Chain Reaction: EV Battery Fire Hazards, Home Depot Struggles, and Future of EV Technology

Ever wondered how a single EV battery fire could wreak havoc on an entire neighborhood? Join us in this episode of Chain Reaction as we uncover the hair-raising incident in South Korea where a Mercedes-Benz EV battery fire set off a chain reaction of destruction. We'll unravel the complexities and dangers associated with extinguishing these fierce fires, which don't just burn hotter but also have a nasty habit of reigniting. This is critical knowledge for anyone involved in the transportation or handling of electric vehicles. Additionally, we dissect the current state of the DIY retail market, spotlighting Home Depot's struggles amidst inflation and the decline in discretionary spending for home improvement. We propose strategic pivots for companies to mitigate these impacts, focusing instead on professional firms that are more resilient to economic fluctuations.

Shifting gears, we dive into the fast-evolving world of electric vehicle technology. Discover the trailblazing advancements by Zeekr, a Chinese brand under Geely, which has developed a battery that charges faster than any other on the market—even in cold weather. Tesla may need to step up their game! We also discuss Toyota's pragmatic approach to going green by prioritizing hybrid vehicles over fully electric ones, balancing environmental responsibilities with managing costs and risks. Additionally, get the latest insights on economic indicators from the UK and US, as we navigate through inflation trends, mortgage rates, and inventory changes. Finally, a roundup of maritime trade impacts supply chains covering new investments, experiments by Maersk with nuclear-powered feeder ships and potential strikes at US East Coast Ports. Don't miss our extensive library of past episodes and make sure to subscribe for more in-depth discussions and insights.

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Chapters

• 0:06 Global Supply Chain and Home Trends
• 12:17 Future of Automobile Technology and Economics

Transcript

Tony HInes: 0:06

Hello, tony Hines, here you're listening to the Chain Reaction podcast all about supply chain advantage. Thanks for stopping by. This is the News Roundup all things impacting global supply chains this week Chaining Reaction. Well, have you ever wondered what happens when EVs go on fire? Well, there's some concern. In South Korea this week there was a fire. It started up in a Mercedes-Benz vehicle and it was an EV battery that caused the fire, destroyed about 140 cars and caused damage to an apartment block above where the cars were parked. And there's much concern from consumers in South Korea that this is something they wish to avoid and they're concerned about whether the companies Mercedes-Benz, volkswagen and Hyundai have all been called in to a discussion about the brands of batteries that are being used in the vehicles, and they're also investigating what they can do to prevent future fires. So I'm guessing this is likely to rumble on until something is sorted out.

Tony HInes: 1:19

And, of course, once an EV vehicle catches fire, it's much harder to extinguish the fire than with a fossil fuel car. The fires are often more difficult to extinguish and they're likely to reignite, and that poses a real problem for firefighters. It took eight hours for firefighters to extinguish this particular blaze. Well, when you take a look around and you do a bit of research about EV fires. Most of the commentaries say that they're less frequent than in combustion engine vehicles, but that they present unique challenges, and one of the significant risks is, of course, this re-ignition problem. Studies show that about 13% of EV fires reignite after being extinguished, and this occurs due to thermal runaway, where damaged cells in the battery pack ignite other cells. Ev fires burn hotter and they can release toxic vapors, and that makes them more difficult to control. They need extensive cooling to prevent re-ignition, and that can take time.

Tony HInes: 2:20

There have been significant incidents of EV fires during the transportation, both by ship and by road. One notable incident occurred in July 2023, when a cargo ship carrying over 3,500 vehicles, including nearly 500 EVs, caught fire in the North Sea. The fire started in the battery of an E-car and it led to the death of one crew member. There were significant challenges trying to extinguish the blaze. Transporting EVs by road also poses risks. For example, if an e-car catches fire on a truck or a train, the fire can be isolated by disconnecting the trailer or the rail car, but the unique nature of a lithium battery fire, which can reignite and burn at higher temperatures, makes them a particular challenge to control. So we probably need more research and more understanding of the safety measures that are needed when we transport EVs by ship, rail, road or anything else, or anything else.

Tony HInes: 3:25

Now, the do-it-yourself retail market is a tricky market in which to operate. Home Depot do it pretty well, but they have a balance within the mixed economy, shall we say, between retail customers and professional firms. They might be builders or jobbing organisations that buy directly from Home Depot and that way, when the consumer market is under pressure because they haven't got as much discretionary income, they can still count on those professional businesses because usually they have projects that are ongoing even in times of difficulty. So they have to make purchases, and that benefits companies like Home Depot. Well, I think one of the most interesting markets to look at when consumer spending tightens is DIY, do-it-yourself and home jobs. Now, how many of us stop doing jobs when spending is tight? Well, I think we cut back on all sorts of things, don't we? We stop making stuff, we stop spending on the do-it-yourself market, on wood, on shelving, on screws, on paint and everything that we would normally do at home to make the home better. Home improvements stop for a while and customers delay big projects. Flooring forget that for a while. Kitchen cabinets, showers, bathrooms they all slow down. And that's what's happening at the moment because we've got higher costs of goods and we've got some inflation in the marketplace when it comes to those goods arriving in the country. So in the United States at the moment, producer prices have softened, but they're still rising. There's weak new home sales and foot traffic Looking at homes has slowed, and this is because people are probably waiting for interest rates to settle down before they commit to a long-term transaction.

