| | | While pondering tech stock future potential this weekend, I watched a few Youtube vids , a few of which left me shaking my head...
One, from Arc's Cathi Wood... useful enough in terms of focus items... thinking about which areas of research might become real markets within an invest-able timeline... assuming no interruptions on a smooth glidepath... might be mistaken by investors as useful for more than that...
In particular... she posits that within five years time... half of all the cars on the road in the United States will be EV's... Maybe she's right... and I'm just missing the massive transformation of the global economy that would have to occur before that could become even remotely possible ? Or maybe she posits a changed social and political environment... in which no one is allowed to drive a gasoline powered car ?
So, as background:
How many cars are made each year ?
The link is a bit dated, current only to 2016... 72.1 million cars made per year (2016)... but gives a flavor for the trends in change over time... shows clearly enough who is making the cars (1/3 are made in China)... and, useful for me here, also carves out a number for the U.S. of how many cars there are on the road already:
"In the United States alone, 268,799,083 "highway" registered vehicles were counted in 2016, of which 192,774,508 passenger cars."
So, making it easier for Cath by using outdated numbers... she says in five years we'll have 96.4 million new EV's on the road in the U.S. ? Round it up to 100 million, and that's... going to require making 20 million new EVs per year for the next five years... or, you know... 2 million this year... 10 million next year... 20 million in 2023... 30 million in 2024... 40 million in 2025... adding new production of 10 million per year each year.
How likely is that ?
From CNBC: "Automakers sold more than 17 million vehicles in the U.S. for a fifth consecutive year in 2019. For 2020, analysts expect U.S. sales of roughly 16.7 million to 17.1 million vehicles." Which, of course, was projected before the Covid reality... making 2020 numbers not useful in prior comparison now.
Except, of course, in that it requires "can't get there from here." The production required for meeting the goal would also have to be met with sales of those vehicles... which would require every car sold for the next 6 years be an EV in order to meet the goal of having half the cars on the road be EV's within 5 years.
A bit more current view of the U.S. market, from 2019, breaking it down by producer, and the position of EV leader Tesla in that market:
The Year in Auto Sales: 2019
Tesla: The EV-only brand says it delivered 367,500 cars and SUVs in fiscal 2019. But those numbers aren't broken down by model. And this number is for Tesla's global sales, so there is no comparison possible with domestic sales. *The Tesla Model 3 may very well be the nation's bestselling EV, but Tesla does not release sales numbers at the same time as the rest of the industry. Automotive News reports total sales for the three-model Tesla line at 93,000 units YTD, off 13.3 percent.
Others it notes:
Bestselling EV-Only ModelsChevrolet Bolt* - 16,418
Nissan Leaf - 12,365
Audi e-tron - 5,369
Jaguar i-Pace - 2,594
So, a total of something like 129,746 EVs sold for 2019... a total that's a very long way from 2 million, much less 17 million... or the "more" required to meet the stated expectation.
Obviously, the expectation is in error... there are not enough vehicles being manufactured now to suggest a potential of that happening anytime soon. But, more critically... there aren't enough vehicles being SOLD to enable getting there... on anything like the suggested timeline.
Either... growth will be a lot more spectacular than suggested... or there's an error or two in the analysis.
There are a couple points of value here as takeways for investors...
First, I started looking at this because a friend in Orlando expressed great surprise that I was holding oil stocks... when oil is so, like, last century... and as an astute investor, he expected I'd be betting big on Tesla, or have some other clever play on EV's that would outperform oil... And, he's not wrong... about that last bit... not Tesla...
I noted Cypress Development CYDVF waking up on Sept 24 to 26... and other lithium stocks have moved similarly... as investors expect the Biden Administration will wave a magic wand an make EV's get built faster than they can be... somehow. But reality requires that there isn't enough lithium for Cathi Woods vision to become real... because there's not enough lithium being produced now to enable half of that...
It takes time and money to make mines that don't exist yet... while cars can't be built without the supply materials required to build them...
The hype over EV's has generated an excess in expectations... which ensures the guaranteed under-performance of the producers... if not the stocks. At the same time, the alternative situation is also true... the EV hype means that the expectation that oil is no longer necessary... because EVs... is grossly exaggerated... without it having too much impact on oil prices... which are better tied to actual production, demand and supply issues than EV's and lithium are for now...
The market still controls oil prices with supply and demand... and the manipulation of the markets as a layer on top of that... But, the error in people's expectations about EV miracles (as other "green energy" miracles) has MORE impact on stock prices in oil stocks... than it has in other markets.
I'm not dissing the potential of EV's... or that of other "green" energy... but, don't let the hype and "can't get there from here" predictions... lead you into investing real $ in what is, essentially, a pump n dump... of vastly over valued tech stocks... when valuations in the market are at ALL TIME HIGHS... higher than they were in 1929...
Oil stocks... are not going to go away because of EVs... ? Oil demand probably won't decline because of them.... less than expected, certainly, given the errors in expectations re EV production, supply, demand, and sales ? But, in any case, the valuation of the oil stocks... and the mineral stocks, including those supporting future techs... are not at historically high levels... while the market reality in oil... REQUIRES that prices are going to go higher... (profits will soar, and dividends that were cut in 2019 will be restored, and grow again) because of the lag time in the restoration of production lost to the market implosion in 2019... It will take YEARS to replace production lost to wells being shut in as the Covid crisis tanked the economy... probably far longer than it will take to replace lost demand... when the economy recovers... which it largely has already, in oil demand...
There will be a time it might be useful to load up on EV or green energy related stocks... The right time for looking at them... to sort the winners and losers... is now. The right time for buying them... (excepting the mineral producers: REE, Li, Co, Ni, Nb, better quality graphite... which have to be developed and moved into production well ahead of cars being built) will be when the multiple in the markets is closer to historic lows than historic highs... and the technological, supply chain, and SALES issues are resolved well enough... that what can't happen today will become able to happen...
We are in a bubble economy... very much like that of 2001... as far as the excess valuations in tech stocks.
That being true... doesn't mean the bubble will pop on a particular day... but, pop it will... in time. The best time to buy the "winners" from the dot.com bubble ... was not during the bubble... but after the crash...
Amazon was $86 in March of 1999. In September of 2001 it was $6... bought then, you were in the green in October... while if you bought it in March of 1999, and held... if took until September of 2007 just to get out of the hole... while the buyers from September 2001 logged a 14X return.
Timing is everything.
Buy and hold works... but only when you buy low... and you can't buy low... when stocks aren't low.
Wait for it... or find something that is low... as value investors do. |
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