I don't think Tesla will have a monopoly on electric vehicle sales.
In this video I will outline how I currently think the EV industry will play.
My views are continually evolving, I dont decide on one outlook, and then attempt to
reinforce it continually, especially when we see things in this industry move so fast.
In investing it's dangerous to be married to one idea, and then use confirmation bias
to continually reinforce it, until when you finally come to the realization you were wrong,
it's simply too late.
And this is actually something we witness first hard with some of these Tesla shorters,
or haters.
For how long they have been grasping at straws in order to provide evidence of their theories
on Tesla.
They just don't seem to be able to let go.
A lot is happening in this industry, and a fortune is being invested from all over.
Battery factories seem to be going up at exponential rates, and sure they took time to build, but
it's years later now, and they are nearing completion, and many other new fabs are up
and running.
The industry is by no means sitting still.
The world has seen how profitable Tesla has become, but it took Tesla many years to reach
that.
So many other companies think they can reach something similar too, and they can leapfrog
many of Tesla's various steps, due to having significantly more capital to start with.
So I just wanted to discuss how other BEVs manufactures will succeed, although I am still
hesitant to call them actual competition, relative to Tesla.
I am doing what I can to put down my Tesla fanboy glasses, and look through this as objectively
as possible.
So for you other fanboys out there, don't get too upset, if its not within our usual
Tesla narrative.
I suppose I am more humoring the possibilities.
CHINA Don't get me wrong, I think Tesla will take
a large part of the market, more so in some nations than others, and will be the largest
global BEV producer.
I think its possible the Chinese domestic electric market may eventually collectively
have a larger share than Tesla.
I am not sure if BYD will actually overtake Tesla with a larger market share in China,
at least not for the BEV market, however China like the be clever and call them NEV, new
electric vehicles, which is when you include the new version of electric vehicle called
battery electric vehicles, with the old versions called hybrid.
And then they can say they are winning in this made up arbitrary NEV industry.
Which makes them feel better.
On top of that China also include miniature EVs like the Wuling, which also skew statistics.
Despite them costing around $4,000 they are still included into the same segment as Tesla.
On top of that, they are not actually taking away much market share of ICE cars, more so
motorbikes.
So although it may look like China's EV market share is expanding faster than other nations,
this has been somewhat skewed by statistics.
Basically, its a lot easier to make EVs, or NEVs, when you only have batteries with about
10 kWh.
A better portrayal would be the actual market share of kWh deployed in vehicles to give
a better representation.
It seems that the Chinese government want to show that China is the future, and ahead
of the rest of the world.
That their way is better, similar to how the Soviets were competing with America to space
and the moon.
Capitalism vs communism, accept NASA was actually a government owned enterprise, so it was kind
of socialism vs socialism in that regard.
If it was capitalism, then it would have been against SpaceX.
But now the new battlefield is which nation can electrify their nations fleet the fastest.
China are doubling down again and again on their iron phosphate cells, that they can
make at rapid speeds, and they can get the factories up and running much faster than
the US.
China also offer subsidies on all NEVs sold in the nation, provided they meet the requirements.
China has given out the equivalent of around US$15 billion in EV subsidies since 2009,
and was meant to end in 2022.
But the subsidies have been dwindling over that time.
However, it sounds like due to COVID reducing sales, they are extending it until 2023.
US Which is the year that the US restart their
new EV incentive.
It's almost like we have another battle here again.
The US don't want to look like they are losing to China in innovation, and still want to
be the world leading nation.
Compare China's $15 billion with what estimate to be the US's $1/2 trillion in subsidies,
although I think congress might have a lot lower budget on that, they might not have
carried a one or something with the math.
Or they might totally under estimate Tesla, or both.
Yes, a $7,500 incentive to buy a North American made electric vehicle, along with further
incentives to produces batteries and cells too, oh and solar, which is not mentioned
much at all.
This may seem like a massive waste of tax payers money, and of course additional printed
money, aka inflation, or a further tax on the poor.
And it's arguable that the poor are paying for the middle class to have a new electric
car.
However in the US, I see it very unlikely that Tesla won't have more than a 50% market
share, no one is coming in there remotely close to Tesla's level.
Fremont already produces more cars than any other factory in the continent, then look
at the size of Giga Austin.
The Chinese will likely focus on easier markets, and concentrate more on their domestic market,
trying to compete with Tesla on their home turf will be tough.
They'll face import tariffs, and wont receive the subsidy, which would be a massive barrier.
Or if they build locally, then their factories will take a lot longer to build than in China,
so that would likely be a 2 to 3 year delay, and then they will lose their advantage of
the low cost efficient Chinese labor, and lower cost of running factories in general.
Many a company has tried to enter the US only to fail.
It's a very tough market, especially if you are foreign.
A typical American is much more likely to buy a local American made product over a Chinese
product, or a product from any other nation, hence why the iPhone has majority market share.
For example BYD would not be able to make their vehicles to close to what Tesla could
in the US.
