Markets Slip Again On Fed Fears
The stockmarkets have fallen over 2,000 points in three days now or over 2% so far this week.
On Episode 462 of The Core Report, financial journalist Govindraj Ethiraj talks to Yves Padrines, CEO at the Nemetschek Group.
(00:00) The Take
(05:00) Markets slip again on Fed fears
(07:44) Direct tax collections stay strong
(09:23) Institutional investment in real estate is rising
(10:38) Trump threatens reciprocal tariffs on India in sign that he has not forgotten his original threats
(11:58) How software is changing construction industry practices and timelines
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Thursday, the 19th of December and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
The top stories and themes
The Take
The year 2025 is set to shake up the automotive industry as we know it.
The early symptoms of a shakeup and shakeout were already in place in 2024 with auto sales slowing down in markets like India, Germany auto giants like Volkswagen cutting back and now talk of Nissan and Honda merging.
Nissan Motor Co. is fighting for its life, again, reports Bloomberg and is now headed into the arms of Honda Motor Co. to pool resources in an alliance that could rival Toyota Motor Corp.
Nissan, a prominent Japanese auto brand has been hit by weak sales in the US and China which triggered a huge profit slump that led to jobs cuts and cutting a fifth of the carmaker’s manufacturing capacity.
Nissan has been a surprisingly early starter in several areas, including electric.
Nissan launched the world’s first mass-market electric vehicle — the Leaf — in 2010. But it was never able to capitalize and create a global model like Toyota did with its Prius hybrid.
Now, Nissan doesn’t have the EVs or the hybrids to compete in either the US or China.
Volkswagen plans to shut at least three factories in Germany, lay off tens of thousands of staff and shrink its remaining plants in Europe's biggest economy as it plots a deeper-than-expected overhaul, Reuters reported last month.
Right now, Volkswagen unions are faced off against the management but there is no return to the glorious past is what it looks like.
And then earlier you had to reckon with an auto company launching new models but today you have to think of a mobile phone company that will make a car.
Reports also suggest that Foxconn, best known for making mobile phones for Apple, wants to wade into the Nissan and Honda party.
Back in India, sales have been slowing steadily with manufacturers finally cutting back production to allow for dealerships to reduce their inventories, now down to around 60-65 days from the peak of more than 80 days two months ago.
Be that as it may, electric car vehicle sales after shooting up encouragingly in the early days are slowing and hybrids are now selling more.
There is a bigger problem. Entry level cars, particularly of the kind made by Maruti, have slowed the most as acknowledged by the company in recent interactions with analysts and media.
One reason is rising prices. Cars that cost on an average Rs 6.5 lakh or so four years ago are now costing around Rs 10-11 lakh, dealers have told me in recent months.
The other is that affluent customers are driving demand on the higher ends of automobiles or for most things whereas lower categories are stagnating. This is a problem with incomes in the economy and not just high prices.
This extends to housing as well where low cost housing has stagnated and Rs 10 crore flats are flying off the shelves.
But back to cars, the problem for manufacturers is this.
People will buy cars of course but demand for cars will grow at a very slow, maybe single digit level in the foreseeable future.
But they will buy electric cars, hybrid cars and internal combustion cars or IC cars.
If SUVs (sport utility vehicles) were the flavour of 2024, EVs (electric vehicles) may turn out to be the big theme for 2025. Automakers are gearing up for some 15 to 20 EV launches in the coming year, doubling from a modest seven to eight in 2024, reports the Business Standard.
Which means car makers have to invest huge sums to add capacities for electrics and hybrids if they want to compete there. Conversely, the internal combustion capacity that they have might not get utilised to the fullest extent.
Which is putting it mildly. More likely that a lot of capacity will idle till it gets converted into electric or hybrid as the case might be.
This has the making of a perfect storm for the auto industry. The coming year promises to be exciting and challenging in more ways than one.
That brings us to the top stories and themes for the day
Markets slip again on Fed fears
Direct tax collections stay strong
Institutional investment in real estate is rising
Trump threatens reciprocal tariffs on India in sign that he has not forgotten his original threats.
