Remember The Time - Lululemon Controversy (again), El Niño (again) and German Cars Crisis #218
plus South Korea's growth and Indonesia's stock market struggle
Five stories that matter last week:
Lululemon apologized in China after its Great Wall yoga festival sparked backlash. A drum performance with brand ambassador Zhu Yilong and the HiiKo Drum Group was criticised for using what users called a Japanese taiko drum at an event celebrating Chinese culture. Against tense China-Japan relations, the criticism spread fast, and Lululemon pulled all related promotional materials.
From a business perspective, the stakes are high. China Mainland revenue rose 30% year-on-year in Q1 2026 to $478 million, with the region now accounting for 19% of total global revenue, up from 16% a year ago. Meanwhile, North American comparable sales fell 5% for the fifth straight quarter.
China is increasingly the market keeping Lululemon’s top line moving. The company still expects roughly 20% growth in China for the full year, but a consumer boycott triggered by this cultural misstep could put that trajectory at risk. Previously, we discussed Lululemon’s PFAS lawsuit in the U.S.Still on brands, BYD is preparing to bring its all-electric Great Tang SUV to Europe by late 2026 or early 2027, with over 150,000 orders secured in China since its April debut. To bypass European trade barriers, BYD is accelerating investment in its Hungarian factory and evaluating additional regional manufacturing sites. Chinese carmakers accounted for 15% of Europe’s EV sales in April and nearly 10% of overall unit volume.
In a different mood, BMW issued a profit warning forecasting a “significant” decrease in pre-tax profit, slashing its automotive EBIT margin guidance from 4-6% down to 1-3%. Shares dropped over 7%. The company cited a sharp demand contraction in China and the economic fallout from the Middle East conflict, keeping energy costs elevated and consumer sentiment weak. Reuters reported that BMW’s positive sales trends in Europe and the US have not been enough to offset the decline in Asia. Meanwhile, Volkswagen plans to cut 50,000 jobs and reduce production by 3 million units by 2030.
Still in Asia, the OECD upgraded South Korea’s 2026 GDP growth projection to 2.6%, the only upward revision among G20 economies. Semiconductor exports surged 169.4% year-on-year in May, with chips now accounting for roughly 42.3% of total exports. Traditional manufacturing contracted in the same month: automobiles down 5.9%, general machinery down 6.3%, home appliances down 21.7%, and steel down 2.1%. South Korea also holds the highest reliance on Persian Gulf intermediate energy imports in the OECD, at 5% of gross output. Inflation has risen to 3.1%, temporarily buffered by a $17.7 billion stimulus package and fuel tax cuts. More to follow on South Korea’s economic growth towards the end of the year 2026, with perhaps more collaborations with China on major technologies to watch.
Things go south for Indonesia’s stock market, as global index provider MSCI is deciding this month whether to downgrade Indonesia’s stock market from emerging market to frontier market status. Analysts project that reclassification could trigger up to $13 billion in foreign capital outflows. The Jakarta Composite Index has already dropped nearly 31% this year, pressured by high oil prices, a widening budget deficit, and political uncertainty around state interventions in commodity exports.
For Indonesia’s industrial and manufacturing sectors, a capital flight of this scale will weaken the rupiah, which increases the cost of importing essential industrial machinery, capital equipment, and raw materials, compressing manufacturing margins across the board. To stabilise the domestic economy, the Indonesian government may accelerate state intervention and enforce stricter export controls on critical commodities such as nickel and palm oil. Supply chain operators relying on Indonesian resources should prepare for a highly volatile pricing environment and unpredictable regulatory barriers in the coming months. Indonesia’s fiscal trajectory has been pretty bleak recently: interest payments consuming 19% of government revenue, the rupiah at an all-time low, and $6 billion in foreign capital already departed under Prabowo.
NOAA places an 82% probability on a strong El Niño emerging between May and July 2026, with CNN reporting it could become the strongest in 140 years. The WMO confirmed that the peak would land directly on Q4 procurement and Q1 production planning cycles.
Agricultural raw materials are already under strain. The World Bank projects fertiliser prices to rise 31% in 2026, with urea hitting $725.6 per tonne in March. Farmers are already changing to less fertiliser-intensive crops, meaning yields will be lower before El Niño arrives. The energy situation makes it even worse: when El Niño reduces river flows, hydropower-reliant manufacturers must either save power or rely on expensive diesel backup. We’ll report more on this in next coming months.
Enjoy your week. Stay sharp, and keep building.
Tri & Anh
On behalf of the Tocco team
Leon’s Thoughts on Nantong (南通)’s Rise
Exploring Nantong (南通), the quiet $184 billion powerhouse that pioneered China’s modernization and is now poised to become Shanghai’s massive northern gateway.
This episode is also available on Spotify and Apple.
Further Readings · Material & Manufacturing News · 06.2026
(United States 🇺🇸) Algenesis: Replacing Polyurethane with Plants: Algenesis has developed Soleic, a plant-based polyurethane system where both material durability and the exact biodegradation rate are mechanically governed by a single variable: the precise ratio of hard-to-soft segments within the polymer chain. This material shift arrives ahead of the EU Extended Producer Responsibility (EPR) eco-modulation fee scheme, which is scheduled for implementation to penalize conventional petroleum-based polyurethanes while financially rewarding biodegradable alternatives. Material specification teams and footwear procurement leads should watch these tunable bio-polyurethanes to hedge against looming regulatory penalties.
(Europe 🇪🇺) CEFLEX Identifies 440,000-Ton Annual Deficit in Recycled Flexible Plastics. A new report by CEFLEX reveals that EU Member States must source an additional 440,000 tonnes of post-consumer recyclate (PCR) from flexible polyolefins annually to meet incoming PPWR mandates. According to the analysis, Europe requires a total of 2.5 million tonnes of PCR derived from flexible plastics by 2030 to satisfy mandatory recycled content targets, a figure projected to climb to 5.9 million tonnes by 2035 to meet comprehensive plastic packaging recycling rates. CEFLEX warns that packaging applications alone cannot absorb this volume. To prevent a market collapse, the value chain must develop non-legislated, open-loop secondary markets, which elevate total potential demand to 4.3 million tonnes by 2030.
(Global 🌐) What Digital Sovereignty Actually Means for Industrial Operators? In her interview with Tocco, Dr. Olga Ustyuzhantseva, Senior Researcher from the University of Johannesburg, outlines how the enforcement of the EU Carbon Border Adjustment Mechanism (CBAM) has officially transformed product emissions data from voluntary ESG paperwork into regulated trade infrastructure.
(Vietnam 🇻🇳) Vietnam’s Economic Boom, Explained. Vietnam's GDP expanded 7.83% year-on-year in Q1 2026, with registered FDI hitting $15.2 billion and disbursed FDI reaching $5.41 billion, the strongest first quarter since 2022. Electronics and component exports jumped 45.5% to $30.7 billion, anchored by Samsung's cumulative $24 billion footprint (including a new $4 billion semiconductor project in Thai Nguyen), Foxconn's $383 million printed circuit board plant, and LEGO's $1.3 billion automated clean energy factory. Total exports rose 19.1% to $122.93 billion, though surging demand for production inputs created a $3.64 billion trade deficit driven by imported machinery, raw materials, and electronic components. Vietnam is upgrading fast, but not equally across the regions. To navigate this, check out our report here.