InvestMacro

By Tom Stacey, Anglia Ruskin University 

Automotive giants Tesla and Volvo have announced pauses to the production of their electric vehicles (EVs) in Europe. Electric vehicles are seeing record sales and demand worldwide, but a lack of parts means that factories cannot sustain their production.

The reasons for this are complex. Parts are taking longer to deliver as attacks by Houthi rebels force ships to avoid the Red Sea. And there are also issues around the monopoly that Chinese factories hold on many EV components, including crucial lithium batteries.

These factors have made it harder (and more expensive) to move parts across the globe to support EV production in Europe.

Modern global supply chains are tightly orchestrated. Moving goods to factories (and away from them to customers) is heavily demand driven. Forecasting this demand has become a huge industry, valued at over US$27 billion (£21.3 billion).

But even with all this intelligence, political tensions, pandemics and even stuck ships can turn this industry on its head overnight. This is particularly the case where the supply side is constrained, as it is with EV batteries from China.

In 2021, a container ship called the Ever Given ran aground in the Suez Canal, blocking this vital shipping route from the far east to Europe for the best part of a week. The blockage prevented goods from passing through the canal, so had the knock-on effect of raising container shipping prices.

Even though the Suez canal has been open for two years, the recent attacks on commercial ships in the Red Sea have caused shipping companies to divert their ships to less direct routes – adding significant costs and time.

What does this mean for consumers and the planet? And are there ways for EV manufacturers to circumvent these risks?

Supply chains are fickle things

If manufacturers cannot produce due to shortages, then factories that make a single product such as Tesla’s gigafactory near Berlin (which produces the best-selling Model Y SUV) have one option – to idle the lines. Hourly-paid workers are sent home and where possible, salaried staff will continue in other roles such as safety checking and testing.

Tesla and Volvo have other factories and other product lines that can keep running. But even finished vehicles travelling from plants in China for sale in Europe are affected by the need to avoid the Red Sea. Vehicle manufacturer, Geely, who also produce Volvo vehicles in China, has warned of delays to European consumers expecting their new cars in early 2024.

Delays are not the only issue associated with shipping parts and vehicles around Africa to avoid the Red Sea. The 3,000 extra miles travelled by ships means they burn more fuel – a lot more fuel.

Peter Sand, a shipping analyst at ocean and air freight analytics platform, Xeneta, has estimated conservatively that each ship taking this route produces 2,700 extra tons of CO₂. If the international shipping industry were a country, it would already be among the world’s top carbon-emitting nations. And greenhouse gas emissions from ships are projected to increase by up to 50% by 2050.

EVs are undoubtedly better for the environment than their combustion engine counterparts. However, when supply is constrained, buyers often have little choice but to delay making the switch. Sales figures from 2023 show that private buyers still did not purchase as many EVs in the historically buoyant month of September as they did in the year before due to uncertainty in the market.

Fleet demand remains strong. But the market can only grow as fast as manufacturers can make cars. And pausing production is not going to help the transition.

Can manufacturers square this circle?

Clearly, these pinch points in the global supply chain have huge repercussions for manufacturers and consumers. Tesla’s factory in Germany is tight-lipped about actual production figures, but reports claim it makes around 4,000 units per week. Each car makes around US$8,000 profit, so this shut down could, in raw terms, lead to a loss of US$64 million in profit.

How do they prevent this? Supply chains do have some element of elasticity, but supply chain managers are always keen to reduce the potential of something known as the “bullwhip effect”. This is where marked differences in order quantities lead to even more shortages down the line. Managing expectations and reassuring buyers will thus help to smooth any issues with supply.

Making supply chains more resilient is also a huge area of research. Rerouting ships to prevent lost components is an example of this concept being put into practice.

If the parts were lost to rebel forces or pirates by taking the Red Sea route, then the revenue loss would be even larger. So although diverting routes is worse for the planet and arguably bad press, it would seem to be the lesser of two evils.

Multinational automotive manufacturer Stellantis has announced that it is instead bypassing the Red Sea by air-freighting parts to its EU factories. But, while this is faster than shipping parts around Africa, it’s not good for either CO₂ emissions or cost.

Keeping the global economy running

To reduce the disruptive potential of geopolitical tensions, Tesla and other automakers are attempting to produce their product closer to the consumer. The strategy is to put factories on each continent or geographical area where their products are sold.

However, as China still produces many of the core EV parts, manufacturers will have to invest heavily in their suppliers and put them closer to their factories.

Ultimately, this will require investment in skills and more factories. But with dropping profit margins, Chinese manufacturing dominance and inflationary pressures, it will continue to be a headache to implement.

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Tom Stacey, Senior Lecturer in Operations and Supply Chain Management, Anglia Ruskin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Anne Toomey McKenna, University of Richmond 

Kochava, the self-proclaimed industry leader in mobile app data analytics, is locked in a legal battle with the Federal Trade Commission in a case that could lead to big changes in the global data marketplace and in Congress’ approach to artificial intelligence and data privacy.

The stakes are high because Kochava’s secretive data acquisition and AI-aided analytics practices are commonplace in the global location data market. In addition to numerous lesser-known data brokers, the mobile data market includes larger players like Foursquare and data market exchanges like Amazon’s AWS Data Exchange. The FTC’s recently unsealed amended complaint against Kochava makes clear that there’s truth to what Kochava advertises: it can provide data for “Any Channel, Any Device, Any Audience,” and buyers can “Measure Everything with Kochava.”

