New York, California and Illinois have been
hemorrhaging residents. Almost 3.2 million more people left those states for
elsewhere in the U.S. than arrived from other states, from 2010 through 2019,
according to population estimates released last week by the Census
Bureau. Nine other states saw net out-migration of more than 100,000 people
over that period, but none really came close to the big three.
Thanks to 2 million more births than deaths and 1
million newcomers from other countries, California’s population still grew by
about 2 million over this period, a gain that trailed only those of Texas and
Florida. New York’s population grew but only slightly, while Illinois lost an
estimated 159,751 people between 2010 and 2019. Yes, these are all big states,
but New York and Illinois ranked second and third in net domestic migration as
percentage of 2010 population, behind only Alaska (California ranked 13th).
Where are all these people going? The
Empire Center for Public Policy, a conservative Albany think tank, put together some estimates for New York based on data that
the Internal Revenue Service gleans from tax returns… This inspired me (Justin
Fox) to do the same for California and Illinois. Here are the Empire Center’s
numbers for New York:
Domestic migration statistics are
frequently cited as evidence of the failures of blue-state
governance, in particular the higher taxes imposed by states that are losing
lots of residents. There’s something to that — income-tax-free Florida sure
is attracting a lot of affluent people from Illinois and New York, and
a recent study of high-income California taxpayers concluded that a
2012 income tax increase there did in fact drive some away.
But California, Illinois and New York have all experienced bigger per
capita personal income gains than the nation as a whole since the
beginning of 2010, and all saw taxpayers with incomes below $50,000
overrepresented among the leavers from 2011 through 2018. These departures
may indicate failures of governance as well, but it’s a different set of
governance failures, presumably related more to housing costs, commutes and job
opportunities than taxes per se.
New York leads all U.S. metro areas as the largest
net loser with 277 people moving every day — more than double the exodus of
132 just one year ago. Los Angeles and Chicago were next with triple digit
daily losses of 201 and 161 residents, respectively.
This is according to 2018 Census data on migration
flows to the 100 largest U.S. metropolitan areas compiled by Bloomberg News.
At the other end of the spectrum, seven cities had on
average more than 100 new arrivals every day. Dallas, Phoenix, Tampa, Orlando,
Atlanta, Las Vegas and Austin saw substantial inflows from both domestic and
international migration. Sun Belt cities Houston and Miami claimed the 8th and
9th spots in the ranking. Seattle was the only cold-weather destination among
the top 10.
The migration figures exclude the natural increase in
population, which is the difference between the number of live births and the
number of deaths.
In 10 of the top 100 metros, deaths exceed births.
Thus, without migration these cities would be shrinking. Half of the 10 are
located in Florida. In 11 more cities, mostly in Utah and Texas, there are more
than twice as many births as deaths. Provo, which ranks first in births and
last in deaths, had a 5-1 ratio.
While New York is experiencing the biggest net
exodus, the blow is being softened by international migrant inflows. From July
2017 to July 2018, a net of close to 200,000 New Yorkers sought a new life
outside the Big Apple while the area welcomed almost 100,000 net international
migrants.
The second most attractive locale for international
migrants was Miami with an addition of 93,000, followed by Los Angeles,
Houston, Boston and the nation’s capital, Washington D.C.
Phoenix passed Dallas as the greatest beneficiary of
domestic migration, adding more than 62,000 residents between July 1, 2017 to
July 1, 2018. Dallas got an influx of 46,000, while Las Vegas, Tampa and Austin
rounded out the top five metro areas.
Some areas are affected by high home prices and local
taxes, which are pushing residents out and deterring potential movers from
other parts of the country. About 200,000 residents left New York last year.
Los Angeles had a decline of nearly 120,000 and Chicago fell by 84,000. Miami,
Washington D.C., San Francisco and San Jose experienced similar trends.
WSJ – Daily Shot: US Crude Oil Production (Select States) 8/30/19
Note
that BP just sold out of all its Alaska operations this last week after having
been in business in the State for 60 years
Few places on Earth feel the impact of the automobile
quite so keenly as Singapore. Car ownership rates are low — around 11%,
compared to 80% in the United States — but that still amounts to nearly 1
million vehicles (600,000 of which are private and rental cars) packed into an
island city-state half the size of Los Angeles. Roads account for at
least 12% of the total land mass.
