Have U.S. Cars Lost Their Edge?

Ukraine claims Starlink is throttling its internet speed, foiling its attacks against Russia. Plus, we've got the scoop as Yemen's Houthis pursue the creation of an advanced homegrown missile. And the EU tries to hold off foreign competition as Chinese car makers flex their might at the Paris Motor Show. The European Union is now talking about a $1 billion a day deficit, trade deficit with China. There's been a real sea change, I would say, in the geopolitics of this. It's Wednesday, October 14th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. Ukraine is claiming that the connection speeds of its Starlink satellite internet terminals are being limited, complicating drone missions over Russian-occupied areas of the country. An advisor to President Volodymyr Zelensky said Ukraine had received no warning about the restriction, which comes as President Trump has called for an immediate energy ceasefire in the war. SpaceX, which produces Starlink, didn't immediately respond to a request for comment. Meanwhile, we are exclusively reporting that Houthi militants in Yemen are attempting to build an advanced new missile using parts from China. Journal reporter Lawrence Norman has more. According to a report, that we obtained from Conflict Armament Research, which is a weapons expertise organization, the Houthis have been bringing in the key components for a medium-range advanced ballistic missile that they have in the past received in limited quantities from Iran. The Houthis are not only a threat to the Red Sea shipping lanes, as we've seen over the last week, they're able to strike deep into Saudi Arabia. They have also repeatedly hit Israel, including a strike very near the Ben Gurion airport in Tel Aviv in May of 2025. So, armed with Iran's missiles, they have already been a powerful threat. If they can produce these type of medium-range missiles that can go up to 1,800 kilometers at home, at will, in very well-guarded, hidden missile production sites, then we have an even bigger problem with the Houthis than we thought we had. China says it's respecting a U.N. ban on selling arms to the Houthis. Overnight, Saudi Aramco's headquarters were hit by a Houthi strike, highlighting just how exposed the kingdom's oil assets are to the conflict. Thanks in part to continued attacks on refineries, fuel prices remain nearly double pre-war levels, and according to the International Energy Agency, supplies will remain tight well into next year. It said that worldwide diesel supply dropped by 1.7 billion barrels a day in the third quarter, pushing the fuel market into a deficit, just ahead of peak winter demand. That's set to strain businesses even more, raise inflation risks, and squeeze refiners already facing soaring shipping and crude delivery costs. In a powerful signal of continued strong AI demand, Dutch chip machine supplier ASML is boosting its guidance for the third time this year. Its stock is gaining on that news. Reporter Mauro Oro crunched the numbers in ASML's quarterly report and said that its margins are holding steady, and its order book already filling up for 2029 and 2030. Chief Executive Klikstofelke has singled out AI as the main driver of demand for several quarters now. ASML's clients are big chip makers like TSMC, Samsung, and Intel, and they are investing heavily on chip production, as their own customers want more and more for personal electronics, vehicles, and especially data centers. And clearly, they need more and more ASML's machines to ramp up production. It was in July when ASML said it planned to boost capacity of its machines. At the time, it was looking at a 30% boost for 2027, followed by another 30% increase in 2028. Now, CEO Klikstofelke said it was becoming increasingly clear that 30% next year and again in 2028 would not be enough for ASML to meet demand from its own customers, and the company is now looking at ways to boost output even more. Unsurprisingly, ASML's stock has grown significantly this year given the demand environment. It's up about 70% since January and over 80% in the past 12 months. Of course, there could be a few bumps on the road, as semiconductor stocks tend to be quite volatile, but if it holds its course, it's on track to become Europe's first company that will be worth over a trillion dollars. Meanwhile, China is reporting a major jump in exports for September, topping economist forecasts on the back of strong demand for its green tech and AI-related products. As we'll discuss later, auto shipments surged 56%, driven by strong overseas appetite for Chinese EVs. That export strength could heighten tensions with major trade partners like the U.S. and the EU, which has pressed Beijing over a widening trade imbalance. The International Monetary Fund is warning governments in advanced economies against relying too much on short-term debt. Our Paul Hannon has more on that message, which is coming out of the IMF's annual meeting this week. Paul, this sounds, I'll be honest, a bit like a textbook warning from the IMF, but one heightened in urgency, I imagine, by rising borrowing costs. Is that right? Yes, exactly. It's very much timed for the moment. Inflation is picking up. Central banks are raising their interest rates. And, investors think that there's more of that to come. So, what that means is that short-term borrowing costs are rising. And also, for governments that have to refinance their debt, that means issuing you bills or bonds to replace the money that they've paid out for maturing securities. So, if you borrow at 10 years, you don't have to do that right now. You can wait until the war is over and peace has been restored to the world. But if you are borrowing at a year, or two years, which is the case with a lot of what the U.S. government has been doing, then you don't really have a choice. You have to take the price that's on the table, and that's going to be higher. So, the IMF is warning against leaning too much in direction of short-term debt because it exposes you to these risks. You mentioned the U.S. there. How diplomatic is the IMF in how they couch these things? Did they name any names? They sure did. The warning was made in a blog posting. But behind that blog posting is an academic paper. Of considerable length, about 214 pages. And it's solely devoted to the U.S. situation because the U.S. stands out as being a heavy user of these short-term debt instruments. And in fact, what they're sort of doing is saying, well, maybe it's maybe a little bit too late for the U.S. I mean, the U.S. has about a quarter of its total outstanding debt in short-term instruments. Most other G7 countries are well below that, around about 10% or lower. So, for other governments, for