15/01/2016 BBC Business Live


15/01/2016

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This is Business Live from BBC News with Sally Bundock and

:00:00.:00:07.

Balancing the books in Russia - a budget cut is planned

:00:08.:00:13.

as the Kremlin copes with those oil prices falling off a cliff.

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Live from London, that's our top story on Friday the 15th of January.

:00:18.:00:39.

As oil prices languish near 30 dollars a barrel,

:00:40.:00:40.

the Russian government prepares for a year of austerity.

:00:41.:00:42.

China's answer to the World Bank, the AIIB, prepares for its official

:00:43.:00:49.

But will the new lender really shift the balance of power

:00:50.:01:02.

And we are 30 minutes into the European trading day -

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most of the main markets are headed lower as investors digest the latest

:01:05.:01:08.

swings in the oil price and Chinese stocks enter a bear market this

:01:09.:01:14.

And we'll be getting the inside track on the future of cars.

:01:15.:01:15.

Will they hover above the ground - well, the last one, probably not.

:01:16.:01:21.

Our technology correspondent Rory Cellan-Jones will be

:01:22.:01:23.

Today, we want to know - would you trust your car

:01:24.:01:26.

It's been another roller-coaster week for the price of oil -

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it's sinking again today after Thursday's brief rebound

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but earlier in the week, crude fell below 30 dollars a barrel

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- a level not seen since 2004.

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Countries dependent on the black stuff to keep their coffers

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lubricated are certainly feeling the strain,

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Today, the Kremlin is expected to announce a 10% cut in its annual

:02:02.:02:06.

Over half of the overall revenues for the government comes from oil,

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so as the price drops, there's a direct knock-on effect

:02:14.:02:15.

Last year's budget was based on an oil price of $50 a barrel -

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a price that is rapidly becoming a distant memory for oil producers.

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Russia had hoped this year would see a change in fortunes and for it

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to see a return to economic growth, having slipped

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But that is looking increasingly unlikely.

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10%, probably not enough. I was looking at the sums here. The

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Kremlin apparently will need oil to rise to $82 a barrel.

:03:06.:03:10.

To meet its current budget. You and I know that is not going to happen.

:03:11.:03:16.

10% is payment on account, if you like. It will not be the last and is

:03:17.:03:22.

not the first. This is a serious situation for Russia. Again, looking

:03:23.:03:30.

at numbers, estimates say if oil stays at $30 a barrel for the

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remainder of this year, it is likely to go even lower, but if it

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$30, it wipes Russia's currency reserves gone. Yes. Give us some

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more! The trouble for Russia is they have locked themselves into a

:03:49.:03:56.

situation where distributing this is the basis for the economy. I had the

:03:57.:04:01.

reform, they have had it for a long reform, they have had it for a long

:04:02.:04:06.

time but it was rejected by Putin when he returned in 2012. They are

:04:07.:04:10.

now reaping the consequences. They have nowhere to turn to except

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hoping the price will rise, somehow something will happen, or reform,

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which is dangerous for the regime. Just wonder if the economic action

:04:20.:04:26.

at the moment which is ritzy bleak could force Putin's hand to reform.

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-- pretty. To stop the sanctions and stop the Russian retaliatory

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sanctions which are crippling things like the financial services. That is

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good logic but it is improbable. His primary objective is for Russia to

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be a great power. It is significant the military budget is being

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protected and it is very large and growing. It would mean him stepping

:04:53.:04:59.

back from Ukraine which he is going to find it very hard to do. It would

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mean his finding some way to get out mean his finding some way

:05:03.:05:07.

of the mess he has made going into Syria in the first place and that is

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especially him. If the worst case especially him. If the worst case

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scenario plays out this year and oil continues to go down, some predict

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as low as $10 a barrel, that was the case for Russia and the people of

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Russia, how will that play out? If things become more chronic economic

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league, is that going to have a knock-on effect on Putin's

