Wednesday, February 3, 2021

Electric Vehicle Competition

One of the things I'm watching that could pop the Tesla bubble is an onslaught of electric competition from the other automakers. I put together a collection of reviews for some models that look really compelling:

  •  I've seen a couple of new Porsche Taycans in my neighborhood. Car and Driver: "The Taycan takes everything good about electric performance cars and amplifies it." There are four models: Taycan ($81k), 4S ($105k), Turbo ($152k), and Turbo S ($186k). The EV Porsche in particular is attacking Tesla from the high end. The high end Teslas have a stale design, are no longer uncommon, and have dorky drivers. Buying a Porsche gets you away from that.
  • On the low end, VW is selling an ID.4 SUV. Review: "Already priced below the Mach-E and Model Y before federal and state discounts, buyers who apply the full $7,500 federal tax credit can pocket healthy savings by choosing the VW over the Ford or Tesla." Base price is $41k.
  • Also by VW/Porsche is the Audi e-tron. One review: "This is an electric car that doesn’t seek to blur boundaries or act radical, but simply persuade regular SUV buyers to make the jump. Audi refers to this as ‘concept clarity’." This starts at $67k and goes up to $84k. 
  • Then there's Polestar, which is a Volvo (Geely) marque. Their latest model is the Polestar 2, where the entry-level "Launch Edition" is $61k. Review: "The Polestar 2 is an excellent luxury electric vehicle, even if it's not as visually exciting as trendier alternatives."
  • Ford is selling a Mustang Mach-E, starting at $44k. Review: "While it doesn't drive or sound like Ford's pony car, the Mustang Mach-E is an accessible and stylish EV."
  • Mercedes is making electric versions of pretty much their entire product line, starting with an EQA model in 2022, a compact-crossover.
  • The Hyundai Kona EV starts at $39k. If you had to buy an all-electric EV, a Hyundai might be a pretty good choice: "Playful handling, long driving range, fantastic standard warranty."
  • Lucid has announced specifics for the Air which will supposedly be on sale this year.

For people who actually care about economical transportation, there are still the Kia Niro (hybrid), Nissan Leaf, and the Chevrolet Bolt. These are far cheaper ($30k range) than the "luxury" (aspirational) models above. 

  • "The Toyota Prius has long been the car of choice for buyers in search of an affordable hybrid—but it's a segment that the handsome and practical 2020 Kia Niro ought to dominate instead."
  • "While luxury brands such as Audi, Jaguar, and Tesla grab headlines with luxury EVs, the 2021 Nissan Leaf quietly serves the proletariat an affordable, all-electric method of transportation."
  • "The Bolt hatchback isn't exciting, but it has the range and practicality to attract and satisfy first-time EV buyers."

By now the other automakers have belatedly realized that Tesla's existence and overvaluation threatens them. Introducing all these electric models will cannibalize Tesla sales and also decrease Tesla's revenue from selling EV offset credits to the other manufacturers. If Tesla sales and regulatory credit revenue start to decline, it will be very difficult not to notice the overvaluation.

The Q4 2020 earnings season has put the overvaluation in stark relief. The market capitalization is so high now, at $750 billion, that it is not really possible to make a credible justification for it. It is as much a creature of momentum and positive feedback as GameStop. The current Tesla market capitalization is about the same as that of Facebook. They are the fifth and sixth largest public companies in the United States, behind only Apple, Microsoft, Amazon, and Google. Facebook's enterprise valuation is about $50 billion cheaper than Tesla, since it has significant amounts of net cash that Tesla does not.

Facebook earned $11 billion in Q4 2020 and $29 billion for the full year. Facebook's net income is equal to or even greater than Tesla's entire revenue. For the entire years 2019 and 2020 (combined), Tesla had a net loss of $139 million despite over $2 billion of regulatory credit sales to other automakers. Gamestop and the other short squeezes show that momentum investors buying call options can push share prices to arbitrarily high levels that are not connected with business fundamentals.

Hence, Tesla became overvalued by more than an order of magnitude. It is truly the odd man out in the list of companies with market capitalizations over $500 billion: they generate tens of billions of annual profit and return cash to shareholders, while Tesla still has to raise capital externally.


CP said...

The Tesla couldn't survive a quarter-lap before overheating and cutting power, which makes any more detailed comparisons—such as speed through the esses, where the Taycan averages 14.8 mph faster than the Model S—irrelevant.

Stagflationary Mark said...

Musk tweeted today:

I am become meme,
Destroyer of shorts

If pride really does come before a fall, Tesla’s fall is going to be legendary.