In other words, they would be offering a vastly inferior product, with a brand with minimal
appeal, especially compared to Tesla, and likely couldn't undercut Tesla.
And they couldn't get any serious production for about 3 years from when they started.
So perhaps by 2026 or 2027 if BYD went really big in the US they could get 1 million vehicles
a year perhaps.
Well can we begin to imagine what level Tesla would be at in the US by then?
GM and Ford started years ago, and it's still going to take them that long to hit a million,
and they know the US business practices.
It would be too risky battling Tesla on their home turf, like I say, BYD and the Chinese
have much easier markets to focus on, ones that care less about drive quality and more
about price, where they can actually be competitive.
Americans love their cars, this is the mistake that Henry Ford made, he figured cheaper is
better, just keep getting the prices down, and he did.
He managed to get the price of a Model T down to $260 from about $850, through manufacturing
advances and massive vertical integration, perhaps arguably to a level even further than
Tesla has taken it so far today.
Even attempting to grow his own rubber for the tires.
Especially now with this inflationary inflation reduction act, Tesla may double down even
faster in the US, as of course this act will backfire and have the opposite of the intended
consequences.
i.e. help Tesla rather than the competition.
I mean they are only up against Ford and GM as far as domestic the competition is concerned,
with a targets of about a million units a year by 2025, if everything goes to plan for
them, in an industry they are new to.
Which didn't go to plan for Tesla, in an industry they are the masters of.
EUROPE Europe is obviously the other major market.
It sounds like Tesla energy is what really needs to be expanded there.
But Tesla are mainly focusing on their vehicles in all markets, as that is simply where there
is so much more profit, at least at this time.
Of course the electric vehicles will mean more demand for energy, and thus more demand
for Tesla's energy business.
Now Europe has a bit more competition when it comes to electric, and a lot of them seem
to be ahead of the curve compared to the US manufacturers when it comes to electric, they
seem to be taking it seriously.
Also Europe is not Tesla's domestic market, unlike the US.
A German will understandably feel more comfortable on their local brands like Mercedes.
There are a lot of German cars that have prestigious brands, that consumers are willing to pay
more, which means they can cover the cost of the battery and perhaps still make a profit,
at least within time.
However Tesla is still the number one selling EV in Europe, oh and #2, and this is pretty
much just from Tesla's China factories, wait until they start getting their German factory
running.
It looks like Tesla will also dominate Europe too.
What's interesting though, is there are no Chinese manufacturers even in the top 10 in
Europe yet.
In fact as far as I can tell, not even in Norway, except for the Polestar.
Norway being a nation with no domestic auto market to protect.
OTHER Then there are other markets like the rest
of Asia, Australia and Japan.
I think the Chinese EVs have a chance in these Asia and Australia, perhaps Korea might be
tougher due to a strong domestic market, but other nations that want lower cost EVs it
may be more likely.
Japan is going to be difficult even for Tesla, Toyota is the largest company in the country.
Tesla have a relatively small presence there too.
LEGACY It is early days still in the EV industry,
as it takes so long to ramp up cell production, and increase the bandwidth, but the big boys
have commenced.
Mercedes intend on securing 200 GWh a year of cells, and many other legacy companies
similar levels.
It will all add up, and when consumers stop buying ICE, they need to turn somewhere, Tesla
can't supply everyone.
And although companies like BYD may not be able to offer relatively good enough cars
for most consumers in nations outside of China, I think they will succeed on their home ground.
And although I still don't believe China's EVs will dominate the market, a narrative
I seem to be alone on compared to the majority of the community.
It would appear that China may dominate on the cell supply.
I think BYD have a chance of being big in Europe too, but perhaps not with their vehicles,
maybe more with their cells.
The Blade cell is great technology.
They are already selling them to Tesla, I think it inevitable they partner with more
legacy manufacturers.
I think Toyota could possibly be one, if they know whats good for them.
BYD don't make a net profit on their BEVs, but they certainly could make a good profit
selling their cells.
CATL is getting huge, they will keep expanding and building more factories.
Like this massive 100 GWh factory they are planning in Hungary.
To conclude, Tesla looks set to simply dominate all markets.
The Chinese EVs will likely succeed in their domestic market and a few others.
But the market share Tesla leaves in the major developed nations will likely be consumed
by the legacy domestic market.
Tesla's market share will be highest in the US, I am not sure if there is enough room
for Ford and GM, they may even have to merge and consolidate.
Tesla's market share will likely be lower in Europe, and the Europeans are making the
necessary efforts.
I think the electric legacy vehicles may struggle entering the Chinese market too, and have
to simply focus on protecting their home turf.
They have large enough local markets, and governments to help.
It's likely not all legacy companies will make it, and some may merge, but Tesla won't
be alone.
However, I think as far as Tesla investors are concerned, I would quote Dan Ives when
he said "It’s Tesla’s world, and everyone else is paying rent"