:05:31.:05:35.

popularity and any dissension? They have got the television and media

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locked down. They locked down for life. They have

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recently given their police the right to fire in crowds should they

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wish to do so, including women and children. How is the general public

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coping and is it tough? It is tough. The polls show they are not hopeful

:05:57.:06:02.

about the future. That is not the same thing as them saying, Putin has

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made a mess of things and replaced. To do that, you would need

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an idea of who and how might replace him, there is non-. Such a man or

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woman would need a programme. There woman would need a programme. There

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is no way to articulate a programme. So he is in a position where events

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have taken control. And he and we will have to see how it plays out.

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We appreciate your time, as always. And no doubt we will speak to you

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soon. Fruit and vegetable in Russia, inflation, 30%.

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It is difficult. announcement about budget cuts, we

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will update you. Goldman Sachs says it's struck

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a deal with the US Department of Justice to pay a $5.1 billion

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settlement over its marketing US banks have taken much

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of the blame for the 2008 crisis after granting mortgages

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to unqualified borrowers, then repackaging those loans as safe

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investments and selling The settlement comes

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after Wall Street rival JP Morgan reported better than expected

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profits for the three recovering to close 10.3% lower,

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after it confirmed there had been police raids on the company's

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facilities to investigate Investors are worried Renault might

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also be involved in cheating emissions tests, following

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the Volkswagen scandal last year. However, Renault stressed that tests

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have shown "no evidence" of devices designed to cheat tests,

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comments backed up by Fiat Chrysler Automobiles is denying

:07:44.:07:46.

allegations that it encouraged The car company is being sued

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by the owner of two US dealerships, who says it offered financial

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incentives to dealers to report unsold vehicles as sold and then

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cancel those sales Fiat Chrysler says it has carried

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out an investigation and found Check out our website. BHP, $7.2

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billion write-down on its onshore oil wrecks. That is another part of

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the falling oil price story. That is a lot of money. They are talking

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year ago, it had 26 and it had five year ago, it had 26

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by the end of the first three months of the year.

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Markets showing signs of being on the case. Let's talk about China

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now. Now, China's answer

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to the World Bank will be officially What is going on is much today is a

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Infrastructure Investment Bank - What is going on is much today is a

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big day for the Chinese. Hello. The AIIB as it is known will

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be launched officially in Beijing. The headquarters this weekend. It

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will hold its first board of directors meeting. This is a bank

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which focuses clearly on providing loans for Asia -based infrastructure

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projects including the likes of roads, health, education and energy

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projects designed to grow the economy is of the recipient

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countries getting the loans. China is the AIIB's largest shareholder

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but India and Russia are also big players and all 57 countries have

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signed up to the bank including many in Europe, controversially, like the

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UK, France and Germany who joined in spite of opposition from Washington.

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The US sees this as an attempt by China to come to Washington's

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efforts to increase its influence in Asia and it is seen as a challenge

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to existing institutions like the World Bank and the IMF. The AIIB has

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tens of billions of dollars to spend and is expected to make its first

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loans available in the second half of this year. Thank you so much.

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So that is in Beijing this weekend. A mixed picture on the markets. A

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Mini bounce back in Wall Street yesterday but that did not help

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Asia. China entering a bear market, stocks in Shanghai at 3.5%. That is

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Japan. This is Europe. Corporate Japan. This is Europe. Corporate

:10:28.:10:34.

stories making the headlines. The merger of British Telecom with EE

:10:35.:10:40.

has been given the Green light by authorities in the UK. That is

:10:41.:10:46.

affecting trade in London. We have mentioned BHP, listed in London as

:10:47.:10:50.

well. A lot going on and we will discuss the winners and losers.

:10:51.:10:51.

