Carmakers are falling back in love with petrol

Summary

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FT News Briefing: Carmakers Are Falling Back in Love with Petrol

Podcast: FT News Briefing
Host: Marc Filippino (Financial Times)
Date: October 8, 2025

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Episode Overview

This episode explores three significant business stories:

• The ripple effects of First Brand's bankruptcy on major financial institutions.
• A global shift among carmakers as they double down on petrol and hybrids, partially rolling back their aggressive push into electric vehicles (EVs).
• A revival in emerging markets investment, driven by currency dynamics and sector trends.

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Key Discussion Points & Insights

1. First Brand's Bankruptcy Hits UBS and Global Investors

[00:40 – 02:15]

• Impact: UBS, Switzerland’s biggest bank, faces over $500 million exposure through its O’Connor private credit fund, which had 30% of its portfolio tied to First Brands, an American auto parts company.
• Broader fallout: Other major investors, including Blackstone, were also significantly affected by the collapse.
• Context: The story highlights how interconnected the global financial system is, as an Ohio-based manufacturer’s bankruptcy ripples through European banking giants.

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2. Why Carmakers Are Refocusing on Petrol and Hybrids

[02:15 – 06:14]

The EV Push – What Happened?

• Regulatory Pressure:
  • Kana Inagaki: “The regulatory environment globally... forced carmakers to invest heavily in electric vehicles.” ([02:22])
  • Battery tech improvements raised hopes EVs would soon rival petrol in appeal.

The Backlash and Reversal

• Primary Drivers of Reversal:
  • US policy changes under Donald Trump—rollback of generous EV credits.
  • Slower-than-expected growth in EV sales.
  • European, Japanese, and South Korean companies are calling for flexibility, postponing their EV timetables.
• Industry Response:
  • Relief and excitement about extending the lifespan of petrol/hybrid models.
  • Kana Inagaki: “Ford’s chief executive, Jim Farley, has called this, you know, a multibillion dollar opportunity.” ([03:35])
  • Companies that already kept diverse engine portfolios (like Toyota, BMW) are better positioned.

Global Differences: The China Exception

• Rapid Growth in China:
  • Surging sales and dropping prices of EVs/plug-in hybrids.
  • Kana Inagaki: “In China…, the price parity … is shrinking quite rapidly.” ([04:15])

Strategic Fears and Mixed Signals

• Losing to China:
  • Concerns that stepping back from EVs will allow Chinese giants (BYD, Nio) to zoom ahead in technology and market share.
  • Kana Inagaki: “...the technology gap between the Chinese rivals… and Western legacy carmakers will expand.” ([04:37])
• Dual Investment Track:
  • Western companies emphasize that they’re not abandoning EV investments, just adopting a “multi-energy strategy.”
  • Kana Inagaki: “Companies like Toyota and BMW have often argued that, you know, you can’t force one technology onto the consumer.” ([05:30])
• Market Complexity:
  • Those with flexibility (hybrid, ICE, and EV) are best positioned as the market’s future remains uncertain.
  • Radical pivots (e.g., Porsche) are forced to backpedal to offer more options.

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3. Emerging Markets Bounce Back

[06:21 – 11:13]

Return of International Investors to China

• Cautious optimism:
  • VC funds aren’t pouring in, but deals are returning.
  • Recent fundraising activity “still modest compared to previous years.”
  • Regulatory thaw—Xi Jinping’s outreach to entrepreneurs and a Hong Kong stock market rally help.

Major Rally in Emerging Markets

• Performance:
  • MSCI Emerging Markets Index up 28% year-to-date; S&P 500 up 15%.
  • Local currency bonds up 15% (JPMorgan index).
  • Joseph Cotterill: “This is coming after a lost decade or more.” ([07:51])

Drivers of Investment

• Weaker Dollar:
  • Main factor attracting global capital, making EM assets more attractive.
• High Real Yields:
  • Currencies like Brazil’s and South Africa’s offer high interest rates minus inflation (real yields) much better than developed-world peers.
  • Joseph Cotterill: “Brazil is a good example. Local interest rates … about 15% … that has created a real yield that's quite high.” ([08:56])

Sector Trends: Tech and AI Influence

• Tech’s Dominance:
  • “In that MSCI benchmark… fully 11% of that index by weight is one stock. That is Taiwan Semiconductor Manufacturing Co. … supplying Nvidia with lots of chips.” ([09:46])
  • AI stocks’ rise mirrors trends in developed markets, raising the possibility of a tech bubble.

