I have said it before, but I am happy to say it again.
Tesla has no competition.
Why do I say this despite there being so many other EVs out on the market these days, and
so much capital going into it.
Well it's very simple, no one else is making a net profit on their EVs.
Whereas Tesla are pretty much making the largest profit margins in the entire auto industry,
excluding a few exotic car manufacturers.
BYD But if there was an actual EV competitor to
Tesla, then I think most people would likely point to BYD as the likely one.
However, as you know, I have been vocal about BYD's EVs also not being profitable, and not
many believed me, but it was clear in the financial statements, if you know how to interpret
them.
Some people just saw a headline and saw that the company increased profits year over year,
yet without the knowledge that only about half of BYD's revenue is actually from EVs.
Or NEVs as they like to call them, which is a marketing term that China use to cover the
fact they are producing hybrids about as much as real electric cars.
Calling them New Energy Vehicles, there is nothing new about them at all.
But finally the evidence is out, and we are hearing that BYD actually do make a loss,
if you exclude all the government subsidies they receive.
However, like I said BYD don't make BEVs they make NEVs, so this would mean that they are
losing money on their hybrids too, or if they are not, then it means they are losing even
more money on their BEVs.
Either way, I would find it likely that BYD lose more money on their actual BEVs.
CHINA I have made many videos on China, and talked
about how their EVs are over rated.
And that these claims are based on statistics, and people tell me how wrong I am.
Such as a certain manufacturer increased their production by 500% from last year.
Well believe it or not, on the first day they manufactured one vehicle, they also increased
their production infinity percent, day over day.
That's because when you start manufacturing, the numbers are low, so statistically it is
very easy to grow.
It's when you get up to around 10,000 units a month, is when it becomes a challenge.
Or something only Tesla can really do.
MANUFACTURING Yet we hear that China are doing really well,
they are copying Tesla in manufacturing, and some have even ordered giga presses too.
And they will catch up to Tesla, and many people even tell me they will overtake Tesla.
I often get told that BYD will make more EVs than Tesla in a few years.
Very credible people in auto manufacturing tell us that China is going to take over,
and even dominate the US EVs, and they tend to base this on how the Japanese cars did
this.
I think the most likely thing that China will follow in Japan's footsteps is a massive property
bubble about to pop.
VOLUME PRODUCITON I have been hearing this for years, yet I
keep looking at the production numbers, even BYD can barely hit half way to volume production
for their BEVs, although they like to consolidate their PHEVs in with those figures too.
Yet here we still are, and no one else is yet to hit volume production for BEVs, or
barely make it half way.
Whereas Tesla achieved volume production over 4 years ago with the Model 3.
Something that was extremely difficult even for Tesla and Elon.
So much so that Elon often reminds us in his talks and on Twitter, just how insanely hard
volume production is to achieve, and to achieve it with a profit is basically impossible,
unless you are Elon Musk accompanied with all the best engineers on the planet, working
really hard, with a motive to save the world, and an incentive to make millions in stock
options.
How on Earth can anyone compete with that?
You can't force creative and innovative break-throughs, you can't incentivize them just with money,
hey the soviets even threatened to kill scientists if they didn't make break-throughs, and most
likely did.
Innovation needs real motivation from creative people.
Creativity comes from freedom of thought more than high IQs.
MODELS And look at how many EV models BYD have produced.
Overall probably a couple of dozen, and are even offering about a dozen for sale today.
They even tried a compact version, which you might think might be more simple to manufacturer,
I think they managed to reach about 12,000 in a month, half way to volume production.
I know my videos never seem to be very popular when I talk about this, and it doesn't fit
the narrative of everyone else in this industry.
But I research on where my background is, in business, economics and finance.
And then I report to you what I find with this.
Sure you should certainly listen to everyone else's opinions on their backgrounds too.
But I have stuck to my findings as it's mainly numbers telling me things, and I can't argue
with data.
PROFIT It doesn't matter how amazing your manufacturing
techniques are, or how incredible your vehicle is, all that matters is how much profit the
company makes, or it will go out of business.
And that's what will happen to many of the EV companies.
They all have limited capital, and make massive losses, including Rivian and Lucid.
And they have no sign of turning a profit.
Except perhaps Li autos, last I checked they were getting some decent margins, but they
still have high OPEX, and Polestar couldn't even make a positive gross profit last year.
They all have high OPEX, much higher than what Tesla had relative to production numbers.
But BYD can self fund themselves in the meantime and generate some market share, even if people
think NEVs mean BEVs.
The rest will not be able to.
Although people tell me that the CCP will support them.
Which would essentially mean nationalization, as the subsidies are actually dwindling.
I don't think the CCP want to own a ton of massively unprofitable EV companies, with
no signs of turning a profit any time soon.
TESLA As a Tesla shareholder, to me it's not that
the others are so far behind, as it is everyone, including legacy, it's more that Tesla is
just so far ahead.
Everyone thought what Tesla did was replicable.
But it wasn't was it?
Clearly.
No one is coming close, they can't even make a Tesla as good as a Model S 10 years ago.
Despite Tesla showing them the way, and even opening up all their patents.
And Tesla's have gotten a lot better from where they were 10 years ago.
PRICES So much so, that Tesla are now able to raise
their prices to insane levels, and the waiting list for them is still quite some time.
And that's before the 4680 Model Y and tax credits in effect, which is going to increase
demand even further.
