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

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

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.

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.

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.

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])

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])

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]

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.