A great leap forward for EVs was on view at the Shanghai Auto Show.

The annual event, which began Wednesday and concludes on Friday of next week, has thus far proven that the electric vehicle industry is not just the future of China’s automotive market — but its present, too. That has both international car manufacturers and the oil industry suddenly looking a bit on the ropes.

The BYD-I-Y Auto Industry

China’s automobile market has experienced two separate radical shifts so far in the 2020s. First: the shift to EVs. In March, new electric vehicles (a category that also includes plug-in hybrids) made up more than half of all car sales in the country, according to the China Passenger Car Association (CPCA), after first crossing the 50% mark in August. New EVs accounted for roughly 13% of all car sales in China back in 2021.

The rapid adoption has turned China into the biggest EV market in the world, by far; last year, China accounted for over 60% of the world’s EV sales. That coincided with the second radical shift in China’s car market so far this decade: the rise of China’s own domestic car manufacturers. Chinese companies accounted for about 60% of all passenger vehicles sales in the country last year, according to the CPCA, up from about 35% in 2020. “The Western carmakers slept their way through the pandemic while the Chinese rode the EV revolution,” Andrew Fellows, global head of automotive and mobility at tech consulting firm Star, told Reuters. “They’re going to find it hard to dislodge the local carmakers.”

To do so, international manufacturers are increasingly leaning on local Chinese talent:

• Volkswagen, which was long the top-selling car brand in China until domestic player BYD surpassed it last year, debuted five new upcoming models at the trade show this week in a bid to halt declining sales, which were down 6% in the first quarter. One model was built in partnership with state-owned auto manufacturer FAW in a bid to reduce costs by as much as 40% to compete with cheaper domestic models.
• Meanwhile, Mercedes-Benz is preparing to launch its electric CLA model in China later this year, with an operating system developed by a local research team. Also this year, BMW plans to introduce its Neue Klasse EV line, which was developed in partnership with domestic tech leaders Huawei and Alibaba.

Tesla, notably, was absent from the trade show for the second straight year; amid its global annual sales decline, Tesla also saw its China market share dip from around 15% to 9% in the first quarter.

Oil Spill: China’s EV revolution should continue another trend in the region, too. After accounting for about 60% of the global increase in oil demand between 2013 and 2023, according to the International Energy Agency, China last year saw crude oil consumption decrease, by about 1.2%. Recent domestic advancements in EV battery technology will likely only fuel the pivot from oil. Last month, BYD announced a battery-charging breakthrough. This week, Chinese battery-maker CATL debuted a battery that it says can be charged just as quickly and lasts even longer. In other words: In China, post-peak oil may already be here.

Even if the Amazing Kreskin had a PhD in economics, he’d still have struggled to read the Fed’s mind. Many have tried, nearly all have failed.

But there are times that members of the central bank’s monetary policy committee will just blurt out what they’re thinking. That was the case Wednesday, as Cleveland Fed President Beth Hammack — an alternate this year — said “clear and convincing data” could prompt interest rate action, suggesting the central bank is ready to move if economic conditions call for it.

Torn in Two Directions

Speaking on CNBC Thursday, Hammack called on policymakers to “be patient” when it comes to monetary policy and to take their time “looking at the data, the hard data.” That was an effective endorsement of the market’s expectation that the Fed will almost certainly leave rates untouched when it meets on May 6 and 7.

Meanwhile, the numbers that could persuade the Fed to move — which Hammack hinted could happen at its June meeting — come down to a game of macroeconomic tug of war. On the one hand, the Trump administration’s tariff plans have led to persistent fears that inflation may worsen in the coming months. That hasn’t materialized yet — March saw a lower than expected 2.4% CPI reading, for example — but it could pressure the Fed to stand pat for longer and hold rates. Insert your gripe about egg prices here.

On the other hand, those same tariff forces have threatened to hamper economic growth — JPMorgan Chase has pegged the odds of a US recession at 60% this year and Goldman Sachs at a more conservative but still serious 45%. Slowed growth would encourage rate cuts to stimulate activity. One key economic indicator, the jobs market, has remained resilient, with new data Thursday showing only a marginal uptick in unemployment claims last week. Hammock said the coming few weeks will be instructive for what’s next:

• “If we have clear and convincing data by June, then I think you’ll see the committee move if we know which way is the right way to move at that point in time,” she told CNBC. Waiting until the Fed’s June 17 and 18 meeting would give the Fed time to see two months of CPI data scheduled for release in mid-May and mid-June, as well as first-quarter GDP estimates scheduled for release in the next few weeks.
• Investors pegged the chance of a June rate cut at 65% as of Thursday, up roughly four percentage points from the previous day, according to the CME FedWatch.

Hammack did flag a worst-case scenario of sorts: “If it’s higher inflation, lower employment, that’s where things get really complicated.”

Reason to Yield: The yield on 10-year Treasuries declined seven basis points to 4.31% on Thursday, in part because President Trump said the US and China are in talks to resolve a trade war (which Beijing denied, reiterating its call for a unilateral disarmament) and as he pulled back on heated rhetoric about the Fed’s independence. That is good news considering yields have recently shot up despite the economic uncertainty, leading to worries US assets had lost some appeal as a safe haven.

TFW you pick the “Advance to Go (Collect $200)” card out of the Community Chest.

Hasbro’s stock surged by double-digits yesterday after the Monopoly board game maker shared an estimate-crushing 17% revenue jump for the first quarter and a 69% hike in profit. After revenue fell 15% in the holiday quarter, Hasbro debuted a profits-focused “Play to Win” strategy it says is starting to pay off.

But it might not be fun and games for long: Hasbro hasn’t updated the annual forecast it gave last month to factor in new tariffs. The company sources half of its toys and games from China, where the Trump administration recently slapped a 145% tariff on goods.

The Dolls are Balding

Without Chinese manufacturing, the CEO of MGA Entertainment (Bratz, L.O.L. Surprise!) doesn’t know how the company will keep putting hair on its dolls’ heads:

• Chinese factories churned out 75% of all the toys and games sold in the US last year, according to the US Commerce Department. The Toy Association said it would take years to move the supply chain to the US, but some tricks of the trade won’t be so easily transferred.
• While the US can take on highly automated manufacturing, toy-making still taps skilled hand-labor, like painting doll faces, that China specializes in. MGA Entertainment’s CEO said there’s no American factory that can make doll hair: “What am I supposed to do? Sell bald dolls?”

As toymakers struggle to find skilled labor in the states, Hasbro predicted the price of some toys could rise 50%. Barbie-maker Mattel, which like Hasbro hasn’t yet updated its guidance to reflect new tariffs, has also warned of potential price increases.

The Tariff that Stole Christmas: Spring is a critical time for the toy industry, because it’s when production starts to ramp up ahead of holiday shopping. Companies that keep Chinese factories humming like normal in hopes that tariffs will be just a bad dream could be hit with a harsh reality when it’s time to ship. Unwilling to take that risk, Basic Fun!, which told CNN all of its toys (including Care Bears and Tonka Trucks) are made in China, paused all production. Its CEO said tariffs don’t just threaten the price and availability of toys, but the industry’s very survival.