Let's look ahead now to Wall Street. Citigroup and Wells Fargo have

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reported fourth-quarter earnings. Citigroup makes up a substantial

:11:05.:11:08.

part of its revenue from Asia and America -- emerging markets, has it

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been affected by the slowdown in China? It is still expected to make

:11:14.:11:18.

a growth in earnings. The biggest presidential mortgage lender WeFargo

:11:19.:11:25.

experienced a big growth but with the exfoliate -- portfolio exposed

:11:26.:11:32.

to the oil sector, watchers will be interested to see how it affects the

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bottom line. Retail sales grew in December showing Americans are still

:11:37.:11:40.

spending and we will get businesses on business in the entries for

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November and manufacturing and business output for November.

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Good on you. Let's stay with the markets.

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Jeremy Stretch, Head of Foreign Exchange Strategy

:11:50.:11:51.

Good to see you. Let's talk about the connection, audio and the

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markets. We have seen a horrible two weeks of the trading year. Can you

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explain, oil continues to tumble, markets react. They reacting to $30

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oil or to the reason we have got $30 oil? It is $30 oil particularly for

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those economies reliant on oil your conversation about Russia was

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pertinent and Canada, under significant pressure, it has lost

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more than 10% of its value because of the correlation with oil. So

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direct economic relationships in oil producing companies -- countries but

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why is the price falling? Slower global growth and fears and eating

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from China as the big swing demand variable in terms of both -- growth

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projection causes the price to foil along with an excess of supply.

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Interesting to see how the day progresses. A lot of news coming out

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of the States. News from China about its money supply and its debt levels

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which was worrying today. Asia closing at a 3.5 year low for the

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week today. Angela Merkel is meeting with Mario Draghi in Berlin today.

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They are having a chat. I would love to be a fly on the wall!

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It is interesting because there is a degree of pressure in Germany

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have seen this in the comments from the Central Bank regarding the

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problems the German system has with negative deposit rates. The printing

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of money. It seems to be the case Mario Draghi is going to be facing

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relative criticism from Angela Merkel about the perception because

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of the legacy that brings. Generally when you find money printing, it

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boosts asset markets. But the Dax is down" and it is. It has created a

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degree of a bubble in the asset markets and Germany is mindful this

:13:58.:14:01.

policy could store up Rob Evans for the future. So it will be

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interesting to hear not an official version but unofficial versions of

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the conversations -- problems. You know the routine, right? You are

:14:12.:14:14.

You will take through the papers shortly.

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Most of us have one - and many of us use them daily.

:14:18.:14:24.

Will you trust your car to drive itself?

:14:25.:14:28.

We'll be discussing all that and more in just a few minutes.

:14:29.:14:31.

You're with Business Live from BBC News.

:14:32.:14:32.

A mega-merger in the UK's telecoms industry is likely to get

:14:33.:14:35.

To find out more about what this means, let's talk to Matthew Howett,

:14:36.:14:43.

So talk us through where we are at the moment, the competitions

:14:44.:14:59.

authority has said these companies can tie up. How will they have to

:15:00.:15:04.

change in terms of which bits BT might have to get rid of or anything

:15:05.:15:05.

like that, do we know anything? Essentially, the competition markets

:15:06.:15:19.

authority has said these companies are fine to join together. They are

:15:20.:15:24.

bringing together two fairly separate businesses. BT has a

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business around broadband and BT business around broadband and BT

:15:27.:15:34.

primarily. EE on the mobile side fairly complimentary. There should

:15:35.:15:36.

not need to be any changes to that business. Over time BT may look to

:15:37.:15:47.

further integrate the division. These are the things we will find

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out about in the coming months. Matthew, just briefly. What

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this mean for customers? Will base much of a difference in terms of

:15:57.:16:00.

pricing and customer service? At the end of the day, this is all about

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the customer. What BT is doing by buying EE, they are gambling on the

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fact that people want to take all of the services from one provider,

:16:13.:16:16.

something we call quad play, they will take TV, broadband, landline

:16:17.:16:22.

and mobile from one operator. It could lead to a form of cost saving.

