I have been in the markets since college, about 6 years ago. I am not an expert and have my fair share of misses. This isnt a typical "doomsday" post. In my 6 years, I've heard every year that the stock market was about to collapse. I think its possible the stock market faces a "lost decade", but I am also a big believer in the innovation within the pipeline that we could benefit from in the coming years.
One area of the market I am confused by is the electric vehicle space. It seems everyone is so high on the space when I think it presents a lot of risks:
- A lot of EV companies are trading like they will be the dominant player in the EV space and have a large % of TAM. In reality, very few of these companies will win any significant amount of TAM and many of them will crash (no pun intended). In the last few years, we've seen the EV space expand from Tesla to Volkswagen to General Monitors/Ford to the darling SPAC companies. Many of these companies have never sold a electric car to the general public.
- The car industry is a tough industry to invest in. In my investing career, the car industry has been the ugly orange haired stepchild. Too many companies, large capital requirements, and tough margins. I dont understand how the EV space would change that. Sure, certain technologies might make manufacturing easier that can improve margins and lower capital requirements... but you are still going to pinching every penny, especially if the market remains this saturated.
- Many EV car companies are dependent on certain tax credits and government handouts. We can argue the merits of the government incentivizing people to buy cars and the merits of the government giving money away to help car companies be competitive. How reliable are these credits in the future?
- It's great you want an electric car to save the planet, but if your EV charging station is powered by coal, or oil/gas, you arent doing as much good as you think. The charging stations seem to need a lot of further infrastructure. I dont think many, if any, markets globally have the infrastructure in place to account for the expected increase in EV vehicles, much less EV charging stations built using power from "clean" sources.
I dont pretend to be an expert at this. My research is still on going and my ignorance might be showing here. However, I just see an industry that is growing in awareness and therefore stock valuations, but still have many questions and less answers.
I have seen some short reports in recent weeks. If anything, I'd buy General Monitors and buy LEAP puts in SPAC EV companies. I think the existing ICE car companies like Volkswagen, Ford, and GM... along with Tesla, have a huge advantage over some of these smaller players.
Submitted March 15, 2021 at 11:48PM by Pittsburgher23 https://ift.tt/3lj5Fk5
