The electric future is here.
At least that's what most people say.
Governments basically said, it's my way or the highway,
before announcing dates when gasoline cars
will be completely banned.
Car makers have to get on board to avoid extinction.
This means there's the potential to
invest and win big here.
But at the same time, nations are
battling to get these precious metals that
Tesla, Ford, Nissan, and others need.
Something that has its own set
of shady conditions, conflicts, and corruption.
I want to discuss my thoughts
and research on the topic.
So are EVs "Cleaner"?
What's really going on behind the electric race?
And ultimately, who's going to win?
In 2009, a young engineer from MIT
founded the car company Rivian.
He combined his two passions nature and cars,
and decided to electrify two American
landmarks: the truck and the SUV.
Rivian was seen as Tesla's main competitor and rapidly
attracted huge investors like Ford and Amazon, who actually
ordered a fleet of 100,000 fully electric vans.
This had a credibility and hype around Rivian's IPO in 2021,
even though the company hadn't sold a single vehicle yet.
Picture that, the biggest IPO in nearly a decade.
For a company that doesn't yet have
a proven track record, it's insane.
Thanks to Tesla, the EV space is absolutely insane.
Despite all this hype, shares of Rivian have since
crashed, losing more than 80% of their previous value.
And there are many reasons for this: supply chain
disruptions, energy concerns, and a bad tech market.
But also the fact that EVs are
not yet as profitable as traditional cars.
There are many major issues that need to be addressed.
The demand for electric cars, though, is surging.
The competition is cutthroat, and
the clock keeps on ticking.
Now, let's consider the main question
Well, yes, but also kind of no. Let's see why.
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Now, broadly speaking, electric cars are built in
a simpler way, where the engine of a
normal gasoline car has around 2000 moving parts.
The electric motor only has around 20.
So exhaust systems, cylinders and
pistons, all that stuff disappeared.
What's essential in an EV is the battery.
The battery is surprisingly large.
It's placed under the floor of the car and usually
occupies a good chunk of the entire vehicle's length.
The battery is also what's responsible for
the fact that electric cars are much
heavier than regular gasoline cars.
These batteries can weigh 600 lbs to 1000 lbs.
Now, if you measure the tailpipe emissions of
an electric car, of course, it's much cleaner
because it doesn't burn any fuel.
But beyond that, things get
quite a bit more complicated.
Research shows that building an EV produces 60%
more CO2 compared to a petrol car.
And that's mainly due to the
making and disposal of batteries.
So there's a mix of metals that are
needed in order to build a battery.
You need lithium, cobalt and nickel,
three fellas that will absolutely play a big
role in politics for years to come.
They are mainly found in faraway countries
like Chile, Congo, China and Australia.
The problem is, mining and transporting these minerals is
Extracting one ton of lithium creates about the same
carbon dioxide as burning 15,000 lbs of coal.
And in the future, we need much, much more of these minerals.
So all this happens before you even buy your fancy car.
Then, once you finally get your cool Tesla,
you need to charge it with electricity. Right?
And how clean this is will depend on
whether the country where you live creates electricity
through clean, renewable energies or not.
To give you an idea, according to the ICCT,
if you live in the US or Europe, your electric car will be
60% cleaner for the environment than a fossil fuel one.
If you live in China, it'll be about 40% cleaner.
In India, it's only about 20% to 30% cleaner.
And here's the bottom line.
If you take the overall life cycle of a vehicle,
then electric cars are absolutely better
for the environment than gasoline ones.
But it just might take a little bit of time after
production for that to fully pay off for the environment.
And the good news is, things will get
better, because there's still a long way to
go with batteries and renewable energies.
So what's the future for the EV market?
Well, consider this.
Both Europe and the US are planning to
completely ban the sales of gasoline vehicles by
2035, which is really not that far away.
And other major countries like China are
aiming at exactly the same date.
Now, according to Bloomberg,
out of all the cars in the world,
which is a drop in the automobile bucket
of just about 12 million total vehicles.
And that means two things.
First, car makers need to hurry the
hell up if they want to survive.
But second, it means that there's
a huge market share here,
an opportunity ready to be taken.
This is a true shift in a massive, massive market.
And this is true both for native electric car makers
like Tesla, Lucid and Rivian, who have an advantage because
they've only ever made EV since day one.