The Outlook

• Valuations:
  • EM stocks are relatively cheap: price/earnings ratio of 14x vs. 22–23x for S&P 500.
  • Rally continuation is uncertain—depends largely on whether the dollar keeps weakening.
  • Joseph Cotterill: “That will be up to decisions in Washington.” ([11:07])

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Memorable Quotes

• "Ford’s chief executive, Jim Farley, has called this, you know, a multibillion dollar opportunity."
  — Kana Inagaki ([03:35])

• "I think those companies that are able to have this kind of flexibility will probably be stronger in this kind of era where it’s very difficult to predict which way the consumers will go."
  — Kana Inagaki ([05:40])

• “In that MSCI benchmark that I mentioned at the beginning, fully 11% of that index by weight is one stock. That is Taiwan Semiconductor Manufacturing Co.”
  — Joseph Cotterill ([09:46])

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Notable Segments & Timestamps

• First Brand’s impact on UBS and global finance — [00:40–02:15]
• Carmakers’ shift back to petrol/hybrids — [02:15–06:14]
• Kana Inagaki on policy and market complexity — [02:21, 03:00, 04:00, 04:33, 05:24]
• China as the global EV outlier — [04:00–04:25]
• Emerging markets investment surge & risks — [06:21–11:13]
• Joseph Cotterill on drivers of the EM rally — [07:37–11:13]

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Conclusion & Takeaways

The episode unpacks key shifts in the global business landscape:

• Financial vulnerability from corporate bankruptcies like First Brand’s can have global implications, impacting major institutions.
• Automotive industry strategies are in flux, with most carmakers outside China hedging their bets on emissions regulations and consumer uncertainty by expanding petrol and hybrid offerings, even as China pulls ahead on EVs.
• Emerging markets are seeing a renaissance in global investor interest, driven by currency dynamics, high real yields, and a technology-infused market environment. Yet, the sustainability of the rally remains uncertain, hinging on monetary policy and global economic trends.

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Transcript

[A]

Markets move fast. Get the insights you need in 10 minutes with Barclays Brief, a podcast from Barclays Investment Bank. Each week our experts analyze market themes, helping you anticipate what's next. Listen to Barclays Brief wherever you get your podcasts.

[B]

Hey guys, Mark here. You've only got a few more days to vote for the FT News Briefing and Signals Listener Award for Best Daily Podcast. We are very close to capturing first place and we need you to push us over the edge. So if you like the show, do me a favor and drop us a vote. It takes less than five minutes. Just click the link in the show notes and thank you as always for your support. Good morning from the Financial Times. Today is Wednesday, October 8th, and this is your FT news briefing. First Brand's bankruptcy is hitting a big European lender and the electric vehicle revolution might be slowing down. Plus, investors are snapping up stocks and bonds across emerging markets. I'm Marc Filippino and here's the news you need to start your day. Switzerland's largest bank is caught up in the first brand's drama. There's a UBS fund that has 30% of its portfolio tied to the American Auto Parts Group. Now to drill down on that a bit, this is UBS o', Connor, a private credit and commodity specialist owned by the Swiss bank. Clients are bracing for big losses from the fund related to First Brands. It went bankrupt last week. Bankruptcy filings show that all in all, UBS has more than $500 million worth of exposure to First Brands. UBS is just one of many investors to be hurt by the implosion of the Ohio based industrial business. Some of the biggest names on Wall street such as Blackstone were also hit. It looks like gas is back in fashion. US Carmakers in particular are refocusing on petrol and hybrid vehicles. Maybe not a huge surprise there, but companies in Europe, Japan and South Korea are also postponing their electric vehicle plans. My colleague Kana Inagaki has been following Petro's resurgence. Hi Kana.

[A]

Hi.

[B]

Okay, so Kana, remind me, what was driving the push to EVs in the first place?

[A]

Yeah, so I think one of the biggest drivers, obviously the regulatory environment globally. You know, the rules were the strictest in Europe, but there were also rules to reduce greenhouse gas emissions in the US as well. So that kind of forced carmakers to invest heavily in electric vehicles. And you know, there was progress made in terms of battery costs and also the battery technology as well, you know, which raised hopes that electric vehicles would become as attractive as petrol Vehicles for consumers.

[B]

And why are they shifting back now? How do carmakers feel about this shift?

[A]

So the biggest driver of this shift back towards petrol, but also hybrid vehicles as well, is the big change in Donald Trump's policy. He's known for his anti electric vehicle policies and he's ended the very generous credits for EV purchases. Also in September, there's an industry wide recognition that even though sales of electric vehicles are rising, the pace of that rise has not been as fast as people expected. And so a lot of carmakers in Europe are also calling for a bit more flexibility. And the truth is, you know, carmakers are excited by the revival of petrol. I mean, Ford's chief executive, Jim Farley, has called this, you know, a multibillion dollar opportunity. Other carmakers may not be as vocal as Ford, but I think it is true that many carmakers are relieved that there is a longer life for the internal combustion engine.

[B]

So it sounds like this is a pretty global phenomenon. Are there any exceptions?

[A]

Yes. So the obvious exception is China, where the sales of electric vehicles have surged. There's also increasing popularity of plug in hybrids as well. Prices of electric vehicles in China have come down as well. So consumers also find it quite attractive to buy electric vehicles as opposed to petrol vehicles. And the price parity there is shrinking quite rapidly.

