Whitney Tilson’s email to investors discussing his TaaS video; Why he is bullish on EVs (but not most of the stocks); his friend’s argument that EVs are NOT like smartphones; Consumer Reports on Tesla Inc (NASDAQ:TSLA); Why Do People Buy a Tesla? Not Because of Elon Musk, Survey Says.; VW ID4 review; carjacking; batteries.[soros]
1) I think most stocks in the EV space should be avoided (including NASDAQ:TSLA, due to its extreme valuation of 24x 2020 revenues), and many are probably great shorts (like NASDAQ:WKHS) – but nevertheless I’m super-bullish on the sector.
I think sales of EVs (especially when married with real AV capabilities, which are ramping quickly) are going to skyrocket and be more than half of all cars sold in America within five years.
I did this video a year ago, which has now been viewed more than 5 million times, predicting the rapid adoption of EVs and AVs, which will result in the creation of an entire new industry called Transportation as a Service (TaaS). (I just taped a new, updated version of the video, which I’ll send out once it’s public.)
Since then, everything is playing out even better than I expected – in particular, Democrats now controlling the Presidency and Congress provides another catalyst/tailwind for the sector.
But I’m not as bullish on most of the stocks simply because most of them have gone up so much…
EVs Are NOT Like Smartphones
2) I think EVs will follow the path of smartphones, when they replaced Blackberries. My friend, however, disagrees. While I think he’s wrong, I want to share his arguments:
There are a few aspects of the smartphone-vs-dumbphone comparison that makes it very different than the automobile (BEV vs ICE).
- The iPhone (and Android) did so many more things than a pre-iPhone/Android did. The product was just not the same. If you give people a product that does dramatically much more, then it should be no surprise that it takes over the market.
- In contrast, an EV performs no task that a non-EV does. It will transport up to five or so adults and their luggage from point A to point B in exactly the same time, on exactly the same road, and park in exactly the same place. The job performed is the same.
- If the EV could fly from point A to point B, or do so while giving the owner a massage while the driver lays on a massage table or whatever in the car — well, then the functionality would be different. But this is not the case today. The functionality today is identical when you compare an EV with a non-EV.
- If all you could do with an iPhone was to place phone calls, who would have cared? Nobody. The genius of the smartphone was that it could do the longest list of things that you simply couldn’t do with an old pre-smartphone. The entire nature of the product shifted completely.
- Today, I buy a car so that I can drive my child to school, run errands and so forth. Absolutely nothing changes if the powertrain changes. Nothing at all. So why would I care whether it’s an EV, all other things equal? I don’t.
- What percentage of homes in the world have the ability to charge at home? First, you have to have a home. Second, you have to have a parking space that’s dedicated and within practical reach for a charging cord. Third, you have to have reliable electricity. I don’t have the exact number in front of me, but if memory serves me right about 18% of the world’s households meet these criteria.
- As a result, the addressable market for EVs may be closer to 18 million units per year — 18% out of conceptually 100 million cars sold per year, globally.
- It is also true that the industry will reach those 18 million addressable homes a lot faster with huge government subsidies, than if there weren’t any subsidies.
- When Wall Street finally realizes that the addressable market for EVs is going to be a lot closer to 18 million units per year than 100 million units per year, the valuations of the EV stocks are going to collapse.
- Over the last 18-24 months, the collective valuations of all automakers have doubled (or more) while the total addressable market remains at 100 million units per year. This does not compute.
- It doesn’t even compute if 100% of these 100 million vehicles would be EVs. Then consider how far off these valuations are if the TAM is one-fifth of what formed the basis for the valuations not even two full years ago.
- The cumulative valuation of the automotive space will therefore fall by one decimal point (deflate by half for the recent increase, and then cap EVs at one-fifth the market size) as the current hype settles down. The vast majority of that deflation will impact the EV-specific companies.
Consumer Reports On Tesla Inc (NASDAQ:TSLA)
3) Consumer Reports just released its annual auto issue – attached are the pages related to NASDAQ:TSLA. CR only recommends one of the company’s four models (the Model 3 is among its 10 top recommendations) and the brand is ranked only #16 out of 32, but note that NASDAQ:TSLA is tied with Audi and Porsche for highest road-test score (88 of 100) and all four models have the highest owner satisfaction rating.
Why Do People Buy A Tesla?
4) Consistent with what CR found, this survey confirms that Tesla owners LOVE their cars (it’s not because they’re Musk fanboys): Why Do People Buy a Tesla? Not Because of Elon Musk, Survey Says. Excerpt:
Most people in the auto industry assume Tesla buyers are drawn to the brand’s high-tech image or are fans of its mercurial CEO, Elon Musk. But a new survey from research firm Escalent suggests that’s far from the real story.
The real reason is simpler, and far more traditional: They like the cars.
“In fact,” Mike Dovorany, VP at behavior and analytics firm Escalent, told Car and Driver, “among respondents who are shopping for or already own an EV—Tesla or otherwise—Elon Musk is among the top [drawbacks in] their consideration of the brand.”
…Tesla’s one-stop shopping for everything from financing to fast charging is a huge plus for the brand, the firm said, and it’s one GM and Ford may not be able to replicate.
Volkswagen ID4 Review
5) From a friend:
This is the most professional and detailed car reviewer in the U.S., possibly in the whole world, reviewing the VW ID4:
The VW ID4 competes against Ford Mustang Mach-E, Tesla Model Y, Volvo XC40, Chevrolet Bolt (both versions), arguably also Kia Niro EV and Hyundai Kona EV.
You will see him point out aspects of how the ID4 differs against most of those direct BEV competitors in ways you will not hear from other reviewers.
I just bought a vehicle that’s of a similar shape as the VW ID4 but half a size smaller, so it’s still easy to imagine whether I would have considered this VW ID4 or not. It would have been a considerably more expensive option. Yes, a half-size larger and possibly with more standard equipment — but nothing for which I would have been interested in paying more.
More importantly though, what about the gasoline vs electric itself? An EV drives better from the “test drive experience” (that may last a couple of hours or so), but in terms of “living with the vehicle in real life” — an EV just doesn’t work for me now. A basic requirement for a good EV experience is that you have to be able to plug it in somewhere.
That said, for someone whose shopping list is confined to BEVs only, the VW ID4 has some distinct advantages compared to most or all of its competitors.
Of course, this list of competitors will widen before the end of 2021 with the entry of these in particular:
- Nissan Ariya: https://www.youtube.com/watch?v=2RdS4sDIt74
- Hyundai Ioniq 5: https://www.youtube.com/watch?v=SlEuoHfG2GU
- Kia EV 6: https://www.youtube.com/watch?v=_rUEIAzj8pg
- Toyota Prologue: https://www.youtube.com/watch?v=PzhBMeYraXU
6) Someone tried to carjack a Tesla and actually put a bullet in it – but the owner escaped! Watch the 23-second video here.
Attempted carjacking Tesla! Acceleration, doors and cameras save my life! I got a bullet hole in my car now. I need a bullet prof one @elonmusk can I trade in? Y’all can do some tests on a M3 ability to take a hollow point! 15 years in the military 8 deployed and shot first in US pic.twitter.com/O8rnsmDxHC
— Draper Younce (@DraperYounce) March 7, 2021
7) An interesting tweet:
This is *prior* to 4680 cells, and the Tesla gross margin advantage doesn’t stop there: structural pack design, single piece diecasting, and factory optimization all are significant durable advantages. https://t.co/Uc5bib12U9
— Mayur मयूर Thaker ठाकर (@freshjiva) March 10, 2021