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Rolls-Royce Shuts Down Advanced Air Mobility Division Amid Strategic Shift

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Rolls-Royce has announced the closure of its Advanced Air Mobility (AAM) activities within Rolls-Royce Electrical, a division focused on developing electric propulsion for urban air mobility, including air taxis and electric vertical takeoff and landing (eVTOL) vehicles. The decision, disclosed in a trading update on Thursday, marks a significant shift from the company’s ambitious plans to lead the market in electric propulsion for next-generation, low-emission aircraft.

In a previous statement, Rolls-Royce had expressed high expectations for the AAM project, emphasizing that its electric propulsion systems would “lead the way for Advanced Air Mobility” by enabling quieter and more efficient short and vertical takeoffs, with reduced emissions. The company projected that urban air mobility would create a multi-billion-pound market by the mid-2020s, supporting applications from air taxis to cargo transport across cities. These aircraft were expected to carry up to four passengers or light cargo, offering sustainable intracity travel as battery technology advanced and new hybrid-electric models were developed.

However, changes in Rolls-Royce’s leadership and strategy prompted a reevaluation of the division’s viability. Former CEO Warren East was a strong proponent of the AAM project, but after his departure, new CEO Tufan Erginbilgic expressed concerns about the division’s development timeline and the high costs associated with it. Despite financial backing from the UK government, Rolls-Royce was unable to secure a buyer when the AAM division was put up for sale last year. Ultimately, the decision was made to discontinue the project.

While winding down AAM, Rolls-Royce reported steady performance across its other business areas, reflecting positive financial momentum for 2024. Erginbilgic emphasized that the company’s overall transformation is on track, with a focus on building a “high-performing, competitive, resilient, and growing business.” He noted the year’s solid performance to date, with results aligning with the company’s full-year forecast.

According to the trading statement, Rolls-Royce’s guidance for 2024 remains unchanged, with an expected underlying operating profit between £2.1 billion and £2.3 billion and free cash flow projected between £2.1 billion and £2.2 billion. The company expressed confidence in meeting these targets despite continued supply chain challenges. The report also highlighted progress toward mid-term financial goals, with profit and cash flow improvements anticipated to continue.

The company noted its recent efforts to strengthen its balance sheet, an improvement acknowledged by credit ratings agencies that have upgraded Rolls-Royce’s credit rating to investment grade with a positive outlook.

While the decision to close the AAM division represents a step back from Rolls-Royce’s electric aviation ambitions, the company is now placing a greater focus on expanding its core operations and bolstering its financial resilience amid an evolving aerospace market.

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Musk Refocuses on Tesla After Profit Slump, Pledges Major Push on Autonomy

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Elon Musk has announced he will reduce his involvement in government-related work and shift his attention back to Tesla, after the electric vehicle giant reported a sharp fall in profits and revenue for the first quarter of the year.

Speaking to analysts on a conference call Tuesday, Musk said he plans to spend “far more” time on Tesla starting in May, now that the initial phase of work on the Department of Government Efficiency (DOGE) is complete. “I’ll be allocating just a day or two per week to government matters,” Musk said, following months of public scrutiny over his role in the controversial agency.

Tesla’s financial results reflected the challenges Musk now faces. The company posted a 71% drop in profits, with net income falling from $1.4 billion to $409 million. Revenue declined 9% to $19.3 billion, missing Wall Street expectations. Tesla shares, which are down over 40% this year, rose more than 5% in after-hours trading following Musk’s remarks.

“Investors wanted to see him recommit to Tesla,” said Dan Ives, senior equity analyst at Wedbush Securities. “This is a big step in the right direction.”

Autonomous Future Still the Focus

Despite the weak earnings, Tesla reaffirmed ambitious plans for autonomous driving. The company confirmed it will launch a budget version of its Model Y SUV in the coming months and aims to begin a commercial robotaxi service in Austin by June. Musk claimed “millions of Teslas” could be operating autonomously by year-end.

“Can you go to sleep in our cars and wake up at your destination? I’m confident that will be available in many U.S. cities by the end of this year,” he said.

However, industry experts remain skeptical. “The system is not robust enough to operate unsupervised,” said Sam Abuelsamid, an analyst at Telemetry Insight. “It still makes far too many errors.”

U.S. regulators are also watching closely. Tesla’s Autopilot system and “Full Self-Driving” software are both under investigation by the National Highway Traffic Safety Administration over safety concerns.

Rising Global Pressure and Tariff Concerns

Tesla is also contending with fierce competition from Chinese automakers like BYD and growing backlash in Europe, where Musk’s political statements have alienated potential buyers. At home, new tariffs introduced by the Trump administration could affect Tesla’s supply chain and energy storage business, though the company emphasized its mostly domestic manufacturing footprint as a buffer.

Tesla has also halted orders for two models in mainland China amid trade tensions. Nonetheless, it saw a boost from regulatory credit sales, which brought in $595 million for the quarter—up from $442 million a year ago. Positive free cash flow of $2.2 billion provided one bright spot in an otherwise turbulent period.

Looking ahead, Tesla will need to deliver on its autonomy promises and win back market share in a rapidly evolving EV landscape.