How software is changing construction industry practices and timelines.
Markets Slip Again
The stockmarkets have fallen over 2,000 points in three days now or over 2% so far this week.
Foreign outflows which have resumed have pushed the Nifty 50 to close below its 50-day moving average for the second straight session on Wednesday, Reuters reported.
Foreign investors are waiting to see how and whether the Federal Reserve will indicate its appetite for rate cuts.
Lower interest rates means more money flows to emerging markets and the like, including India, where returns are high.
But now it appears that rate cuts will be less than what was earlier projected because of fears of inflation in the US, among other things.
Foreign investors offloaded Indian stocks worth about 64.1 billion rupees ($755 million) on a net basis on Tuesday, Reuters said.
The BSE Sensex and NSE Nifty50, ended the Wednesday session in negative territory. The 30-share Sensex fell 502.25 points to settle at 80,182.20.
The NSE Nifty50 ended down by 137.15 points to close at 24,198.85.
The Nifty Midcap100 and Nifty Smallcap100 indices ended lower by 0.64 per cent and 0.87 per cent, respectively.
In general, stock market experts The Core has been speaking to in the last few months have been asking investors to prepare for a more muted 2025 in stocks at least compared to 2024.
Meanwhile, in a surprising development, India's record gold imports that we've been talking about since the day before is said to be due to a calculation error according to Bloomberg, which says that officials probably double-counted gold stored in warehouses and the confusion may have been triggered by a change in counting system. Attempts are apparently on to reconcile the data, which could have been overestimated by as much as 50 tonnes in November or almost 30% of total imports of gold in that month, according to people who spoke to Bloomberg. Now, the important thing is if that error is corrected, the trade figures, that's the overall import, export or other import figures are likely to be revised and traders could expect some correction in the foreign exchange rate as well. So there is a lot of downstream effect, which I'm not sure should be speculated upon right now because it's better if we wait for those final figures to what extent they are corrected. Economists had earlier said that the rise in gold imports in November could not be explained by festive demand alone because it represented a substantial jump, which everyone did notice but we're not sure why and assumed, of course, that the data was accurate. India's overall trade deficit had risen to about $38 billion in November thanks to that four-time increase in gold imports to a record $15 billion from just $3.4 billion a year ago.
Direct Taxes
Overall GDP numbers have slowed down, to 5.4% for the last quarter and company sales are also slowing but tax contributions are still rising.
Net direct tax collection grew 16.45 per cent year-on-year to over Rs 15.82 lakh crore till December 17 this fiscal, thanks to higher advance tax mop-up, government data quoted by Business Standard said.
Gross direct tax collection, which includes corporate, personal income tax and STT stood at over Rs 19.21 lakh crore, a 20.32 per cent growth over the collection in April 1-December 17, 2023.
Advance tax collection during the period rose 21 per cent to Rs 7.56 lakh crore.
The collection includes corporate tax of over Rs 7.42 lakh crore and non-corporate tax mop-up of Rs 7.97 lakh crore.
Securities Transaction Tax (STT) of Rs 40,114 crore was collected between April 1-December 17 of current fiscal year.
Incidentally, some refunds worth Rs 3.39 lakh crore were issued during the period, registering a growth of 42.49 per cent year-on-year.
Oil
Oil prices edged up again overnight after sliding for two days following reports that there was a sharp sizable drawdown in US commercial crude inventories which means increasing demand.
Brent crude was quoting just above $73 a barrel after falling slightly in previous two sessions
Bloomberg reported the American Petroleum Institute saying US stockpiles shrank by 4.7 million barrels last week, which would be a fourth straight decline.
Real Estate Investments
India’s real estate sector is getting more institutionalised across both residential and non residential.
Institutional investment in Indian real estate rose 51 per cent to a record $8.87 billion during 2024 as investors look to encash strong demand for housing, office and warehousing properties, according to JLL, quoted by Business Standard.
JLL India says this compares to $5.878 billion in the preceding calendar year.
Interestingly, foreign institutional investors accounted for 63 per cent of the total institutional investments in Indian real estate.