Tony HInes: 5:19

Now, one of the barometers, of course, is a company like Home Depot, and the transaction volumes is a good indicator as to whether things are improving or going down with consumers. And if you look at the quarters since 2019, transactions in 2019 were about 455.5. They went up in quarter two of 2020 to 5.1.1 and through to 23. They're about 4.5.9. And if we look at quarter two of 2024, we're down to 4.5.1. So we're back below pandemic. Now comparable sales have fallen 3.3%, steeper than expected, and it's a 13th straight quarter in which Home Depot has seen those transaction rates fall, and so people just haven't got the discretionary spend to take on the bigger projects. And until we see signs of those bigger projects coming back, we can say we're in pretty tight times at the moment.

Tony HInes: 6:17

Home Depot's recent performance is mixed. In the second quarter of 2024, they reported sales of US$43.2 billion, at an increase of 0.6% from the same period last year. However, the comparable sales in the US decreased by 3.6%. Despite this, home Depot remains profitable and has net earnings of US$4.6 billion for the quarter. The current consumer market has been challenging, with the higher interest rates and, of course, economic uncertainties affecting consumer demand. One strategy to alleviate some of the pressure, of course, is to invest in professional firms building and repair services where such a strategic move could see a move away from consumer purchases to business to business purchases, and those sort of businesses have less sensitivity to economic fluctuations because they've got major projects always in progress, so that might offset some of the some of the volatility that they're currently experiencing.

Tony HInes: 7:21

Home depot faces significant competition from several major players in the home improvement market and in the retail sector. It's got competition from Lowe's, who are the primary competitor, and they offer a similar range of home improvement products and services. Lowe's operates over 2,000 stores in North America and they have a strong online presence. Amazon, of course, is always lurking in the background. The e-commerce giant competes with Home Depot by offering a selection of home improvement products online, and it makes it very convenient and competitive in that market. Walmart, too, has an extensive network of stores online platform also and they compete in various segments in the market. Walmart's broad product range and competitive pricing strategy will attract many customers. Ace Hardware is another competitor independently owned stores, and they focus on personalised customer service and local market needs. Menards, predominantly located in the Midwest, offers a wide range of competitive products In the home improvement market. They have competitive pricing and large store formats. And there's always Costco, of course. While primarily a wholesale club, costco offers a variety of home improvement products and appliances and they're all at attractive, competitive prices for consumers. Home Depot, of course, distinguishes itself through its extensive product range, the large store format, and it has a strong focus on professional customers, which does help it. Their strategy is to invest in technology to enhance the customer experience and expand their online presence to compete with e-commerce giants like Amazon.

Tony HInes: 9:15

Now it's interesting when we hear about some big organizations, big companies, in different parts of the world. We would think of the automobile makers and we might think of companies like Samsung, one of the biggest electronic companies in the world. Well, there's a strike by the workforce which is likely to damage the company. The firm may not have enough office backup staff if strikes go ahead, but Samsung has said they will ensure there'll be no disruption to production. So interesting what they've actually come out and said. There are 36,500 members of the union and they make up about 30% of Samsung Electronics. South Korean workforce Strike is planned for Thursday, when there's a national holiday, so many workers would be away in any case. So it could severely disrupt the business and it's obviously designed to have maximum impact on the firm. They want more pay, better pay benefits, and they're going to hold strikes to pressure the company into meeting their demands. It'll be interesting to see how that unfolds and whether it will actually do any damage to the business. It depends, of course, how many strikes there are, how long they last and how much production output is impacted by the strikes, so watch this space.

Tony HInes: 10:36

Well, brian Nicol has been appointed the new CEO of Starbucks this week, and he was previously at Chipotle, which is a Mexican grill company, and prior to that he was CEO at Chipotle, which is a Mexican grill company, and prior to that he was CEO of Taco Bell, which is a division of Yum Brands, from 2015 to early 2018. And, prior to that, experience at Pizza Hut. So he's got a good track record and generally, the market has been in favor of this change and sees the appointment of the new CEO as a positive move. Change and sees the appointment of the new CEO as a positive move. He's an MBA graduate from the University of Chicago Boo School and a graduate of Miami University. Chipotle's sales doubled to around 10 billion US dollars in the 2023 financial year and he seems to be somewhat of a growth expert, because he added a new 1,000 stores globally. He also introduced automation into avocado processes that cut guacamole preparation time by 50%, and robotic dual-sided grills were used to speed up the cooking process. So, all in all, he seems to be someone who's prepared to take positive action, both to grow the business and to make efficiency innovations, and this is why Starbucks are so keen to have him. Starbucks have been in a flat position for the past couple of years and they want to return to growth and better profitability.