But also for traditional car makers like
Ford or Volkswagen,
they've been making vehicles for decades, sometimes
over a century, and they're now investing
everything they can to make the jump.
So the market is getting crowded.
Ford's F-150 Lightning, Audi e-tron, Tesla's Cybertruck.
What's stopping all of this?
Well, some technical problems and
huge, massive political problems.
There's a saying in electric cars
that they're like pancakes.
The first one sucks, the second one is
okay, but the third one is spot on.
But to reach mass adoption, there are still
some obstacles that need to be overcome.
One problem is range anxiety.
In other words, the fear that there's not enough
charge in the battery to get wherever you need to go,
and that you'll just be left cursing
in the middle of the desert.
This was understandable in the
beginning when range was modest.
But now many models easily cover 200 or 300 miles in
a single charge, which is a lot if you remember that
Americans drive about 30 miles per day on average.
This is also helped by the fact
that governments and companies are investing massively
to build thousands of charging stations.
But will they be efficient
compared to regular gasoline pumps?
I mean, they have to be, because many
car owners simply don't have a garage or
driveway where they can charge their car.
And then we have price.
Price is a huge factor.
Electric cars are more expensive than gasoline cars.
And even though it's true that the running
costs of electric cars are lower, many people
are still scared to spend big bucks upfront.
But this problem is mainly due to the higher costs
of the minerals needed to produce these massive batteries.
However, this is expected to change
because battery prices are actually dropping.
Which takes us to some even darker problems,
starting with the battery race.
If before we had oil, now we have these guys.
Cobalt, nickel and especially lithium are
everything in this electric revolution.
And according to Bloomberg, the demand will
grow by 15 times by 2030.
So much that if we don't recycle it properly,
we'll run out of lithium completely by 2050.
Now, major countries like the US.
Produce just about 1% of the global output
of lithium and completely outsource the rest.
And one thing that nations learned during the
shortage of semiconductors is that it's dangerous to
rely on foreign imports of essential materials.
Especially if you consider that China alone
does more than half of the processing
and refining of lithium in the world.
But why?
Because China right now makes and sells batteries cheaply
and is taking over the market for electric cars.
Their cars are affordable and sometimes cost
even less than their gasoline counterparts.
Chinese brands like Nio or BYD, which is
backed by Warren Buffett, are becoming strong contenders.
So traditional automakers need to watch out.
But the issue is even bigger than that.
Superpowers play monopoly around the globe to
seek the resources that they need.
And often these minerals are
extracted in questionable conditions.
I mean, take the Democratic Republic of Congo,
one of the richest nations in
the world when it comes to minerals.
During World War II, Americans went there to
get uranium for, well, you know what for.
And it turns out Congo is also chock full of
cobalt, more than any other country in the world.
But currently China owns and controls
the majority of these cobalt mines.
Well, American automakers like Ford, GM and
Tesla buy cobalt from the Chinese.
Well, in these mines, workers are paid around
thirty cents an hour working tight tunnels.
And if they get sick, they just don't get paid.
So a priority for the EV industry has to
be finding a different way, some more sustainable method
to get these minerals and do it cheaply.
This all brings up a question
Right now, the markets in Europe and the
US rely on public subsidies and tax incentives.
This helps them achieve their tight deadlines.
And it's not only about
vehicles, but also infrastructure.
But what about other countries?
Well, some researchers suggest that the
transition might be more difficult in
developing nations than we think.
This is due to a variety of
barriers that are mainly technological and financial.
Examples are the capacity of the electric grid to
charge all of these cars, and the ability to
build a vast network of charging stations.
This is still an open question, but two and three
wheelers seem to be a popular solution in these countries.
Meanwhile, data suggests that lowering the
price of EVs will help dramatically.
What sure is the electric race is on.
The US, Europe, Japan and China are all in,
and this is a real revolution.
In fact, if in the past the car sector was
hard to get into, now the electric one is a
whole new thing with new rules and new players.
What, like it's hard?
The objective of zero emissions is still ahead of us,
and there are many problems yet to solve.
However, there are great opportunities
to invest within this market.
So let's buck up, because some of the old names will
absolutely go and new names will come and take over.
This space will be completely
different 20-30 years from now.
Investing in this space is a
matter of thinking long term.
Refusing to buy into massive hype and scooping
up deals as they happen to come by.
Just being patient.
Because where there might be excitement in the short run,
in the long run value always wins.