Among different asset classes, the residential segment attracted 45 per cent of inflows followed by office buildings 28 per cent and warehousing properties 23 per cent.
The deals are not that many though, with institutional investments hitting $8.9 billion across 78 deals. This figure stands as the highest on record, eclipsing the 2007 peak of $8.4 billion," JLL said.
Trump Tariff On India
For those of us here wishing Trump might have forgotten his early promises to slap import tariffs on exporting countries like India, tough luck.
Nor is he forgetting the famous Harley Davidson tariffs or duties on imports of Harley Davidson bikes into India though Harley Davidson has already moved on in some ways by manufacturing its lower capacity bikes in partnership with Hero in India.
In his latest round of threats, US President-elect Donald Trump has said he will impose reciprocal tariffs if the country continues to levy high taxes on American goods.
Speaking with reporters at his Mar-a-Lago resort, Trump criticised India’s steep tariffs, including the 100 per cent tax on certain US products, and warned of a tit-for-tat approach if these practices persist, according to agency reports.
“I’ve always said, if they tax us, we tax them the same amount,” Trump remarked, signalling a tougher stance on India and other nations like Brazil for imposing high tariffs on US imports.
His comments formed part of a broader discussion on the state of US trade relations with major partners such as China, Mexico, and Canada.
Trump specifically highlighted India’s significant tariffs on American goods, including a 100 per cent tax on items like motorcycles and consumer products. He argued that such policies create an unfair playing field for US businesses.
“The word reciprocal is important because if somebody charges us – India, we don’t have to talk about our own – if India charges us 100 per cent, do we charge them nothing for the same?” Trump stated, reiterating his view that the US should impose equivalent tariffs to address these imbalances, Business Standard reported.
Construction Projects
Some 90% of all construction projects are either late or over budget, which means the ones that are late are quite likely over budget too.
Moreover,40% of the global CO2 emission is coming from the construction industry, and not only in the design and construction phase, but of course a lot in the operate and manage phase.
Technology can play a useful role in cutting times and also managing emissions in projects.
This is a slightly different way of looking at sustainability and through the eyes of a company working in the global architecture, engineering and construction space.
I spoke with Yves Padrines, the Germany based CEO of the Nemetschek Group which also expanded its R&D base in India. I began by asking him about what companies like him were bringing into the project management industry.
INTERVIEW TRANSCRIPT
Yves Padrines: Well, you're right. I think 90% of all the projects globally in construction are either late or over budget. And it's clear that digitalisation can help to deliver on time and on budget.
But the other issue also that the construction industry has is the fact that 40% of the global CO2 emission is coming from the construction industry, and not only in the design and construction phase, but of course a lot in the operate and manage phase. And then 20% of the material used in a construction project are wasted. And last but not least, the main other challenge, like a lot of industries, there is a huge lack of skill set and manpower in construction.
People are talking even about over 7 million employees are missing in the overall construction industry globally. At Nemetschek, we have a big range of different software solutions. So we are really covering the entire life cycle of construction from design planning, where we have software solutions like ArchiCAD or Vectorworks, which are mainly dedicated for architecture firms.
Alplan for engineering firms, including structural engineering and design solutions. Solibri, which is more clash detection, Beam quality insurance. And then on the construction side, we have Bluebeam, which is a collaboration software to exchange PDF files, to do markup on PDF.
Then we just acquired in July the US company called GoCanvas, doing field management, on-site safety and also fire software solution. And then we have on the operate and manage side, also a solution called SpaceWell, which is doing workspace management and also energy management software. And then we have two horizontal solutions.
One is called DROFUS, which is data management software to make sure that the owner of a complex project, they don't have any loss of data during the life cycle of construction until the delivery and the handover. And then we just launched a few months ago, a new solution called DTWIN. So DTWIN is an open data digital twin of a building combining historical data, any data that you can have from a building.
Of course, the Beam model, if you have it, but it can be photo, pictures, PDF, specification of material. And we're combining that together with live data, with sensors. And the use cases are mainly around predictive maintenance and also energy efficiency software.