To manage the traffic and other impacts on urban
livability, Singapore imposed the world’s first congestion pricing
scheme in 1975. Initially, it applied only to morning rush hour in the
central business district. But as the numbers of humans and cars expanded, so
too did efforts to control the impacts via such schemes. They were
effective in controlling traffic, but did little to crimp the appetite of
upwardly mobile Singaporeans for new cars that would contribute to traffic.
Indeed, between 1975 and 1989, the annual rate of automotive growth
averaged 4.4% (it peaked at 9.6% in 1980).
So in 1990, Singapore established
a quota for the number of new vehicles annually allowed on its roads.
Aspiring car owners bid for 10-year ownership permits. The cost of
these permits, combined with other taxes, have made Singapore the most
expensive place in the world to own a car, forcing buyers to regularly pay
three or four times more for a model than they would elsewhere. And ownership
is only going to become more expensive: in 2018, Singapore cut the
annual growth rate of new vehicles to 0% (commercial vehicles are excluded from
the policy until 2021). The government justified the cut “in view of
Singapore’s land constraints and our commitment to continually improve our
public transport system.”
They aren’t joking. In 2014, Prime Minister Lee Hsien
Loong unveiled his commitment to a “car-lite Singapore” and a
15-year, $1.5 billion program to boost public transportation. Among other
initiatives, the subway system will double by 2030, to 224 miles (at
a cost of more than $21 billion). The goal is to boost the number of commuters
using public transit at rush hour to 75% and to ensure that
90% of journeys to the city center can reach there within 45 minutes.
Singapore’s government hasn’t been nearly as
aggressive when it comes to aiding the deployment of personalized electrified
automobiles. Just ask Elon Musk: in 2018, he tweeted that
“Singapore govt is not supportive of electric vehicles.”
His grudge, it appears, dates back to 2016, when
Singapore imposed a $10,850 carbon emissions surcharge on a Tesla
Model S to account for carbon emitted during the electricity generation process
(Singapore is heavily reliant on fossil fuels). There is also
Singapore’s slow deployment of battery-charging infrastructure
compared to other countries.
Masagos Zulkifli’s repudiation of Tesla as a lifestyle is
easier to understand. Thanks to Tesla’s premium pricing (and Singapore’s
taxes), a used model S can
exceed $250,000 in the city-state (a new one can be double). In
fairness, other electric vehicles also have eye-popping prices in Singapore —
the Kia Niro is one of the cheapest at $132,600. But from the
perspective of policymakers seeking to electrify transport for as many people
as possible, a car that exceeds the price of some homes isn’t a climate change
solution — it’s a bauble.
“Opinions differ on the exact nature of Tesla, ranging from struggling car manufacturer to tech pioneer to something akin to the second coming. Regardless, it is undoubtedly one thing: a money machine.”
“I don’t mean that in the sense of Tesla making a lot of money; more that it is a machine for the raising and consumption of money.”
“All companies are this to one degree or another, of course; it’s just that Tesla Inc. is more at the ‘another’ end of things. Reliably negative on free cash flow, Tesla depends on a smorgasbord of external funding, from equity raising to vehicle deposits to high-yield bonds to securitized leases to negative working capital. And that smorgasbord rests, of course, on Tesla’s famously gravity-defying stock price and faith in CEO Elon Musk.”
“Which is why these four charts deserve more than a glance from even the most ardent Muskovite:”
“We’re just over a week away from knowing whether or not Tesla has hit its (much reduced) target for producing 2,500 Model 3s per week by the end of the first quarter. The signs thus far aren’t good, which also raises doubts about the 5,000-a-week target for the end of June.”
“Hitting these targets matters for the Tesla money machine on three fronts.”
