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1. California effectively bans the sale of new gas-powered cars starting in 2035
  • California governor Gavin Newsom recently signed an order requiring 100% of all new cars and passenger trucks sold in the state to be zero-emission by 2035. The order will effectively ban the sale of new internal-combustion vehicles (i.e. gasoline- and diesel-powered), though it will not prevent Californians from owning gas-powered cars or transacting on the used-car market.
  • The order also mandates that, “where feasible,” operations of medium- and heavy-duty vehicles (e.g. commercial trucks, construction vehicles) should also be 100% zero-emission by 2045. The California Air Resources Board is tasked with developing these regulations, as well as coordinating with other state agencies on strategies to achieve 100% zero-emission in off-road vehicles and equipment operations.
  • California, often a bellwether for national regulation, is the first US state to commit to a full ban on traditional internal-combustion vehicles. It is the largest car market in the US with 1.9M new passenger vehicles sold in 2019, representing 11%+ of the US market. The only at-scale production auto-manufacturing plant in California belongs to Tesla, an electric-vehicle company.
  • The order, once implemented, is expected to achieve a 35% reduction in greenhouse-gas emissions in the state. To reach these goals, the state will need to transition away from traditional gas stations and upgrade its electrical grid and charging infrastructure. The order directs state agencies to “accelerate deployment of affordable fueling and charging options,” assess the infrastructure required to support higher levels of electric-vehicle adoption, and support new and used zero-emission vehicle markets.
  • Automakers are already committing billions to electric vehicles and other new technologies (VW: $38B by 2024; Ford: $11B by 2022; GM: $20B by 2025; Hyundai: $87B by 2025). However, these investments are still anticipating a relatively small proportion of electric vehicles (for instance, if Volkswagen hits its goals, just 20% of its vehicles will be battery-electric in 2025). If bans on internal-combustion vehicles are instituted and enforced more widely around the world, it will have sweeping implications for the automotive ecosystem – including automakers (which will have to reorganize their R&D investments and manufacturing), their suppliers, and the fueling and energy infrastructure.
Related Briefs:
  • Sep 25 2020 (3 Shifts): Tesla’s plan to cut battery costs by 56% within 3 years
  • Jun 5 2020 (3 Shifts): Investments may spur a rebound in China’s electric-vehicle industry
2. Microsoft and Amazon push forward on cloud gaming
  • The past few weeks have seen Microsoft’s public release of its Xbox cloud-gaming service (also known as xCloud), and Amazon’s early-access debut of Luna. These two are among the host of players vying for the cloud-gaming market – a group that includes Sony’s Playstation Now (2.2M+ paid subscribers), Google Stadia (1M+ app installs), Electronic Art’s Project Atlas, Nvidia’s GeForce Now, Tencent’s GameMatrix, telcos Deutsche Telekom and Verizon, and others.
  • Cloud gaming is game-streaming with processing in the cloud and rendered frames delivered to a “thin client” on a user’s device. In theory, cloud gaming allows premium console- and PC-quality games to be played from anywhere, even mobile devices. (Both Microsoft and Amazon recommend connection speeds of at least 10Mbps.) Subscriptions based on downloaded games – a more traditional model typical of PC game distribution platforms and mobile games – are generally not considered cloud gaming.
  • Microsoft also plans to add EA Play (formerly EA Access) – which represents another 60+ titles – to Xbox Game Pass for no extra charge. It is also adding more exclusive games through its recent $7.5B acquisition of video-game holding company ZeniMax Media, which will expand the number of studios under Microsoft’s umbrella from 15 to 23.
  • Subscribers can stream games onto Android devices and play using compatible controllers. xCloud on Facebook Gaming is also expected. Notably absent, however, is availability on the iPhone and iPad. Apple indicated in Aug 2020 that cloud-gaming services violated App Store guidelines; it only recently relented, allowing developers to submit games as separate apps that can be streamed via a “catalog app.” Apart from xCloud, Microsoft also updated its Xbox iOS app to enable “remote-play” streaming from a user’s Xbox One console to their iPhone, though only for games the user has on their console.