Separately, the FTC is touting a settlement it just reached with data broker Outlogic, in what it calls the “first-ever ban on the use and sale of sensitive location data.” Outlogic has to destroy the location data it has and is barred from collecting or using such information to determine who comes and goes from sensitive locations, like health care centers, homeless and domestic abuse shelters, and religious places.

According to the FTC and proposed class-action lawsuits against Kochava on behalf of adults and children, the company secretly collects, without notice or consent, and otherwise obtains vast amounts of consumer location and personal data. It then analyzes that data using AI, which allows it to predict and influence consumer behavior in an impressively varied and alarmingly invasive number of ways, and serves it up for sale.

Kochava has denied the FTC’s allegations.

The FTC says Kochava sells a “360-degree perspective” on individuals and advertises it can “connect precise geolocation data with email, demographics, devices, households, and channels.” In other words, Kochava takes location data, aggregates it with other data and links it to consumer identities. The data it sells reveals precise information about a person, such as visits to hospitals, “reproductive health clinics, places of worship, homeless and domestic violence shelters, and addiction recovery facilities.” Moreover, by selling such detailed data about people, the FTC says “Kochava is enabling others to identify individuals and exposing them to threats of stigma, stalking, discrimination, job loss, and even physical violence.”

I’m a lawyer and law professor practicing, teaching and researching about AI, data privacy and evidence. These complaints underscore for me that U.S. law has not kept pace with regulation of commercially available data or governance of AI.

Most data privacy regulations in the U.S. were conceived in the pre-generative AI era, and there is no overarching federal law that addresses AI-driven data processing. There are Congressional efforts to regulate the use of AI in decision making, like hiring and sentencing. There are also efforts to provide public transparency around AI’s use. But Congress has yet to pass legislation.

What litigation documents reveal

According to the FTC, Kochava secretly collects and then sells its “Kochava Collective” data, which includes precise geolocation data, comprehensive profiles of individual consumers, consumers’ mobile app use details and Kochava’s “audience segments.”

The FTC says Kochava’s audience segments can be based on “behaviors” and sensitive information such as gender identity, political and religious affiliation, race, visits to hospitals and abortion clinics, and people’s medical information, like menstruation and ovulation, and even cancer treatments. By selecting certain audience segments, Kochava customers can identify and target extremely specific groups. For example, this could include people who gender identify as “other,” or all the pregnant females who are African American and Muslim. The FTC says selected audience segments can be narrowed to a specific geographical area or, conceivably, even down to a specific building.

By identify, the FTC explains that Kochava customers are able to obtain the name, home address, email address, economic status and stability, and much more data about people within selected groups. This data is purchased by organizations like advertisers, insurers and political campaigns that seek to narrowly classify and target people. The FTC also says it can be purchased by people who want to harm others.

How Kochava acquires such sensitive data

The FTC says Kochava acquires consumer data in two ways: through Kochava’s software development kits that it provides to app developers, and directly from other data brokers. The FTC says those Kochava-supplied software development kits are installed in over 10,000 apps globally. Kochava’s kits, embedded with Kochava’s coding, collect hordes of data and send it back to Kochava without the consumer being told or consenting to the data collection.

Another lawsuit against Kochava in California alleges similar charges of surreptitious data collection and analysis, and that Kochava sells customized data feeds based on extremely sensitive and private information precisely tailored to its clients’ needs.

AI pierces your privacy

The FTC’s complaint also illustrates how advancing AI tools are enabling a new phase in data analysis. Generative AI’s ability to process vast amounts of data is reshaping what can be done with and learned from mobile data in ways that invade privacy. This includes inferring and disclosing sensitive or otherwise legally protected information, like medical records and images.

AI provides the ability both to know and predict just about anything about individuals and groups, even very sensitive behavior. It also makes it possible to manipulate individual and group behavior, inducing decisions in favor of the specific users of the AI tool.

This type of “AI coordinated manipulation” can supplant your decision-making ability without your knowledge.

Privacy in the balance

The FTC enforces laws against unfair and deceptive business practices, and it informed Kochava in 2022 that the company was in violation. Both sides have had some wins and losses in the ongoing case. Senior U.S. District Judge B. Lynn Winmill, who is overseeing the case, dismissed the FTC’s first complaint and required more facts from the FTC. The commission filed an amended complaint that provided much more specific allegations.

Winmill has not yet ruled on another Kochava motion to dismiss the FTC’s case, but as of a Jan. 3, 2024 filing in the case, the parties are proceeding with discovery. A 2025 trial date is expected, but the date has not yet been set.

For now, companies, privacy advocates and policymakers are likely keeping an eye on this case. Its outcome, combined with proposed legislation and the FTC’s focus on generative AI, data and privacy, could spell big changes for how companies acquire data, the ways that AI tools can be used to analyze data, and what data can lawfully be used in machine- and human-based data analytics.

About the Author:

Anne Toomey McKenna, Visiting Professor of Law, University of Richmond

This article is republished from The Conversation under a Creative Commons license. Read the original article.