A (3:00)

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 (3:55)

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

A (4:00)

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 (4:25)

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

A (4:33)

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 (5:14)

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

A (5:24)

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 (6:10)

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

A (6:14)

Thanks so much.

B (6:21)

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 (7:30)

Hi Mark.

B (7:31)

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

C (7:37)

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 (8:21)

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

C (8:27)

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 (9:26)

Are there other factors driving this emerging Markets comeback?

C (9:30)

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 (10:23)

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 (10:32)

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 (11:13)

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

C (11:17)

Thank you very much, Mark.

B (11:20)

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 (11:44)

Thinking long term about your investment career. Hear stories, advice and lessons from seasoned leaders at Capital Group on the Capital Ideas podcast. Subscribe and start listening today. Published by Capital Client Group Inc.

A (11:59)

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