The big bubble of 2021 is over. But if redistributed, 2020’s massive uptick remains. The electric car genius is aging rapidly. Today’s electric car is actually less valuable than he was at the end of 2020, even with a few new faces on the scene. Traditional automakers also sold off last year. Not charging to the same extent, their decline is also much more gradual.Even now, Old Auto has him 23% higher than he was at the end of 2020.
On the electric front, Tesla went down and took over all mini Teslas. Along with Elon Musk’s Twitter Inc. debacle and the dumping of his own Tesla stock, old-fashioned regression to the mean has sunk his Big EV. But the drama masked a more pernicious, albeit mundane, development. Tesla, like the old automakers, had a pressing need to stimulate demand and refresh its product lines. China’s BYD Co Ltd surpassed Tesla to take his top spot in EV sales last year, including his plug-in hybrid.
Still, Tesla still boasts the industry’s highest valuation, which means that, along with BYD, two of the top five companies by market capitalization are EV makers. The EV sector may have given up all his gains since the end of 2020, but remains six times the size he was at the end of 2019. Electric models, including plug-in hybrids, make up a quarter of his vehicle sales. Preliminary data in China, the world’s largest market, last year showed that one-tenth of the cars sold worldwide were electric, up from one-hundredth just five years ago. Meanwhile, long-established companies continue to set targets and invest in the electrification of their vehicles. Last year saw the Lightning, an electrified version of his F-150 truck from Ford Motor Company, the best-selling model in the United States.
Overall, the total market capitalization of automakers remains about 75% higher than at the end of 2019, with traditional automakers making hundreds of billions more than at the end of 2020 after the first leg of the rally. Worth it. Although numbers have shrunk from the dizzying heights of about a year ago, the industry is effectively an electric vehicle revolution led by the clutches of (chastised) newcomers and the seemingly displaced traditional We continue to set a price on the prosperous future of our company. And all of this happened at the end of the year when global car sales appeared to be down slightly.
Call it the Fog of Confusion. Warren Buffett famously said that it’s easier to pick the losers than the winners of the transportation revolution. Musk’s aura may be blurry, but he’s never been counted. Tesla still trades at a 76% premium to the S&P 500 on futures price-to-earnings ratios. Meanwhile, traditional automakers, still making big profits from their dominant internal combustion engine models, are starting to catch up to the electrified side.
Another element of this cacophony has nothing to do with different drivetrains. Anecdote: We’ve had electric cars delivered for a few months now, and one of my favorites is him charging his phone with a built-in induction pad to remind him to pick up an electric car when he parks. It is to give. Obviously, I get excited easily.
The bottom line is that user experience is the most likely path if an industry whose core business continues to power 90 million boxes-on-wheels annually can even survive the last few years of declining valuations. That’s it.
Technology inside, not under the cabin, was certainly a key theme at this month’s Consumer Electronics Show. For all current buzz, electrification itself has the potential to become significantly more commoditized over time, even if it undermines the industry’s current go-to differentiator of engine power other than price. There is. Features like entertainment, driver assistance, and yes, phone charging reminders help brands put a little distance between themselves. Even better, the driver may be willing to subscribe to such a service, as Tesla’s fully self-driving monthly package and General Motors’ OnStar do now.
Selling a box-on-wheel and having drivers pay a recurring fee for the privilege of using it to the full (a razor blade model with a handle) is the ultimate goal. And there’s no guarantee that drivers will accept it, or that the industry will be able to provide a service that justifies the charges, if you look at it another way. Musk’s regular overselling of self-driving cars may have provided Tesla’s only means of trying to justify his over $1 trillion peak valuation. Growing skepticism that self-driving cars will soon become a reality, perhaps fueled by low expectations elsewhere in the industry, may also have contributed to Tesla’s sale. There is a nature.
Therein lies the challenge, albeit schadenfreude, that comes with traditional automakers. Seeking to confuse themselves towards a more electrified and smarter future, they may not need to justify the kind of insane valuations imposed on Tesla not so long ago. We have to convince investors that the industry can not only make the transition from gears and grease to charging and chips successfully, but make more money in the process. Oddly enough, Old Auto’s quietly hailed Tesla retreat also helps explain its own transition challenges.
Bloomberg Opinion Details:
Musk poured rocket fuel into Tesla stock crash: Liam Denning
• The Tesla-BYD rivalry shows that not all EVs are created equal: Anjani Trivedi
• Electric car trade war sparks: Lionel Laurent
This column does not necessarily reflect the opinions of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist on energy and commodities. A former investment banker, he was the editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’ Lex column.
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