:16:23.:16:26.

This is something that will be pursued in the coming months.

:16:27.:16:32.

Thank you for your time. There is so much more information about that

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British Telecom EE tie-up on our website. There is also the ode to

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deal with three to agree on -- 02. We will hear about that in the

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spring. You have interviewed Jimmy Wales,

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the founder of Wikipedia. Wikipedia is 15 years old this week.

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What would we do without it? It has enriched my life, Sally!

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balancing the books in Russia - as a new era of low oil prices begins,

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so the Kremlin looks to cut its budget by up to 10 %.

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And now let's get the inside track on the future of the car industry -

:17:24.:17:26.

one of the biggest money makers in the world at the end of a week

:17:27.:17:30.

where the big names in the business have been showing off their latest

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It's a market worth a whopping $800 billion a year -

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And big changes are in the works - to keep customers buying

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as well as address environmental concerns.

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Electric is gaining steam with brands like Tesla,

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that offer luxury and 4x4 all electric vehicles.

:17:57.:18:00.

We've seen prototypes for driverless cars from the likes

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of Google and others - but is that technology about to be

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Apple is thought to be developing prototypes as we speak.

:18:09.:18:18.

So could the traditional players soon be facing

:18:19.:18:20.

Lots of questions - and hopefully some answers.

:18:21.:18:25.

Our technology correspondent Rory Cellan-Jones is here.

:18:26.:18:31.

You had the pleasure of meeting Elon Musk. I drove to meet him in a car

:18:32.:18:49.

which was an exciting, slightly terrifying experience. Tesla make

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electric cars sexy. It is a electric and it accelerates like nothing on

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earth. It has a range of about 250 miles.

:19:05.:19:08.

features in it. You can switch on Lane control. You can sit there on

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the freeway, it will stay in Lane. You can keep a certain speed. You do

:19:15.:19:19.

keep your hands close to the wheel. It will even change Lane, indicate

:19:20.:19:28.

and automatically move out into the next lane. I am fascinated by this!

:19:29.:19:37.

It will do this. There is an extraordinary vision that this will

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be commonplace, in fact it will be the norm in about ten years' time.

:19:42.:19:46.

You will only dry if you want to dry. It will be like owning a car

:19:47.:19:51.

which is not self driving in the long-term will be like owning a

:19:52.:20:01.

horse, you will have it for sentimental reasons but not for

:20:02.:20:09.

daily use -- you will dry. I do not have a car for sentimental reasons!

:20:10.:20:16.

The point he's making is your car will completely automatically. You

:20:17.:20:23.

might dry a Europcar, you won't need to. It will come to you without much

:20:24.:20:37.

intervention. This man is an inspiring, brilliant thinker. What

:20:38.:20:42.

he's saying is a bit too extraordinary for

:20:43.:20:46.

when he said you will be able to pick up your car, if your car is in

:20:47.:20:51.

Los Angeles it will drive to New York to meet you, I said, maybe that

:20:52.:20:58.

that is a long time away. He said about two years. I think that is

:20:59.:21:03.

slightly mad. Think about the regulatory changes you need. The

:21:04.:21:07.

technology is evolving very fast, the regulation less so. Allowing

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driverless cars onto the road will be huge decision and will need a

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huge change in the structure. That is always the case of

:21:18.:21:23.

the regulation struggles to keep up. Thanks, Rory.

:21:24.:21:27.

To Switzerland now because exactly a year ago, the financial world

:21:28.:21:29.

was buzzing with a new word: Francogeddon.

:21:30.:21:31.

The Swiss National Bank shocked markets by abandoning its peg

:21:32.:21:33.

to the euro - causing the Swiss franc to soar in value.

:21:34.:21:36.

The policy, in place for three years, was designed to keep

:21:37.:21:39.

the franc low, and Swiss exports competitive.

:21:40.:21:46.

