I don’t have a dog in this fight, but it’s worth looking at the valuations of Tesla and other EV manufacturers relative to “legacy” manufacturers like GM, Ford, Toyota, etc.
https://www.visualcapitalist.com/putting-ev-valuations-into-…
Excitement about a great story + crazy high valuations = bubble
Wendy
Wendy, the problem with these reports is that they are driving by looking only in the rear view mirror.
Do you remember the most quoted word in The Graduate? ‘Plastics.’ In the EV revolution it’s ‘Batteries.’ The difficulty of solar and wind renewables is intermittency as has been claimed at nauseam. The solution is storage and the best current alternative is ‘Batteries.’
Lead acid batteries were a dead end. By luck or serendipity, Tesla decided to use laptop and cellphone lithium batteries that most people thought was a stupid idea (including The Captain). Reality has proven us wrong. The curious thing is that these batteries not only solved the EVs’ difficulties but also found their place the electric grid at both ends, at grid level and at home level. Batteries energised the Green Revolution [pun not intended but lovely!]
What is driving the Green Revolution are the economies of scale and Wright’s Law. What ICE cars are facing is not just EVs but the Green Revolution powered by batteries. Dismissing it as a bubble just obscures your vision.
The Captain
no fan of Climate Alarmism
This was good too:
https://www.visualcapitalist.com/breaking-down-the-cost-of-a…
I don’t see why, eventually, margins for EVs won’t be similar to margins on ICE vehicles.
There’s going to be plenty of competition.
Sure, Tesla is seen by its investors as more than an EV manufacturer. It’ll be interesting watching that play out.
We are enjoying owning a non-luxury EV in the meantime. We’ll be in the market for another one in a couple of years. I doubt Tesla will be on our list - the “$25k hatchback” is not likely to happen. I expect the legacy manufacturers will have a raft of suitable products we can choose from in the $30k range.
What is driving the Green Revolution are the economies of scale and Wright’s Law. What ICE cars are facing is not just EVs but the Green Revolution powered by batteries. Dismissing it as a bubble just obscures your vision.
There is no contradiction in holding that EVs and batteries are big in the long run, and simultaneously holding that the current prices of the relevant stocks are a speculative bubble.
(Not commenting at this time on whether either view is correct.)
There is no contradiction in holding that EVs and batteries are big in the long run, and simultaneously holding that the current prices of the relevant stocks are a speculative bubble.
Have you seen the price to sales multiples?
RIVN 45,000
TSLA 18
NIO 7
DB2
There is no contradiction in holding that EVs and batteries are big in the long run, and simultaneously holding that the current prices of the relevant stocks are a speculative bubble.
True as long as you don’t treat all EV stocks as being the same. There will be winners and losers. Buy the winners. LOL
The Captain
I don’t see why, eventually, margins for EVs won’t be similar to margins on ICE vehicles.
Eventually? Yes! That’s where the “S” curve comes in. You want to invest in the technology between the bottom and the top of the “S” curve. In theory at least the time to get in is at 15% market penetration and the time to get out is at 85% market penetration. With new cars selling around 80 million units per year that would be entry at 12 million and exit at 68 million.
Automakers sold 6.6 million plug-in vehicles in 2021, more than double the 3 million sold in 2020, and more than triple the 2.2 million sold in 2019, according to the IEA. The broader definition of EVs as battery electric plus plug-in hybrids also claimed about 9% of the global new-car market, up from 4.1% in 2020 and 2.5% in 2019, the IEA said.
https://www.greencarreports.com/news/1134999_global-ev-sales…
2022 should see 12 million plug-in vehicles. 
The Captain
Excitement about a great story + crazy high valuations = bubble
And yet, after skimming the article, I did not find the any real mention of the “great story” so that one could evaluate it.
Such as:
Mike
Tesla has two operating car assembly plants…with two more ready to start production within a few weeks and they have an increasing backlog of orders
Not that bigger is always better (Sears was bigger than Amazon, for instance) but Ford has over 60 assembly plants world wide. GM has 30 plants including stamping & assembly in the US alone.
- The graph does not include the market value of the legacy car makers dealers and service centers
- The graph does not account for the Tesla Supercharger network compared to legacy makers having nil
Arguably the legacy manufacturers don’t/won’t need a charger network by the time things ramp. There will be chargers all around. Tesla had to have a charger network since the business couldn’t start without one. That has to have been a distraction. It may have been a good distraction, but it did divert some attention from stamping out cars.
It’s actually difficult to make perfect comparisons, Tesla has the battery factory, the legacy guys don’t. The Big 3 have a dealer network around the world, Tesla doesn’t. (I know, I know, somehow that’s a bad thing.)
Dismissing it as a bubble just obscures your vision.
Unless, of course, it’s a bubble. Both Lucid and Rivian have announced production cutbacks. Ford is doubling production for it’s F-150 Lightning pick-up, and has a three year order backlog. The market is responding to all of this, but not in real time. There’s money to be made for some of these stocks, but it’s pretty flukey at the moment.
Not that bigger is always better (Sears was bigger than Amazon, for instance) but Ford has over 60 assembly plants world wide. GM has 30 plants including stamping & assembly in the US alone.
And many (most?) of those won’t be able to make EVs without major modifications, most likely.
Arguably the legacy manufacturers don’t/won’t need a charger network by the time things ramp.
Arguably, the Tesla Superchargers will be like Tesla owning half the Interstate gas stations at least for the next 5+ years.
The Big 3 have a dealer network around the world, Tesla doesn’t. (I know, I know, somehow that’s a bad thing.)
Dealers take, maybe, half the profit on a new car sale plus all the service income. When cars are in high demand the dealers mark up the prices, sometimes by a lot of some models and trims. This practice is pretty much disliked be all. Tesla sets the prices for all to see on its web site.
Mike