CONCERN: Electric vehicle (EV) stocks have been under pressure. By triple-impact of demand concern, production/supply chain issues, and normalizing valuations. This is starting to throw up opportunity for long term investors. Demand is still strong, supply chains better, and valuations re-entering stratosphere. This could attract institutional investors, a key upside driver with Tesla retail investor ownership already 3x typical levels. The slowdown is for all cars, not just EV’s, given cyclical macro headwinds. A car is the second largest purchase most will ever make and faces falling consumer confidence, rising financing costs, and rising car prices. EV’s are seeing the first ever battery cost rise and now lower China and US subsidies. @Driverless, @ChinaCar.
CONTEXT: EV sales growth is set to slow this year, but still rise around 40% and breach 10% threshold of total new cars sold for the first time (see chart). This will be four times the growth of ICE vehicles and leaves a very long runway. EV’s are only 2% of the total light vehicles in use today globally. Growth should diversify away from China, which was over 50% of sales last year and where EV’s have been over 1/3 of total new car sales. This is the upside for Europe (20% sales) and US (5%) as new model launches ramp, with better range, and more charging infrastructure.
TESLA: Tesla (TSLA) has been the poster child for EV concerns and its stock slumped. Missing Q4 delivery forecasts and discounting prices in China added to concern over Musk oversight. Its valuation reset has been dramatic from 130x P/E to 22x in a year. This is three times ICE leader Toyota (TM) but supported by its three times profitability (c$1,200 a car). And its higher growth rate as the premium EV leader with new capacity, from Indonesia to Mexico, and new products like cybertruck coming. Plus its multiple ancillary ‘other businesses’ from solar to services.
All data, figures & charts are valid as of 12/01/2023