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Eurozone Economy Stalls in April as Services Sector Contracts Amid Trade Tensions

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Economic activity in the eurozone came to a near standstill in April as heightened trade tensions and uncertainty weighed heavily on the services sector, according to newly released data from S&P Global’s Purchasing Managers’ Index (PMI).

The Composite PMI for the 20-nation bloc dropped to 50.1 in April from 50.9 in March, barely remaining above the 50-point threshold that separates growth from contraction. The decline reflects mounting concerns over global trade, particularly fresh tariffs introduced by the United States, and fragile consumer confidence within Europe.

A deeper look into the data reveals a widening gap between sectors. The services PMI fell into contraction territory for the first time in five months, slipping to 49.7 from 51 in March. Meanwhile, the manufacturing sector showed modest improvement, rising to 48.7 from 46.1—surpassing expectations and suggesting some resilience among producers.

Across the eurozone, business confidence dipped sharply, with survey respondents voicing growing concerns over tariffs, the broader economic outlook, and delays in customer decision-making. Sentiment is now at its lowest since November 2022.

Germany’s Manufacturing Holds Ground Amid Services Slump

In Germany, the bloc’s largest economy, the Composite PMI fell to 49.7 from 51.3 in March, with the services sector suffering the most. The German Services PMI dropped to 48.8, reflecting client caution and trade-related uncertainty.

However, manufacturing showed signs of stabilization, aided by falling energy costs and a rare rise in export orders. “Most manufacturers are weathering the new tariffs better than expected,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “Production increased for the second consecutive month, indicating cautious momentum.”

France’s Downturn Deepens

In contrast, France’s economy continued its downward slide, with the Composite PMI falling to 47.3 in April from 48 in March. The services sector led the decline with a reading of 46.8, while manufacturing showed only minor improvement at 48.2.

“Demand, especially domestically, is weakening,” said Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank. “The service sector is under considerable strain, and companies have responded by cutting staff.”

Feldhusen added that political instability and fiscal challenges are compounding France’s economic struggles, warning of ongoing pressure in the months ahead.

Inflation Slows, Supporting ECB Policy Shift

Despite the economic headwinds, inflation data offered some encouragement for the European Central Bank. Input costs rose at their slowest pace since November 2024, and output price inflation eased to a five-month low. Analysts believe this could strengthen the ECB’s case for further rate cuts, with some expecting up to three more reductions in 2025.

“With inflation pressures cooling, there’s more room for policy easing,” said de la Rubia. “We may see more targeted fiscal expansion, especially in areas like defense and infrastructure, which could help lift both manufacturing and services later in the year.”

The April data underscores the eurozone’s fragile recovery path, with analysts urging close monitoring of trade developments and domestic fiscal measures.

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Beijing Warns of Retaliation Over US-Led Trade Deals as Tensions Escalate

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China has issued a strong warning to countries negotiating trade agreements with the United States that come at Beijing’s expense, vowing to take countermeasures to defend its economic interests. The statement follows reports that the Trump administration is pressing US trading partners to distance themselves from China during ongoing tariff negotiations.

In a statement released by the Ministry of Commerce, Beijing said it respects efforts by other countries to resolve trade disputes with Washington through “equal consultation.” However, it emphasized that China would “respond resolutely and reciprocally” to any deals that harm its national interests, adding that it will not tolerate being sidelined in global trade talks.

China accused the US of engaging in “unilateral bullying,” warning that if international trade descends into a system where the strong dominate the weak, “all countries will become victims.” The remarks came amid growing concern that secondary tariffs could be imposed on nations maintaining close trade ties with China.

Last week, reports surfaced that the US is exploring such penalties as part of its broader strategy to isolate China economically. In response, Chinese President Xi Jinping made a high-profile tour of Southeast Asia, visiting Vietnam, Malaysia, and Cambodia. The visits were widely interpreted as a move to solidify regional partnerships and push back against growing US protectionism.

Meanwhile, the tariff battle between Washington and Beijing appears to have plateaued. The US currently imposes 145% duties on Chinese imports, while China has retaliated with 125% tariffs on US goods. Both countries have suggested they are unlikely to raise tariffs further. However, tensions have shifted to non-tariff measures.

Beijing recently introduced export restrictions on a variety of critical minerals essential to US industries. In response, President Trump signed an executive order to investigate mineral imports, calling the resources “essential for economic and national security.” Additionally, the US imposed new fees on Chinese-built vessels docking at American ports, following an investigation launched under the Biden administration.

Despite Trump’s repeated assertions that China will return to the table for a deal, there is little sign from Beijing that negotiations are moving forward.

Markets React to Rising Trade Tensions

Global markets showed clear signs of unease as tensions escalated. During early Asian trading hours on Monday, haven assets surged amid widespread risk aversion. Gold futures jumped 1.8% to a record $3,389 per ounce, while spot prices reached $3,376 per ounce. The euro also strengthened significantly, surpassing $1.50 against the US dollar for the first time since 2021. The Japanese yen and Swiss franc also gained as investors sought safe havens, while US stock futures extended their decline.

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