The move caught traders by surprise and even bankrupted one brokerage -

:21:47.:21:47.

but how much long term damage has it done to the Swiss economy?

:21:48.:21:50.

It was called Francogeddon, market mayhem one year ago. The Euro peg

:21:51.:22:09.

abandoned, the Swiss franc sword. Swiss exports and Swiss

:22:10.:22:16.

more expensive overnight. Disaster was predicted for Switzerland's

:22:17.:22:22.

economy but what did happen? Fortunately, the situation has been

:22:23.:22:26.

challenging but not dramatic. Many empathises could deal with the

:22:27.:22:31.

situation, without having some severe difficulties -- many

:22:32.:22:34.

enterprises could deal with the situation. How has Switzerland's

:22:35.:22:38.

economy avoided disaster? costs and increasing productivity is

:22:39.:22:46.

one way. Many workers here are now putting in a 45 hour week instead of

:22:47.:22:50.

the usual 40 at no extra pay. And more painful measures could follow.

:22:51.:22:55.

50% of all Swiss exports are sold in the euro zone. One measures firm

:22:56.:23:06.

take is to relocate their production because based on a currency rate of

:23:07.:23:13.

1.08 per euro now, the Swiss franc is still overvalued. Surveys show

:23:14.:23:19.

one in five Swiss manufacturers want to outsource, but that is not an

:23:20.:23:22.

option for the hard-pressed tourist industry. It hopes Switzerland's

:23:23.:23:27.

questionably stunning landscapes will push price back into the

:23:28.:23:35.

background. We have to concentrate on those experiences which are

:23:36.:23:39.

unique to our country. I think we have to sell Switzerland through the

:23:40.:23:44.

emotions, three something which you cannot buy. No Francogeddon yet

:23:45.:23:49.

then, but huge challenges ahead. Swiss businesses feeling the cold,

:23:50.:23:55.

and everyone agrees 2016 will not beat you seek, even for this usually

:23:56.:24:02.

resilient economy. It looks pretty.

:24:03.:24:04.

Jeremy Stretch is back to look at the papers.

:24:05.:24:09.

This treat from a regular James Newman, he says I don't trust my

:24:10.:24:17.

car's parking sensor. I trust driverless cars but not the people

:24:18.:24:21.

in them. Hermione says Mike are drives itself.

:24:22.:24:32.

I understand you have your own experience of this situation? I have

:24:33.:24:36.

a self parking mechanism on my car and the first time I used it it

:24:37.:24:40.

drove the car into the curb and damaged the wheels so I think there

:24:41.:24:44.

are teething problems! Did you have are teething problems! Did you have

:24:45.:24:49.

any recourse? Was based on the fact that the car in front was part badly

:24:50.:24:53.

so it was lining itself up with that. It is always the small print.

:24:54.:25:01.

On the subject of small print, a teenager, a 19-year-old UK teenager

:25:02.:25:04.

who is studying at Stanford University in the US, has come up

:25:05.:25:11.

with a robot lawyer to help bypass the massive fees. I

:25:12.:25:16.

interesting that he is studying in the US rather than the UK so he has

:25:17.:25:21.

perhaps decided the US situation is better. He has designed an algorithm

:25:22.:25:26.

to look at parking issues and provided an opportunity to come back

:25:27.:25:30.

with advice to deal with parking fines which are very easy to pick up

:25:31.:25:37.

as we all know. It is an attempt to revolutionise the sector and provide

:25:38.:25:43.

an opportunity for recourse. I think we should name him, Joshua Browder,

:25:44.:25:48.

studying computer science in the US. That is a name we should remember.

:25:49.:25:54.

Studying at Stamford, try harder, Josh, that is what

:25:55.:25:56.

There will be more business news throughout the day on the BBC Live

:25:57.:26:03.

webpage and on World Business Report.

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It is a cold, frosty start across the country that lovely and bright

:26:09.:26:17.

with some sunshine around.

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