But if Tesla are able to raise their prices, then that would mean the rest of the EV industry
could also raise their prices too, I mean the Model Y Long Range was under $50,000 and
now its mid 60s.
That's a huge raise, surely now these consumers might consider a much lower cost Volkswagen
ID 4 or something instead, so much so that VW could also raise their prices.
But this doesn't seem to be the case.
Not many consumers are moving to electric because they want electric, its because they
want a Tesla.
I mean in the US you can buy a Nissan Leaf for under $20,000 with the tax credit currently.
Which means Nissan have sold fewer than 200,000 Leafs in the US, if that is still eligible.
But then imagine BYD in the US, with the additional shipping costs and tariffs, logistics, service
centers, etc.
And not only would they no longer get their Chinese government subsidies, they would also
have to compete in the US against domestic cars with a $7,500 credit.
This is just not going to happen.
Oh and they would also be losing a massive amount of money on every sale.
Oh and not only that, they can't make enough because they can't hit volume production.
I keep saying this, but China will not dominate the US EV industry, not even close.
Besides the biggest market by sales for autos is in China.
So it makes much more sense for the Chinese to do what they can in those markets.
And perhaps enter a few other easier markets, that don't have domestic auto industries like
Norway or Australia.
Small markets, and Tesla will dominate in each of those too.
But China will have a very hard time in the US, and will likely create a very fast bankruptcy
if they try.
Also remember when the Japanese autos did succeed in the US, there was not Tesla equivalent
there at the time.
So I don't think the competition can raise their prices in order to make a profit, because
they don't have the demand, people want Teslas not electric cars.
COSTS The other chance EVs have of survival, in
order to make a profit, is well, if you can't raise prices, you have to reduce costs.
Something Tesla is doing in leaps and bounds.
But currently costs are rising for these manufacturers, as they didn't have the economies of scale
in order to lock in absolutely massive long term contracts with their suppliers at low
low prices from years ago.
They are getting hit by inflation now, and on top of that demand for these resources
has increased too, resulting in higher prices.
They have locked in their production lines and techniques, from years ago, and are not
capable of building new state of the art factories each year, with further improvements and ways
of getting productions costs down and production speeds up.
Faster production speed is a massive cost saving.
The marginal cost of an additional unit dwindles each time, due to further economies of scale.
But if these manufacturers are only able to achieve half way to volume production then
that makes it very difficult.
BATTERIES Obviously the main cost with EVs is the battery.
Now I think a lot of these companies are hoping for a huge battery break-though.
And there has been one, called Tesla's 4680 cells.
But none of them are going to get close to that, certainly not this decade.
They are hoping for companies like QuantumScape to come and save the day with their solid
state battery.
Again that wont be in mass production until next decade, and do they really think it's
going to be lower cost.
Meanwhile they are also struggling immensely with range efficiency too.
Meaning their vehicles have to use about 30% more cells than Tesla to get close to Tesla's
range.
Well the more cells you use, the more it costs, and the more it effects the ride, performance
and handling.
Yes CATL's new M3P cells are looking promising, but it is not going to be the make or break
for these manufacturers.
And they are all running out of time, perhaps they have 2 years left to get this sorted,
or they go under.
PIVOTING I think BYD may have even seen the writing
on the wall, and are already pivoting, and perhaps going to become a large battery manufacture
instead, like CATL.
But a company can only become a large battery manufacturer, if Tesla is their customer.
And Tesla want so many cells, so many.
That Tesla will buy everyone's cell who is offering them.
Especially LFP, as worse case scenario, Tesla can place them into energy storage, which
should become profitable now using LFP cells.
SOLUTION So what is the solution then?
How do these other EV companies survive.
Well like I said they need to raise prices and reduce costs.
So how might this be achieved.
Well the EV companies aren't the only auto companies that may face bankruptcy.
There are also the legacy auto companies.
Things are already not looking great for them as it is.
And Tesla has barely begun.
Tesla nearly produce one million last year, but will be at a run rate in excess of 3 million
sometime next year.
5 million the following year.
The exponentials don't stop there, the numbers start to get really big.
And all of these Tesla sales, are taking away from the likes of legacy.
They will eventually lose their economies of scale when producing cars, and have to
close down factories.
There will be less supply, which means the prices will rise.
Therefore this might mean that EV prices can actually rise significantly higher, perhaps
high enough to really make a profit.
Along with more consumers coming on board the EV movement, and realizing that you can
justify spending more on an EV, due to all the cost savings you get.
I think that is what these EV companies need to do.
SUMMARY Anyway, this is what the research in my field
has shown me.
I'm sorry if it is not the same narrative the rest of the community feels, but I am
not here for your confirmation bias, I try to be as objective as I possibly can.
And even if it keeps coming up very Tesla Fanboy esque, that's what the data tells me.
I think the industry players are in the scenario where it will be more like they don't have
to outrun the bear, they just have to outrun the competition.
Eventually there will only be higher priced vehicles left, and owning a car will simply
be more expensive than it once was, however depreciation may not be as bad, which was
the major expense anyway.
BYD are able to fund themselves for what might be a long enough time, I can't say the same
for the other EV makers, they can't raise much more capital now either due to their
low stock prices.
Legacy can also fund themselves, for the time being, until their funding source collapses
as the ICE industry falls.
It is concerning for the EV industry, it really only leaves Tesla, which means I don't think
they can stop at 20 million vehicles a year.
Not if they are serious about the transition.
There is no one else is going to have the slightest impact.