Electric Vehicles

There isn’t much major news on electric vehicles, no acquisition but there have been many smaller deals that signal this industry is finally ready. For a while, in several different intervals, the electric vehicle industry has almost been prepared. When Toyota came out with the Prius in 1997 (26 years ago) electric vehicles seemed to be close to turning the corner and being relevant. That didn’t happen, but Toyota kept making Priuses. Then, the next major milestone was when climate change started to be taken seriously. Electric vehicles were identified as a major component of the necessary changes required. Still, infrastructure was lacking and nobody wanted to drive the only electric car, The Prius. Then in the late 2000s, and early 2010s Tesla came about. They had extremely advanced battery technology, and most of all, the cars were just cool. Still, they were mostly just reserved for your pretentious doctor friend. Now, we have reached the real point (for real this time). Now electric vehicles have been subsidized. It’s no longer a dream because it makes sense. Electric vehicles are becoming cheaper and consumers are buying as producers are making. So, how is this going to play out?

Tesla will lose market share. I said this for the first time in 2019 and stand by it. As of right now and in years past, Tesla hasn’t encountered much competition. If you want a nice electric car, buy a Tesla. If you don’t want an electric car, then don’t buy a Tesla. All they have had to beat is themselves. Just don’t put yourselves out of business. That is no longer the situation, and it definitely won’t be in a couple of years. Mercedes, BMW, Audi, and Lexus. These are all companies that will be competing with Tesla directly, something Tesla has never experienced. If Tesla goes low and tries to make a cheaper maybe less luxury-focused car they will get crushed. That move would provide short-term relief and cripple them long-term. There are just as many if not more companies that would overpower them in that area: Toyota, Honda, Volkswagen, GMC, Chevy, Ford, Etc. Tesla has never experienced competition, even if they handle this perfectly they will still lose market share. It’s inevitable, but not world-ending. They know this and have started taking (very wisely) the appropriate steps. Tesla has chargers all over the country, these chargers can refuel a battery in fifteen minutes. This is three times faster than their closest competitor. They have already started signing companies, locking them into contracts making them only compatible with their chargers. They can be the Exxon of electric charging. This is brilliant if they can capitalize effectively, and could secure their future for decades to come.

Another big thing people have to realize is that there is no going back. Very smart car company executives can see the way the wind is blowing. They have taken note of excellent EV sales in various cost brackets as well as the continued interest the Federal government has taken in subsidizing this industry. They know this is the future, and there is no going back. By the time I’m an old man yelling at kids, gas-powered cars will be as foreign to them as model-T cars are to me. Relics of the past, of a bygone era.

From an investment point of view, you have to be smart. Don’t pick the new, only electric companies who haven’t been proven and are as likely as not to be bankrupt in five years. Pick the smart companies with a past of adapting and being right. Think car companies like Toyota, Mercedes, or if you’re feeling bold Porsche. These are companies that consistently have hit trends correctly and have excellent leadership. It is practically a given that these companies not only will be here in a decade but that they will dominate whatever they attempt. They each represent three separate brackets of cars for consumers, and these are the three companies I see beating out all of their competitors in their bracket. If you are partial to BMW however, you could switch them and Mercedes. I just don’t think they are as well run, and I think they manufacture worse cars. I trust Mercedes because I believe they have better engineers and in my opinion, they make better cars.

I also have to add this, I don’t like the car industry and have never invested directly in them. I think there is too much competition, the companies are too volatile, and the entire industry is vulnerable to international changes. It would take an extraordinary opportunity for me to consider investing. I also hold this opinion because there are just so many better options out there. Thousands of stocks to invest in, so why would I choose to buy any of these 15-20 car companies?

Also, on a more personal note, I feel very conflicted. All analysis ends here, so click off if that’s what you were reading for. I consider myself a “car guy.” Not a gearhead, but I love cars. Let me put it this way, if tomorrow Warren Buffet said “Henry, I like you, here is 20 million dollars.” I would spend 19 million of that on cars. I think they are one of the purest forms of human ingenuity and expression. If I were to summarize human advancement in a microcosm I would use the journey of cars. So, all this change confuses me. I have real trepidation about the future of cars. How much longer until we lose real legendary cars with beautiful engines like the 911, Shelby, and Mclaren GTs? I know that electric cars won’t cause these cars to disappear forever, just merely change them for the future. But legendary car lines are getting changed permanently. For example, I don’t think I’m ready to not hear a Hellcat engine in a Dodge Challenger. The Dodge Challenger is one of the most iconic American (WOOOO) cars of all time. A car that almost single-handedly brought back muscle cars in general. The sound of that Hellcat engine in a Challenger is iconic and forever burned into my soul. How could we throw that away, how could we prevent future generations from feeling that excitement? To me on one side of my brain, this is necessary, and I will get to experience brand new excitements in this new electric field. On the other side of my brain, this feels blatantly unnecessary. They aren’t making Hellcat Challengers anymore, just electric ones. It almost feels painful. It doesn’t feel rational, the more I think about it, the more I disagree with my emotion. But my emotion tells me this is wrong, I want more. I want faster, louder cars. I want a 911 you can hear as it forces your stomach to flutter, I want a Shelby you can feel from a mile away. I don’t want this to end, and in that, I feel conflicted.