  • A week after xCloud’s launch, Amazon announced early access to its long-rumored cloud-gaming service Luna. It will launch with 100+ games through two channels that users can subscribe to: Luna Plus (for $5.99/month) and Ubisoft. Users can stream on a PC, Mac, Fire TV, or – notably – through web apps on the iPhone or iPad, which circumvent App Store rules and Apple’s cut of sales. (Android is also under development.) Luna is integrated with Amazon services such as live-streaming platform Twitch and voice assistant Alexa (on Amazon’s Luna Controller).
  • The cloud-gaming market, driven by the pandemic and 5G, is expected to reach $585M in 2020, with analyst projections of $4.8B by 2023. It’s no coincidence that cloud players and game publishers are the frontrunners – they own the scarce, expensive assets needed. Though the market is still nascent, content is shaping up to be the deciding factor as to who will win. Google Stadia, which launched in Nov 2019 with promising technology, has underwhelmed in adoption, in part because Google has struggled to lure developers.
  • Latency is also a big deal – gaming is experience-driven and delays have a significant impact. Cloud gaming is harder than video-streaming, requiring responses to inputs and synchronization of masses of data in milliseconds, delivered to a device from the cloud at 60 frames per second. Depending on the game, inability to play seamlessly can be a nonstarter. Still, while it’s an open question whether this generation of cloud-gaming providers can deliver on the experience anytime soon, the promise and opportunity in cloud-native “AI-powered, real-time content generation” will continue to drive them forward.
Related Briefs:
  • Nov 22 2019: Shifting tides around the leaderboard in the global cloud race
  • Nov 5 2019: Google Stadia – will cloud gaming finally become a big business?
3. Regulators paint a clearer picture for cryptocurrencies
  • The global cryptocurrency market is continuing its recovery from the bubble deflation of 2018, with the total global market cap of all cryptocurrencies currently at $339B – nearly 3x the market cap in Jan 2019. The past few weeks have seen an uptick in activity from regulators, who are providing more clarity to the market than they did in 2018.
  • In the US, it was recently revealed that the IRS was updating the standard 1040 tax return form to elevate a question on crypto to the first page just below the taxpayer’s address: At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency? The change will make it harder for taxpayers to claim ignorance or mistake, shoring up a gap in tax crypto guidance and helping the IRS collect on crypto transactions.
  • San Francisco-based crypto exchange Kraken was also recently the first to receive permission from the state of Wyoming under a new regulatory framework (the Special Purpose Depository Institution) to launch an affiliate crypto bank called Kraken Financial. The new structure, designed for crypto companies, will let Kraken open an account with the Federal Reserve and offer banking functions to clients, reducing its dependence on 3rd-party providers. The firm could, for instance, offer a crypto debit card, asset custody, yield accounts, IRA, or trading in stocks, derivatives and commodities.
  • Last week, the European Commission released its official proposal for a regulatory framework for crypto-assets and stablecoins. The 168-page document recommends a “bespoke regime” for crypto-assets, regulating the main activities such as issuance, wallets, exchanges, and trading platforms, as well as specific requirements for different types of tokens. Stablecoins, in particular, are viewed as having the potential to be widely adopted and systemic, and therefore would be subject to “more stringent requirements.”
  • In general, regulators appear to be seeking to balance the necessary structure with promoting continued experimentation – in some cases with an eye towards geopolitical ambitions and competitiveness. We also can expect to see some dropout as regulation weeds out those not adhering to standards. On net, less regulatory uncertainty is good for the industry, helping to drive greater public trust and more investment.
Related Briefs:
  • Mar 6 2020: Digital yuan, e-krona and other national digital currencies
  • Feb 7 2020: Visa’s $5.3B bet on Plaid & the pathway to open banking
Disclosure: Contributors have investment interests in Microsoft. Amazon and Google are vendors of 6Pages.
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