Everyone knows electric vehicles are the future (along with fuel cell tech), this has created a bubble somewhat like the weed bubble we had not too long ago. People are pouring money into EV companies like Tesla (TSLA), and Nikola (NKLA). This has led to pretty much all EV companies being massively overvalued in my opinion. We are a minimum of 10 years away from Electric vehicles fully taking over the market. The earliest adopting countries are talking about banning the sale of new petrol vehicles starting in 2032, but that is just speculation at this point. Even once that happens gas vehicles will still be on the road for at least another 15 years if not longer.
Thats even ignoring the fact that making EV’s is significantly harder on the environment than making petrol vehicles (open pit lithium mines, the fact that certain battery parts are only available in certain parts of Africa which are highly volatile at the moment). Tesla charging stations use diesel generators to keep up when their stations can’t keep up using green energy, which is a large portion of the time. That and the fact that the largest EV market in the world right now (China) largely charges their EV’s using coal so their greenhouse gas emissions are actually going to go up as they move toward EV’s. That being said EV’s are going to take over whether we want them to or not and they will get cleaner for the environment over time as technology advances.
The biggest issue for EV companies isn’t that they aren’t going to make money long term, it’s that the large established manufacturers are going to have plenty of time to get their EV games up and running before the numbers really matter. GM (GM) is putting $20 billion into EV’s over the next 5 years for example. The other advantage the major manufacturers have is that no EV company is profitable yet Tesla lost 775 million last year.
Tesla’s current market cap is 177.91 billion and they sold 367,500 cars. Volkswagen, the second largest car manufacturer in the world, has a market cap of 69.95 billion and sold 10.8 million vehicles. They also made $14 billion after tax compared to Tesla’s loss of 775 million. The highest market share any 1 company has is 10% (Toyota in 2019). Assuming Tesla can get a 10% market share (unlikely) and sell 11 million vehicles or more in a year, they are still almost 3 times overvalued compared to Volkswagen. The downside potential of their stock right now compared to the upside potential is huge. Sooner or later people are going to realize how overvalued Tesla is and a lot of people are going to lose their shirts.
The other company that really shows the EV market is in a bubble right now is Nikola. They have a market cap of 22.94 billion. Yes billion with a B and all without 1 cent of revenue. When companies start getting money poured into them without even pulling in any revenue you know you’re in a bubble. At some point the bubble will pop, until then I’m going to just sit and watch and wait for the eventual pop and drop. At that point I will contemplate looking into buying one of these companies.
I don’t think the bubble is going to pop anytime soon though. It is too much of a fad right now and too many people are enamoured by Elon Musk for reality to set in yet. People feel to good about the future of EV’s and are making too much money trading these stocks for it to pop yet. Just keep in mind a quote from the intelligent investor before you decide to jump in on the EV market. ‘An intelligent investor knows stocks become more risky as the price increases and less risky as the price decreases’