“First, reducing that risk-laden reliance on negative working capital and getting a return on the money already spent on production lines relies on producing more cars. Second, analysts currently expect Tesla to burn through $2.7 billion of cash this year — and analysts tend to be optimistic on this stuff. Third, when Moody’s rated that bond Tesla sold last August, it was assuming 300,000 Model 3 deliveries this year, which now looks far out of reach.”
“In other words, Tesla’s money machine will almost certainly need to raise more this year due to the Model 3’s problems — but those same problems undermine the pitch for selling more equity or debt.”
“This is happening against a backdrop of rising interest rates. Tesla’s debt has jumped in recent years, especially after it took on SolarCity Corp.’s obligations. Interest expense more than doubled in 2017 and reached the astounding level of one-third of gross profit in the final quarter of 2017:”
“At the same time, Tesla is moving closer to a maturity wall, with $3.7 billion of bonds and credit lines needing refinancing by the end of 2020.”
“Some $1.7 billion of that consists of three convertible bonds falling due between this coming November and the next one. Almost half of it — inherited from SolarCity — is hopelessly out of the money, with conversion prices starting at $560 (Tesla closed Thursday at $309 and change). The rest of it, a $920 million convertible due next March, sports a conversion price of just under $360; still underwater but within sight of the surface.”
“Converting that last one to equity would dilute Tesla’s free float by 2%. But that could be more palatable than the alternative of replacing it with a straight bond.”
“As of now, those three bonds pay a weighted-average coupon of just over 1%, or about $18 million a year. All else equal, assuming they were all refinanced at spreads similar to where Tesla’s 2025 bonds trade now, but factoring in the forecast increase in Treasury yields, that would jump to 7%, or $120 million. Putting that in context, Tesla’s entire interest expense last year was $471 million.”
“A rebound in the stock price would take much of this pain away, of course.”
“Today, established carmakers flaunt their ability to manufacture all kinds of models, from hatchbacks to sport utility vehicles, on a single production line. Their challenge is to revamp these operations to produce electric vehicles in high volumes, reinforcing barriers to entry in an industry under siege from technology companies and start-ups.”
“Instead of coming out with an array of unprofitable electric cars today, the incumbents are putting the bulk of resources into production facilities that will mass-produce models from 2020, once battery costs fall and economies of scale kick in. Analysts suggest this approach leaves the impression the incumbents are lagging far behind Tesla. But once the game actually starts, say experts, the carmakers will be in a strong position to dominate the market.”
“’None of the traditional car manufacturers will have problems scaling up electric vehicle production,’ says Klaus Stricker, co-head of the global automotive practice at Bain & Company. ‘That’s exactly what they do best’.”
“Yet if the stock market is any guide, investors are more skeptical. Valuations of the big carmakers are among the most depressed on the S&P 500, Germany’s DAX and Japan’s Nikkei indices, according to Bernstein. Yet Tesla is valued like its products are set to dominate the car market the way Apple conquered mobile phones.”
“Tesla’s market value of $55bn is about $2.3bn more than GM’s, though for every car it built last year the latter group produced 100.”
“Tesla’s production troubles are a reminder that in automotive history, it is how to build cars, rather than the merits of any particular model, that is key to success. After Ford displaced craft production with mass assembly in 1908, it was overtaken by GM in the 1920s with ‘flexible mass production’ that could produce an array of models, from entry-level to luxury brands, and respond to customer preferences. In the 1980s, both companies were disrupted by Honda and Toyota’s methods of lean production. The Japanese groups outsourced a majority of tasks previously considered critical. With parts arriving ‘just in time’ on the assembly line, they largely did away with inventories.”
“The success of German manufacturers, whose volumes more than trebled from 4m units in 1990 to 15m last year, was largely based on ‘platform sharing’ that let multiple models use the same design underpinnings. VW Group, the world’s largest carmaker, uses common building blocks under ‘the Lego principle’ to share engines, transmissions and components across its 12 brands.”
“These progressive changes were all based on superior methods of producing cars, forcing rivals to adapt or die. ‘Efficiency was always the cornerstone of success in the automotive industry,’ says Oliver Zipse, head of production at BMW. ‘As soon as you were not able to produce in a particular cost frame, you were out of the market’.”