So overall, you know, we have a big range of different products and solutions. And our main goal is to help all the players in the construction industry to be more efficient, more productive, and of course, more sustainable.
Govindraj Ethiraj: And what would be examples of large projects where you're involved both at the construction stage as well as the operating stage? And you talked about sensors, which is more of operations. And if you can maybe give us some examples.
Yves Padrines: Well, we have many examples of especially on the hospital and clinic sides. Just one example, where we are providing, first of all, our Beam software solution to do the design of the building. For example, Archicad.
Then Solibri is used to make sure that there is Beam quality insurance and clash detection with the model. Then DeRofus is used by the owner and also the architects to make sure that all the specification that you have as an owner of a hospital or clinic, which is quite complex in terms of specification, there is no data loss in the overall lifecycle of the building. So from the design construction side up to delivering them the keys to the owner.
Then Bluebeam is used a lot in terms of collaboration software in the design phase, but mainly in the construction phase to make sure that there is no good collaboration, exchanging PDF files, you know, doing the markup on PDF, etc. And then after the handover, I mean, the example here is that hospitals are using workspace solution from SpaceWell. Also energy management solution from SpaceWell.
And now planning also to use our dTwin solution, which is kind of this open data centric digital twin of a building combining any historical data that they have. And here, as it is a new building, they have a lot of data because, you know, with a Beam software solution, also with DeRofus, they have any type of data. And of course, also all the life sensors.
Now, the good thing also with our dTwin solution, the data can come from anywhere. So it doesn't need to be data coming from Nemechek. It can be also from third party software or anything at the end.
So that's one example. And then we have other examples, of course, as it is a fragmented market construction. You know, there are also a lot of construction projects where, for example, a big one in Australia, where there are over 45 software solutions used in the construction project, which is almost kind of a city that they are currently building.
Is this the one in Brisbane? Absolutely, yes. And here, yes, they are using Archicad from Graphisoft, Solibri also, Bluebeam, DeRofus, etc.
But then there are many other solutions. And here's a good thing with DeRofus is that clearly it can also take any data from third party. And then what is very key for us is that we are really pushing for open Beam, for interoperability, for open standard.
And we are pushing for some workflow and bridges with a different solution because we are convinced that as the market is so fragmented, we can push for proprietary standard. It has to be open standard and pushing interoperability for the construction to work.
Govindraj Ethiraj: You talked about hospitals as one example. So if I were to stick to examples, you know, in countries like India, some of the biggest projects are actually run by government. And I'm sure that's the case in many other countries as well.
So where do you see the biggest application for software like this? Whether it's at the construction phase or it's in the operation phase or even during construction by building or creating these digital twins that you spoke of?
Yves Padrines: So if you look Nemetschek, we do around 50% of our revenue today in the design and planning phase. Why? It's also because the company was founded 61 years ago by Professor Georg Nemetschek here in Munich.
And then it became the second largest software company in Germany and one of the top two being players, especially in buildings. So if you look at our design and engineering piece, a lot of the projects are in residential and commercial. So mainly buildings, of course, also in the public sectors with larger and complex buildings.
We have also data centres, logistic centres, but a big piece are buildings for commercial, residential and office buildings. And if you look even especially in Europe, the majority of our customers in design and planning are small, medium sized customers. For example, just in Germany, there are over 40,000 architecture firms and the average number of users or employees in a marketing firm in Germany is two.
A lot of them are working in residential or commercial buildings. Then we do 40% of our revenue in North America, in the US. And here it's mixed.
Of course, it's design and planning, but it's a lot also in construction. And here in construction, it's everything. You know, it is from infrastructure projects.
It is a lot also in the public sector. It is also in residential and commercial. And then in the operate and manage phase, all solutions are mainly linked to the building area, less to infrastructure.
Then we have also a specialised solution in design and planning called Alplan Bridge and Transportation, where here we have solutions mainly for bridge tunnels and transportation for design and engineering.
Govindraj Ethiraj: You talked about 40% of the carbon dioxide being generated during construction and then, of course, subsequently in the operation of a building. Now, how does your software help reduce that at either of the two levels or how is it doing so right now?
