts. Chinese Foreign Minister Wang Yi told EU foreign policy chief Kaja Kallas earlier this month that Beijing doesn't want Russia to lose the war in Ukraine because the US would then shift its attention to China, according to people familiar with the exchange. China has said that it has played no role in the conflict in Ukraine and rebuffed accusations from the Group of Seven that it is supplying Russia with materials critical to sustaining its war effort. Should China further tighten restrictions on rare earth exports, it could not only hinder the EU's defenses against Russia. It would also highlight Beijing's leverage over the European defense companies that arm Ukraine — and China's ability to control the provision of weapons to Kyiv. As the geopolitical tradeoffs and risks become clearer, EU leaders are thinking more seriously about how to reduce the bloc's mineral dependency on China. The strongest legislation to date, the Critical Raw Materials Act, entered into force last year but has been criticized by industry for failing to pull together the necessary funding. The act includes proposals to create domestic supply chains for minerals and to recycle more rare-earth elements from used electronics. Traders agree that in order to make this work, significant financial incentives would be required, partly because sending electronic waste back to China is cheaper than recycling in the European Union. One potential role model for how Europe might de-risk is Japan, which was cut off from Chinese rare earth exports in 2010. Japan responded by tasking a government agency to invest in overseas mining operations, and has built up supply chains in places including Australia and France. If the situation with China continues to escalate, Europe may need to pursue a similar approach, said Kullik, the politics researcher. He suggested that the bloc should aim to build rare-earth processing plants on the continent with the long-term goal of developing strategic stockpiles. After that, he said, the EU would have to adopt its own protectionist measures. 'If a conflict really comes about,' he said, 'that would be the only logical solution.' --With assistance from Arne Delfs, James Mayger, Michal Kubala and Alberto Nardelli. 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an hour ago
Tesla profit plunges in latest quarter as Musk's turn to politics continues to keep buyers away
NEW YORK -- The fallout from Elon Musk's plunge into politics a year ago is still hammering his Tesla business as both sales and profits dropped sharply again in the latest quarter. The car company that has faced boycotts for months said Wednesday that revenue dropped 12% and profits slumped 16% in the three months through June as buyers continued to stay away. 'The perception of Elon Musk, its chief executive, has rubbed the sheen right out of what once was a darling and soaring automotive brand,' wrote Forrester analyst Dipanjan Chatterjee in an email. Tesla is 'a toxic brand that is inseparable from its leader.' Quarterly profits at the electric vehicle, battery and robotics company fell to $1.17 billion, or 33 cents a share, from $1.4 billion, or 40 cents a share. That was the third quarter in a row that profit dropped. On an adjusted basis, the company said it earned 40 cents a share, matching Wall Street estimates. Revenue fell from $25.5 billion to $22.5 billion in the April through June period, slightly above Wall Street's forecast. Tesla shares were little changed in after-hours trading as investors wait to hear from Musk on the company's earnings call later in the afternoon. Musk, who helped elect President Donald Trump with a massive campaign donation and then headed his DOGE cost-cutting program, has been pinning the future of the company less on car sales and more on robotaxis, automated driving software and robotics. But those businesses are yet to take off, and the gap between promise and profits was apparent in the second quarter. A big challenge is that potential buyers not just in the U.S. but Europe are still balking at buying Teslas. Musk alienated many in the market for cars in Great Britain, France, Germany and elsewhere by embracing far-right candidates for office on the continent. And rival electric vehicle makers such as China's BYD and German's Volkswagen have pounced on the weakness, stealing market share.