example, France, which is considering this move, it's a warning to maybe think twice about doing that. Paul Hannon is the economics editor for Dow Jones Newswires. Paul, appreciate the update. Thank you. Thanks, Luke. Coming up, have Washington's moves to keep Chinese cars out of America lost the U.S. its competitive edge? We'll consider that and other trends with a report from the Paris Motor Show after the break. It's called the Paris Motor Show, but as our Stephen Wilmot is here to discuss, it's Chinese automakers making the biggest splash at the Biennial Industry Showcase, where Stephen is joining us from today. Stephen, we've had you on the pod a lot in recent years discussing how, especially in Europe, Chinese carmakers are offering vehicles that have premium features, but at budget prices. Big picture. I know that theme has come up again this week in Paris, but are there some individual moments you'd highlight that speak to just how front and center that trend is? Yes, well, hopefully you can hear in the background the hubbub of the Paris Auto Show, which is in full swing. I was just at the BYD store, so BYD, obviously the world's largest EV maker and front and center of the push into the European market by the Chinese brands. And there were quite a few Renault engineers who were checking out the competition. But then I also spoke to some buyers and the theme came up again and again, amazing value for money, basically. One wrinkle is that at the show, we've also had quite a lot of Chinese luxury brands coming in. And of course, China has quite a different sense of what luxury is to Europe historically, much more about internal comforts, massage seats, big screens, cooling boxes, that kind of thing, rather than the kind of driving handling quality that the German brands are traditionally known for. I think that that market is a bit wider open where consumers are a bit less value focused, a bit less clear. The likes of Xiaopeng and Li Auto and Ito, which announced that it's coming to Europe, can make inroads there. And yet, in fact, it's a bit less value focused. You know, at least in Britain, the top selling car is sort of going right up against Range Rover and, you know, maybe among a different cohort of buyers, but doing really, really well. Yes. Extraordinarily, the best selling car in Britain of all last month was a Chinese brand, Jaikou, all imported. Jaikou is made by Cherry, which is China's largest car exporter. And it's a brand that has taken Britain by storm, partly by channeling the looks of Range Rover and plays into a very British sense of what premium is, whilst not fetching premium prices half the prices you report yeah yeah half the price basically All right. So Europe has become a really fertile market for Chinese brands. It's clear. But the broader outlook for some of these companies does seem a bit uncertain at this moment. As we mentioned on Monday's show, the domestic Chinese market is pretty weak. The European Commission this week pushing to limit the number of Chinese hybrids that can be imported into the EU starting in December. And we should know Chinese cars remain mostly shut out of the large American market. How are these brands sizing up where they go from here? Yes. Well, the European Union is now talking about a $1 billion a day deficit, trade deficit with China. There's been a real sea change, I would say, in the geopolitics of this in the European Union. And that has led finally to this agreement that we got first hints of on Friday. It looks like that could really slow the growth of the Chinese automakers, unless, of course, they localize production in Europe. And that was a very big theme of this show. So in Europe for Europe was a slogan emblazoned everywhere on the. The Xpeng stand, Chang'an, one of the largest state-owned automakers in China, which has got big ambitions in Europe. It was also talking about it, laid out sort of ambitions to have local production capacity of 180,000 vehicles by 2028. And of course, the geopolitics are most complex, or most challenging, shall we say, for the Chinese automakers in the US, where essentially they're shut out of the market by high tariffs and regulations on software. And yeah, there's no immediate sign that's going to change. So when you ask. When you ask Chinese automakers how they think about the US market, you get responses like, well, be ready to go there if it opens up, whilst BYD was adamant that, you know, they don't need the US market to be a global player. And I think that's one of the interesting questions, both for the Chinese automakers and the US automakers, is what does it mean to be a global automaker anymore? Can the Chinese be global without the huge and lucrative US market? And can US automakers be global without actually competing in their domestic market with the Chinese? Because, well, as. Volkswagen CEO is always saying, China is the fitness center of the automotive industry. So if you're not competing against the Chinese here in Europe, for example, at the Paris Auto Show, having consumers compare your vehicles alongside the Chinese ones, can you really remain globally relevant? And I think that that's definitely a question for Detroit. You know, as I'm curious about what Detroit's presence looks like there, what case are you hearing, Stephen, from American brands for why they remain globally relevant beyond this very walled-off American market, as you've described it? Well, there are only three American brands represented at this show, Ford, Tesla, and Lucid. GM, of course, pulled out in 2017 by selling its business, O'Call and Vauxhall, to what was then Peugeot and now Stellantis. And Ford itself has been shrinking quite a lot in Europe as it retreats from the less lucrative small car segments, for which it was very well known. It was the best-selling brand in Britain for many, many years, decades. But it's retreated from those segments in favor of a strategy of selling fewer cars at a higher price. And that leaves Tesla and Lucid. Lucid is obviously a very small player. And Tesla, you know, did have a big success in Europe. And still, Model Y is one of the most popular vehicles. It's really retreated in a way from its big volume ambitions in favor of focusing on technologies, humanoid robots, and robo-taxis. So, yeah, the future of automotive technology is really up in the air. And that's also on show here in Paris. I've been speaking to journal European Autos reporter Stephen Wilmot at the Paris Motor Show. Stephen, thank you so much for the update. Thank you, Luke. And that's it for What's News for this Wednesday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. And until then, thanks for listening. Transcription by ESO. Translation by —