EV Wars To Drive These Stocks Even Higher
An EV war is coming.
It’s not for the critical minerals to build them (there’s more in that soon).
It’s a war for market share.
With a slew of new EV models set to hit the market from all the major automakers, things are about to get hot.
There will be a handful of winners and many, many losers.
Here’s how to spot the few and when to buy them.
These Wars Have Few, But Big Winners
First, let’s face a troubling fact.
EV’s may never pan out to be the panacea they’ve been touted as.
They definitely have a role in the future of transportation, but how big of a role remains to be seen.
There’s a case to be made that it will take decades for EVs to exceed 50% of the market.
It took 50 years for internal combustion vehicles to fully replace horses.
EV’s could take just as long.
After all, just think how far along we’d be if the U.S. government was kicking in $7500 per car and making regulations that basically require massive investment in EV production.
With that in mind, we don’t see the EV wars going well for most EV companies.
There was big demand for EVs.
The first few million to hit the U.S. market had ample buyers lining up to pay for them.
That was the “easy” money in EVs.
Now, the industry is going to have to move beyond early adopters and convince sceptics to buy in with real money.
How will they do that?
Discounts. Huge discounts.
Well, Tesla has shown the way this week. Other EVs are going to have to follow suit.
It’s a full blown war of market share and it's going to take years for it all to settle down and the EV sector to get right-sized.
Until then, it’s going to be a battle for market share.
Tesla is poised to lose a lot of it.
Tesla dominated the market with little competition.
Tesla had 79% of the U.S. EV market in 2020.
Its market share fell to 64% last year.
But it is still far away in the lead.
Ford, Kia, Chevy, and Hyundai are all in the single digits of market share.
And all have new EVs ramping up production this year.
It’s going to be an EV war for market share.
And there will be winners and losers in it all.
EV War Bust And Boom
This is a war for market share and it rarely ends well for most players.
After all, we saw how speculative investor money fueled a war for market share during the dot-com bubble.
What remains is a handful of wildly successful giants and thousands of also-rans and never-weres.
We don’t see how it ends well for most EV companies.
One winner will be lithium market.
We foresee interesting things happening in the lithium market.
Demand for lithium could become highly inelastic and less responsive to price.
After all, the traditional automakers must meet certain fuel economy standards which will require them to produce hundreds of thousands of EVs to get average fuel consumption numbers down.
And they’re going to have to do that whether it’s profitable to do so or not.
Also, there’s a high likelihood of a lithium cartel, like OPEC or the cartel that controls potash fertilizer prices.
Lithium is a global industry, yet production is a concentrated in a handful of companies.
It wouldn’t take much of a drop in lithium prices for them to lock up prices forever and it would take years for new lithium sources outside the cartel to come online.
Finally, there is a big bottleneck in the lithium refining process.
“Battery grade” lithium is going to continue to be valuable until all this gets worked out which could take years of slow evolution.