[B]

Is there any concerns by the fact that Western carmakers are ceding ground to China on the electric vehicle front?

[A]

So the biggest worry, I think, for the industry is that as companies refocus their efforts into expanding the petrol and hybrid lineup in markets like the U.S. you know, Chinese players will keep on advancing in electric vehicle technology and also in terms of advanced software that are installed in electric vehicles. And so that technology gap between the Chinese rivals such as BYD and the other Western legacy carmakers will expand. And to be fair, the carmakers are not giving up investing in electric vehicles. They are still going to invest heavily, and they have already invested heavily. So that's not going to change. It's a question of doing both.

[B]

That is my question. And I'm curious to know whether or not this pivot back towards petrol sends mixed signals to consumers.

[A]

I think it is extremely complex and I think a lot of companies call this strategy, the multi energy sort of strategy. Companies like Toyota and BMW have often argued that, you know, you can't force one technology onto the consumer. And I think those companies that are able to have this kind of flexibility will probably be stronger in this kind of era where it's very difficult to predict which way the consumers will go to and the pace of the transition is going to be very difficult to predict. I mean, those who have made a radical pivot like Porsche are suffering now because they now have to move back to providing various options. Those that already do have that kind of flexibility are able to navigate this complex environment.

[B]

Kana InAgaki is the FT's industry editor. Thanks so much, Kana.

[A]

Thanks so much.

[B]

International investors are returning to China's startup scene now. They're not rushing back in. But a few small venture capital fundraisings show that investors are cautiously willing to give China another shot. Sources tell the FT that several of the top VC funds were close to raising a little more than a billion in total dollar denominated funds this year. Now, to put this into perspective, these numbers are still modest compared to previous years. Investors have been skeptical about China because of its tech crackdown and US Rules restricting American investment in AI there. But there are signs that conditions in China are starting to thaw. President Xi Jinping held a high profile meeting with entrepreneurs in February. Plus, the Hong Kong stock market is booming. Emerging market stocks are enjoying their biggest rally in 15 years. This is thanks to a combination of a sliding dollar and bargain valuations. To talk about this, I'm joined by Joseph Cotterell who writes about emerging markets for the ft. Hi Joseph.

[C]

Hi Mark.

[B]

So just put this into context for us. Just how big is the rally compared to advanced markets?

[C]

So The S&P 500 US index is up 15% year to date. The MSCI Emerging Markets benchmark, which is a dollar index of 24 large emerging markets is up about 28%. It's not just emerging stock markets, it's also the local currency bonds of these countries as well. And a JP Morgan index of these debts is up about 15%. This is coming after a lost decade or more where they were really overshadowed by US markets.

[B]

Now which em countries are we talking about here? Which have been most attractive to bond investors?

[C]

It's important to remember first of all that for all of these countries, more or less the most important factor has been the weaker dollar. So that's made emerging market stocks and bonds much more attractive in dollar terms. But what is driving the local currency bond trade in particular is something called real yields. So when you look at high interest rates in countries such as Brazil and South Africa, subtract their inflation rates from that. The so called real terms yield is quite high compared to U.S. treasuries or other developed market government debts. Brazil is a good example. Local interest rates in Brazil are about 15% and that is because the central bank there has been very cautious about inflation, so they've been reluctant to massively cut rates and that has created a real yield that's quite high.

[B]

Are there other factors driving this emerging Markets comeback?

[C]

Just like in developed stock markets, AI and tech has become quite a large part of benchmarks. In that MSCI benchmark that I mentioned at the beginning, fully 11% of that index by weight is one stock. That is Taiwan Semiconductor Manufacturing Co. Which is probably better known these days for supplying Nvidia with lots of chips. However, you know, if you were to invest in in the benchmark as a whole, you know, a tenth of your investment would be that one company. That reflects the AI frenzy that's going through markets, but it also reflects the concerns many have, which is is this a bubble? So in that sense, whether you're investing DM or em, you are grappling with the same issues around AI.

[B]

Now, Joe, I know it's hard to predict these sort of things, but can we expect this rally to continue? I mean, what would need to happen for emerging markets to keep up the pace that they're on right now?

[C]

Emerging market stocks compared to the US are relatively cheap. When you look at their price as a multiple of earnings, it's about 14 times for that MSCI benchmark compared to 2223 times for the S&P 500. So that cheapness might mean the rally continues. However, we also have to bear in mind a really important variable in emerging markets this year has been the weakening dollar. It's weakened at the fastest pace since the 1980s. Can that continue into 2026? We don't know. That will be up to decisions in Washington.

[B]

Joseph cotterell is the FT's emerging markets correspondent. Thanks so much Joseph.

[C]

Thank you very much, Mark.

[B]

You could read more on all these stories for free when you click the links in our show Notes. This has been your daily FT news briefing. Check back tomorrow for the latest business news.

[C]

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[A]

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