Yves Padrines: In different stages. First of all, already in the design phase, using some altering tool and beam solutions, such as the one from Nemechek, like ArchiCAD or Alplan or Vectorworks, we are able already to make sure you use the right materials, that you are also designing greener buildings, and also that you make sure that you have buildings which are going to be more energy efficient. So already in the design phase.
Then in the design phase, you're also making sure that you do not waste too much materials during the construction. By first of all, calculating properly the quantity and the volumes of material you really need and not to overbuy materials, but also to avoid clashes and defects. Because the big issue of waste of material is the fact that there are still a lot of defects, and then you need to reconstruct things which have been already done.
And here with clash detection software, such as Solibri, Beam Quality Insurance Software Solution, you can avoid a lot of these defects and clashes that you may have. So that's already in the design and engineering phase, if you want, design and planning phase. Then in construction, here, software solutions can help definitely in programme management to deliver better on time and on budget.
There is also very good field management solutions such as GoCanvas that you have, but also third-party solutions existing in the market. And here, you know, competition is really pen and paper or Excel somehow. And here, you can much better manage, better collaborate also between different parties, for example, using Bluebeam.
You can have a very quick return on investment with a solution like Bluebeam on saving time, but also cost at the end with collaboration software. And then if you lose time and cost, well, it's also energy savings, you know, at the end of the day. And then last but not least, on the operate and manage phase, this is really where there is a lot of, of course, consumption of CO2 emission.
Here, it is really to make sure that you have strong energy management software to be more energy efficient. And here, D-Twin solution can really make sure that you're managing properly your office space, for example, that, you know, you turn the heat when some of the rooms are not too much occupied or less occupied. You can really plan properly all of that.
And frankly, artificial intelligence is now used in the overall lifecycle. So you have, for example, our AI visualiser is used a lot for architects to help them to be much more productive, to do quicker sketching, et cetera, or to change the model in a much quicker way so that they are kind of an augmented architect or augmented engineer. And then AI is also used, you know, for example, Bluebeam is now going to, which is mainly using PDF Bluebeam 2D, that once you have many PDF in 2D, automatically you're going to have a 3D plan.
But AI is used a lot, a lot in operate and manage phase because you have so much data to analyse, et cetera, especially in energy efficiency that AI is out there.
Govindraj Ethiraj: You've set up base in India, both in Mumbai and in Hyderabad for R&D. Can you tell us about what kind of work is going on in your India development centres?
Yves Padrines: So our development centre and shared resource centre is in Hyderabad, where we have R&D across all the different solutions that we have. So from design and planning, build and construct, but also operate and manage. In fact, it used to be SpaceWell India.
So first in the operate and manage phase that we had in Hyderabad, and then when I joined the company a few years ago, we decided to make it Nemetschek India so that we can really benefit from all the fantastic, strong, good talent that we have in Hyderabad, benefiting all our brands and solutions. And then earlier this year, we decided to open a go-to-market office in Mumbai, Nemetschek India in Mumbai, representing here in terms of sales, marketing, customer support, the overall Nemetschek group and all different brands. And, you know, it was a bit of a shame for us that we were not present directly as Nemetschek.
So we were mainly using small, medium-sized resellers to help us on the go-to-market in India. And now we really want to go directly as Nemetschek, representing our overall portfolio. And Nemetschek India is also proposing to sell some suites and bundles of the different Nemetschek solutions, combining, for example, Archicad or Vectorworks for architects together with Solibri on cloud detection and beam altering tools together with Bluebeam on collaboration software, etc.
And India is the third largest construction market in the world. It is in the top five economy and soon in the top three. And we really want to help the overall Indian construction industry to be more efficient, productive and sustainable.
And that's why we also started to also invest in academia and education. For example, earlier this year, we made a partnership with J.J. College launching this Nemetschek AEC Centre of Excellence, educating students about what they can do with software, how digitalisation can help to be more efficient, more sustainable from the design phase up to the operator-managed phase. And we started to do this type of partnership with other large universities across the country and more to come.
Govindraj Ethiraj: Thank you so much for joining me.
Yves Padrines: Thank you.
