The narrativ of EVs being the future is getting stronger and stronger. But just because we
have this one company that was capable of making an affordable EV, everyone seems to
accept that if they can do it, then surely an actual auto manufacturing company that
has been around for 100 years or so, well obviously they can too.
And we are just referring to the legacy autos being capable of producing an EV that looks
reasonably good with a sufficient range, and affordable, which only really needs to be
around the average price of a car in America which is around $40,000, or maybe up to $50,000,
given the added cost savings that an EV offers, i.e. no more fuel or servicing. We are not
referring to a smart robot car like Tesla, no, simply electrifying the current offering
legacy autos have, is where the bar is set. Let alone talking about $25,000 price point
for the masses.
But these legacy autos simply cant achieve it. It doesn't appear to be in their wheelhouse.
Again part of the reason are their legacy systems, and Tesla's economies of scale, creating
an automatic $15-20,000 discrepancy in cost, per vehicle, before legacy autos have even
spent a dollar on the actual cost of manufacturing a car.
But now we are seeing Rivian with an $80 billion valuation for their IPO, ummm that is crazy.
I have said before that the EV industry might bubble, something similar to the dot com bubble,
especially if the the US get this tax credit. The issue is, that the barriers to entry in
starting an EV company, are a lot tougher than putting up an e-commerce web site, as
in the dot-com bubble. Although I really have to hand it to Trevor Milton, Nikola reach
an unbelievable value without even a working prototype. Unless you include rolling trucks
down a hill.
Perhaps thats more an indication of the madness of crowds, and how truly insane people can
get, particularly when it comes to FOMO in this scenario. FYI, if you feel you missed
out on investing in EVs, well it's still not too late to actually invest in Tesla. Rather
than invest in a company with a valuation larger than GM that hasn't even delivered
one car. Also one other issue with Rivian, is it has ties to Jeff Bezos, who could quite
possibly hold back the growth of the company, by refusing to use things like the Tesla charging
network or Tesla FSD, just out of spite. Although he doesn't have control of the company, he
does have a lot of sway when it comes to Rivian's largest order, being the Amazon delivery vans.
Anyway, Rivian make a really nice looking pick up truck, much nicer than the F-150 Lightning,
and they don't face all these legacy auto moats, although I suspect unlike Tesla, they
will have to invest significantly in advertising. But they are around where Tesla was about
10 years ago. Well that's not even true as Tesla did have their Roadster sales before
then too. Either way Tesla's market valuation was around $2 to 3 billion back then. Oh also
when Tesla were that size back then, there wasn't a massive juggernaut of an EV company
already, they were actually the market leaders. Rivian faces a lot of other competition in
this space. This valuation is beyond absurd. NIO is only $60 billion, why should Rivian
be worth more than NIO?
I think its just marketing, or negotiating. In negotiation one strategy is to start with
an absurdly high number, so that when the valuation falls back to $60 billion, then
investors will think, oh $60 billion well thats 20 billion less, so that's a good discount.
Whereas the actual valuation probably should have been closer to $40 billion. Just going
by the market, not my personal valuation. I think NIO, Lucid, probably all of them are
over price because they think they can expect similar profits to Tesla.
But Tesla has a brand that consumers are willing to pay more for in the first place, and they
have the lowest costs in the industry and these costs will continue to diminish further
as time goes on.
I do believe EVs and associated services like FSD will be a much larger industry than the
internal combustion auto industry, and offer more opportunities. But these other EV companies
are valued like they will be just as big and successful as Tesla, and be able to achieve
similar economies of scale, and similar profit margins. Just because EVs are so profitable
for Tesla, doesn't mean they will be for everyone else. And that is why they are so over priced.
Tesla haven't just done something amazing in the EV industry, its remarkable by any
business standard. It just happens to be in the auto industry, and everyone has witnessed
what Tesla has done, and think they can simply copy their play book. And because Tesla's
numbers look so good, there is plenty of capital investors are willing to risk, in the chance
others can succeed. But this is not the case.
But Elon and Tesla have pretty much built this entire industry from scratch. They are
the ones that decided lithium-ion batteries were the path. They decided that charging
stations would be necessary. They worked out you can control the entire car from the computer,
something no one else has done yet, Tesla is still the only computer one wheels to this
date. Some of the others are trying with their own over the air updates, but we are talking
about simply firmware updates. And they are even struggling with those. Not updates that
will allow the car to suddenly stop at traffic lights, or increase range and performance.
That's right, there is an upgrade in the Model Long Range, where you can pay for improved
acceleration. That's how much control the computer has over the car.
But the legacy autos can update their firmware, well barely, with their over the air updates,
and thus they get to tell their customers and shareholders that they can do over the
air updates, just like Tesla. It is such a scam. I can't believe the audacity of the
people at VW, Ford and GM. Now I actually was not in the CIA or anything like that,
but through all these processes I have become very good at detecting when a legacy auto
company executive is lying, and actually found some signs, it seems whenever they are lying
their lips move.
Also not to mention Tesla were so far ahead of the game, that they have managed to secure
all the necessary supply chains, and all the best ones, where the resources they require
are the cheapest. That's just another advantage of being first to market, or first mover advantage
as they say. Yea, the ones Tesla left, well there's a reason they didn't take them. And
everyone else has to fight over the scraps.
But some of them are waiting for the next technology in battery, and have it all riding
on that, or at least its something they can sell to their shareholders. Like Quantumscape,
another potential company in line to ride the EV bubble, just as soon as they can get
their batteries into mass production. And provided they are actually going to end up
costing less than Tesla's, of course Quantumscape are not doing this for free either, and would
expect a significant profit margin. And their technology may not even be ready for 5 more
years or so, and then they have to ramp up, and also source all the necessary supplies.
Oh but what auto companies are left in 5 years time?
Governments are adamant that we are moving over to EVs and forcing the industry to move
that way, legacy autos can't transition and will be forced to go out of business, as their
sales of their ICE cars keep falling, whilst their costs keep rising due to emissions standards,
and they spend their 10s of billions of dollars in attempting to transfer to EVs. Those 10s
of billions of dollars are being invested because we see ridiculous valuations on the
likes of Rivian at $80 billion. If they can show investors, or banks those kinds of numbers,
then they might expect that Volkwagen's EV business will be worth more like $200 billion.
I mean whats an electric Porsche compared to a Rivian, a brand with that much prestige,
history and class. But again these valuations are based on if they can achieve similar profit
margins to Tesla. And although Rivian might be able to make some profit, well perhaps
gross profit, and possibly break even or even eventually scrape a small net profit, well
Volkswagen are still stuck in their legacy moats, that are now keeping them stuck inside
rather than keeping others out, and preventing them from entering the EV market. They are
stuck.
Bottom line, EVs are the future, and we have yet to see a nice looking, affordable EV from
legacy autos with sufficient range, let alone that also makes them a profit.
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