Tony HInes: 12:17

Zeekr is a Chinese made EV brand and it's owned by Geely, which is one of the big Chinese brands alongside BYD. Well, they've just developed a new battery for the latest model, and this battery can charge from 10% to 80% within 10 and a half minutes, and even in the coldest of weather, apparently, it can charge within half an hour, so it's faster than any other battery on the market. Presently, tesla is no longer in the lead when it comes to battery charging for EVs, and I suppose that's natural, because if you're in the market for a long time, others catch up and overtake, and this is one of the problems with the development of new technology, and that's what electric vehicles still are. They're new technology and I suppose if you buy one, you're paying a price to be part of the big experiment. So you pays your money and you takes your choice.

Tony HInes: 13:09

Now, sticking with automobiles and EVs, it's like any new innovation, new product. The risks are high and Toyota is taking a gamble. Presently They've held back from developing EV models, but they could be the first to get rid of only gasoline models, so they might stop the gasoline models, but they're not going all out to EVs. They're betting the futures on hybrids. It's three decades now since they launched the Prius model. It's pioneering gasoline-electric hybrid and Toyota is moving to convert most and eventually maybe all of the models for Toyota and the Lexus to hybrid only models. The hybrid, of course, presents the benefits of EVs to consumers and to those buying the cars for fleets, and it makes a contribution towards climate change without going or switching fully to an all EV model. So it's balancing risk. It leaves the purchaser with some confidence that if the battery runs out, you'll still get home, and, of course, it challenges the view of the world that everything will be electric.

Tony HInes: 14:21

But is this a commute moment, holding back the waves, or is it a very clever move that will reshape the thinking around automobiles for the next few decades? They talk about the multi-pathway strategy, where they're going to look at EVs, hybrids, hydrogen fuel cell vehicles, green fuels and potentially other technologies as they emerge. Of course, they'll have to be watchful of new emission rules and make sure that they are compliant with their vehicles as they develop. Toyota hybrids don't need charging and they switch seamlessly between gasoline and electric power, or they can use both at once, depending on driving conditions. Its plug-in hybrids can be charged and typically travel about 40 miles on battery power before the gasoline engine kicks in. They see this as the future in the American market, in particular, new emission standards come into effect in 2027 through to 2032, so people are still experimenting in automobiles to see which is going to be the best bet for the future.

Tony HInes: 15:30

The question, of course, is are Toyota right in this strategic move? Well, many might think so, because the demand for EVs has stalled presently and, as Akio Toyoda said back in January, he sees that the demand for EVs will top out around 30% of the total mix because there'll be other technologies and other vehicles that won't be EVs. Now, if that's correct, that would be a really good move by Toyota and it does make a contribution to going greener, but it doesn't go all the way. It's a balancing of risk. It's also a nod to cost, because they can produce those kinds of cars at a lower cost than switching to total EV production, and that means they only add about $2,000 to the price of a car by switching to hybrid models. So it saves the cost for the consumer in the general market. It's all about economics and affordability. If we look at Toyota United States own numbers, the demand for EVs went up 66% from last year at June 30th to around 438,845 vehicles, and that compares with just 15,107 EV sales. So it looks like the numbers support the argument that Toyota are making the UK economy returned with some inflation.

Tony HInes: 17:06

This week Inflation has gone from 2% to 2.2% in July and so that's above the Bank of England's target of 2%. It's marginal I know it's 0.2 of a percentage point but it signals the road ahead is not all going to be lowering interest rates, because if inflation is on the rise again it's likely to put lowering interest rates on hold. The mortgage rates have actually dropped significantly in the UK. New mortgage rates are around three and a half percent currently. But also saving rates are also falling. So if you've got cash in the bank, it's going to be eroded with any inflation and the lower interest rates of course paid by those banks. You like to hold on to the money, don't you?

Tony HInes: 17:54

The other statistic that came out from the Office of National Statistics in the UK was that the economy grew by 0.6% in July, so there's growth in the economy. Us business inventories increased by just a small amount in June. They rose by 0.3% after increasing 0.5% in May. The Commerce Department, the Census Bureau, said that the increase in inventories, a key component of gross domestic product, was in line with economists' expectations. Inventories increased 2.1% year on year in June and private inventory investment contributed 0.82% to the economy. Annualised growth is 2.8% and if you look at the picture beyond that, there's a surge in retail inventories which was offset by just small gains at wholesalers.

Tony HInes: 19:01

Well, that's it for this week. I hope you've enjoyed the news roundup and I hope you've learned something new by listening. And don't forget we've got over 250 episodes of the Chain Reaction podcast, and I'm sure there's something there that you won't have listened to, that you may want to go and listen to, and we've got new episodes coming out all the time. There's some good episodes coming your way in August and September, so look out for the Chain Reaction Podcast. Or, better still, why don't you subscribe? And if you subscribe, you'll be first to know about the new episodes. You'll get it right to your email. You'll be told right away once you subscribe on your favorite platforms. Well, that's it from me. I'll see you next time in the Chain Reaction Podcast. I'm Tony Hines. I'm signing off. See you next time, stay safe and take care. Bye, for now. You've been listening to the chain reaction podcast, written, presented and produced by tony heinz.