A Glut Of Electric Vehicles Building Worldwide

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

This is a big week for economic news, namely the Consumer Price Index (PPI), the Producer Price Index (PPI) and Retail Sales.  The big thing associated with the CPI is that we want to see the real estate component, namely, Owners’ Equivalent Rent, finally moderate due to falling home prices and a soft rental market. 

The PPI contracted in February, so we want to see if that trend continues in March, plus it would help if wholesale service prices moderated.

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Q1 2023 hedge fund letters, conferences and more

Additionally, we want to see if consumers were still spending in March, since after an explosive January, retail sales dipped in February. Ironically, due to a manufacturing recession, based on the ISM manufacturing survey for the past five months, the only way for the U.S. economy to grow is if consumer spending via retail rales remains strong.

Strategist Disconnect

The financial media has been warning that the first quarter earnings may be decelerating, but I do see that from the analyst community covering my stocks. There seems to be a big disconnect between top-down strategists versus the actual analyst community that covers individual stocks.

Although bank earnings will be released this week, we do not own major banks, so we should not worry about the inverted yield curve and other banking woes. The Fed has opened its discount window for a year to help any troubled banks and it appears that many banks have taken advantage of the discount window.

Electric Vehicles Glut

The EPA is supposed to announce new emission regulations this week.  Specifically, EPA Administrator Michael Regan is supposed to announce on Wednesday in Detroit new EPA emission limits that would require as much as 67% of new vehicles sold by 2032 to be fully electric.

These new stricter regulations are expected to be effectively a death blow to internal combustion engines and even more restrictive that the current regulations mandating EPA emissions. It will be interesting the reaction from Detroit and other automotive manufacturers.

Currently, there seems to be a glut of electric vehicles building worldwide after China and Germany recently ended their tax incentives to build electric vehicles (EV). Tesla Inc (NASDAQ:TSLA)’s inventories at its Berlin plan are apparently growing and the company announced more price cuts last week. 

In Tesla’s defense, the prices of lithium, nickel and cobalt have all moderated as electric vehicle demand in China has softened.  However, long-term the demand for battery components is expected to soar due to more EV models in the pipeline as well as electricity storage demand.

Interestingly, Tesla announced that it is building a new factory in Shanghai, China to build its large-scale battery for electricity storage called the Megapack. Australia has been shutting down all its coal plants and has been expanding its electricity storage. 

California is another big market for Tesla’s Megapacks, which are made with cheaper iron phosphate (LFP) batteries sourced from CATL. It will be interesting just how fast electricity storage facilities expand across the U.S., since it typically causes electricity rates to rise.

Coffee Beans

Avoiding Retirement Boredom. Cooking and baking is the most popular hobby among retirees in the United States with nearly half of all respondents saying it is one of their pastimes. This is followed by reading (42 percent), caring for pets (39 percent), and gardening (34 percent). Source: Statista. See the full story here.