Are EVs on Their Way Out?
If you listen to the pundits, you probably think the electric vehicle (EV) boom is now a bust. Here are some headlines and figures you may have seen or heard…
“Ford Loses Nearly $60,000 for Every Electric Vehicle Sold” – TheStreet.com
Then you have an article about how EV giant Tesla (TSLA) is making less and less money on EVs…
Then there’s this fear-based lithium sell-off headline…
“Lithium Price Crash Could Trigger Shortages From 2025” – Oilprice.com
You’ve also got oil company Exxon Mobil (XOM) getting into lithium…
And there’s this line from an article about the lack of demand for EVs…
“Electric vehicles (EVs) currently make up around 1 percent of all the cars, vans, trucks, and SUVs on the road in the United States.” – Natural Resources Defense Council
But there’s a different story developing overseas, with China ramping up EV sales…
“China’s EV sales share is currently double the global average.” – World Resources Institute
As you can see, the news is all over the place, and it’s having a real impact on auto and lithium companies.
So let’s clear up the confusion right now.
First of all, Ford is not Tesla. Tesla doesn’t have to deal with unions or legacy issues, and it’s the pioneer of EV technology. It’s also infinitely more efficient in its use of technology and robotics, and its cost structure is way better than Ford’s or GM’s. That’s why Tesla is profitable in EVs while the others are not even close.
As for Exxon moving into lithium, the question I had from that article was “Why would an oil giant invest hundreds of millions of dollars to develop lithium mines that won’t come online for three more years?”
Then I found out the answer.
The truth is…
Battery storage is increasing, not decreasing.
So with EV tech improving, and with just 1% of U.S. vehicles using EV technology right now, there’s real potential for EVs in the future. And Exxon wants in.
Yet there’s resistance from a substantial lobby in the U.S. that’s still partial to oil and gas and the internal combustion engine. After all, there’s a ton of money in that too!
This conflict is putting the U.S. behind the curve on electrification of vehicles and battery technology.
However, the same cannot be said for Europe and China. They are going full speed ahead, and penetration levels there are far ahead of where they are in the U.S.
And whether you like it or not, YOU are supporting the move with YOUR tax dollars as global governments, including the U.S., are pouring hundreds of billions per year into subsidies for alternative energy technology, ranging from outright grants to tax rebates for buying electric vehicles.
YOUR ACTION PLAN
With EV technology improving but still getting bottlenecked by the government, major players in EV and lithium are currently on sale. That means you have a chance to catch a trend at a very early stage and at very cheap prices. Could it fail? Sure. But the cost is low and the payoff could be huge, which is why you would be remiss if you did not add some exposure to your portfolio now.
To see exactly how we’re trading them in The War Room, go here.
And to get our best pick every week in Trade of the Day Plus, go here.
MONDAY MARKET MINUTE
- Market Shrugs Over Credit Cut. Over the weekend, Moody’s cut its U.S. credit outlook from “stable” to “negative,” although it did maintain its U.S. credit rating of AAA. Fiscal policy and political dysfunction in Washington have created the risks that triggered the downgrade. The major market averages are down as a result of the news, but not by any significant amount.
- Here We Go… Another Shutdown Risk. Same day, same problems… just with a different Speaker of the House. The U.S. government will partially shut down this Saturday if Congress fails to pass a funding bill before then.
- Our Takeaway: These ongoing threats of a government shutdown have turned into nothing but a way to use the urgency of the deadline for political gain. The market’s reaction seems to echo this thinking as well. Until the deadline passes and the government actually shuts down, I don’t see this as a market-moving event. However, if gridlock in Washington actually does force a shutdown, then we’ll pivot to a negative downside bias.
- Notable Earnings This Week. It’s a big week for retail, as Target (TGT), Home Depot (HD) and Walmart (WMT) highlight this week’s earnings releases. But I’m targeting a few other candidates as well. Solar stocks are also making huge moves, so Canadian Solar (CSIQ) is a top earnings consideration.