How The ‘Cyber Tire’ Has Jeopardized Pirelli’s Future

The vast interconnectedness of the world was always an inevitability, which makes debates about whether it’s a good or a bad thing both important and just a little tiresome. Still, if the last two decades were concerned with the possibilities of global expansion, this decade will be defined by the limitations.

In today’s Morning Dump, we get a great example of this from Italy and tire-maker Pirelli. This is a famous brand known for its high-performance tires and revealing calendars. The company has a technologically advanced tire that it’s anxious to sell in the United States, but it can’t because that tire is now caught in a global power struggle between the Italian government, American lawmakers, and Chinese shareholders.

GM is building more vehicles in the United States, but is that enough to deal with tariffs? Will price increases have to follow? Akio Toyoda’s leadership of his family’s company has been in dispute for the last few years after a wave of controversies. Do most shareholders want to replace him? Nope. Especially not now.

Tesla is also sticking with Elon Musk, who is putting a lot of his eggs in his Austin robotaxi launch. Will it be a real robotaxi service or just a small demo? That’s another big question.

Pirelli And The Golden Power Law

The idea of a global enterprise goes back as far as the Dutch East India Company in the early 1600s. Once mankind had the ability to take stuff easily from one place to the next, opportunities for trade and arbitrage on a large, cross-continental scale emerged (no disrespect to the Silk Road).

This raises questions of who gets to own what, which today we lump under the concept of Foreign Direct Investment. In particular, China has decided to play in a lot of industries that various countries think are core to their economic and physical security. How does this impact Pirelli?

Chinese company Sinochem, which is a state-owned and controlled enterprise, put billions into Italy’s Pirelli in order to gain a majority share. In doing so, it had to comply with Italy’s so-called Golden Power Law, which gives the Italian government control over approving/vetoing sales to non-Italian investors. This law also gives the government the power to place restrictions on owners. In the case of Sinochem, it wasn’t allowed to get involved in the day-to-day operations or change leadership, and has had its overall control reduced over time.

For obvious reasons, the existence of a large shareholder that can’t influence policy running up against a small minority investor (Camfin) that can has inevitably created friction. It’s come to a head lately because of one specific tire, the “Cyber Tire” that uses a Bluetooth connection to communicate more details on the performance of the tire to a car’s ECU. Pirelli thinks this is the future and wants to sell that technology in the United States, which is one of its most important markets.

Why can’t it? The United States banned Chinese firms from deploying any systems on cars that might allow the Chinese government to track where people are going. As Manager Magazin explains, this has caused quite a headache for Pirelli:

Officially, the law serves to protect national security: The government is concerned that sensitive data could be read from the affected vehicles. It is set to take effect starting with the 2027 model year, but also affects technologies being developed today, according to Casaluci. Pirelli is considered a Chinese company because of Sinochem, and the “Cyber Tire” is therefore subject to this embargo.

In order to fix this, the Pirelli board has been pleading with both the Italian government and Sinochem for a change. Specifically, Pirelli wants Sinochem to cut its stake to below 25% so it doesn’t have to deal with this law (it currently has a 37% stake). Sinochem doesn’t seem interested in this and, as of a couple of hours ago, isn’t going away quietly, as Bloomberg reports:

Pirelli & C. SpA’s biggest shareholder, Sinochem International Corp., escalated a clash among the Italian tiremaker’s owners by voting against the approval of last year’s financial results.

The Chinese group was the only shareholder that didn’t approve the 2024 report at a shareholder meeting in Milan on Thursday, according to a press release. The annual report was approved with 57% of the votes.

Clearly, Pirelli’s board can act without Sinochem’s support and still get a majority, but it’s not an ideal situation. The Italian government has pushed its decision on Sinochem’s ownership while it gives the issue “careful assessment.” I suspect one of the challenges is that the Italian government doesn’t want to make the Chinese government too upset while it still enjoys trade with that country, and its automakers require things like Rare Earth minerals and magnets.

GM Is Exercising Price Discipline

Chevrolet Corvette C8 Stingray — Photo credit: Chevrolet

I thought it was interesting that General Motors didn’t join Ford and Stellantis in employee pricing or other big incentives ahead of tariff impacts. Now we’ve got a better explanation from CFO Paul Jacobson via the Detroit Free Press:

General Motors did not join fellow automakers that discounted certain models or advertised tariff-free pricing deals. This choice will aid the company in the long run, Jacobson said, by helping the vehicles GM sells to retain their value in the aftermarket and preserve vehicle profitability.

“I wouldn’t say that we’ve been focused on pricing; we’ve been focused on discipline,” Jacobson said. “Pricing is an outcome of that.”

GM can mitigate further losses, Jacobson added, through a disciplined approach to vehicle inventory. Rather than respond to the cyclical nature of the automotive sector, where car-buying tends to heat up and cool down at various times during the year, he said GM should avoid self-imposed processes that overreact to known changes.

Quarterly sales and financials will be available next month, and I’ll be better able to judge who played their hand better.

Investors Seem Fine With Akio Toyoda

2018 Lexus Dealer Meeting Akio Toyoda 9169493a1f2a50f6699521f904041ddf3d67c8d3 600x400 — Source: Toyota

There was some concern earlier this week that Toyota Chairman and former CEO Akio Toyoda might face a grilling at the annual shareholder meeting over the company’s purchase of Toyota Industries, his statements about EVs, or the ongoing fallout of past scandals. That didn’t happen, though the exact numbers on his reapproval are not yet available (the guess is he’ll do better than the low of 72% last year).

Here’s how Bloomberg describes the scene:

Partway through the meeting, Toyoda reminisced about his longstanding personal friendship with a recently retired sumo wrestler. Later, one shareholder asked if he could trouble Toyoda for a picture together, which garnered broad laughter from other attendants.

Questions about the privatization of Toyota Industries and Toyoda’s role in it never came up.

Well, that’s convenient.

What Is The Cyber Taxi Rollout Actually Going To Be?

Tesla CEO Elon Musk is excited about robotaxis and, probably, excited to not talk about his recent tweeting habits. This is a big deal for the company, even if the robotaxis won’t be the Cybercab we were shown and instead just Model Ys.

It was already announced by Musk that the taxis would be geofenced, but the actual limitations of this system are starting to become even clearer. An analysis from Bloomberg shows that the launch is more of a “souped-up demo,” and former Waymo boss John Krafcik told Automotive News he doesn’t think the company is ready:

“This is my nightmare scenario,” Krafcik said. “Cruise crashes nearly dragged down the entire U.S. AV industry. And right now, the public doesn’t always differentiate between AV operators.”

This is a big gamble. If anyone is in Austin and wants to try out the service for us, hit me up.

What I’m Listening To While Writing TMD

British artist Jamie xx (of The xx) had a low-key hit with his song “Girl.” There are numerous samples in here, but today I want to focus on one. It’s from “Brian Wilson Presents Smile.” Can you hear it? RIP Brian Wilson.