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07 September 2021

Electric Vehicles: The Race is On

There’s a car race on and it’s the third lap. The newly formed “Team Tesla” is in pole position and their star driver, Elon Musk, got off to a flying start. His most adoring fans think he’s got this one tied up, but the rest of the grid have just changed their tires and are gaining ground on the race leader. With so many laps to go, it’s all to play for; this race will be closer than many expect.

Mr Musk’s notoriety is dichotomous. Many have criticised not only the quality of his cars, but his ability to manage a half trillion-dollar company. He’s been the subject of U.S. Securities and Exchange Commission investigations, a media storm for consuming illicit substances in an interview and, more recently, received condemnation over his wavering support of Bitcoin, which has been attributed to severe volatility in cryptocurrency markets.

Nevertheless, Tesla has blazed a trail for electric vehicles (EVs) in such unexpected fashion, leaving many of the auto industry stalwarts in the dust. Focusing on battery technology and affordability, Tesla has single-handedly proved that EVs are a viable alternative to the traditional internal combustion engine (ICE). It has also shown that people will buy them; Tesla’s vehicle sales have skyrocketed from just under 20,000 in 2015 to almost ten times that by 2020.

But what about the others? Have they fallen asleep at the wheel? (See: “The Rise of EVs”) As government targets push the automotive sector to develop new ways to lower their contribution to global emissions, carmakers have had the rug pulled from beneath them. Their existing operations and expertise have not done them any favours here; mechanical engineers are being replaced by software engineers, manufacturing facilities need rebuilding, and entire workforces need retraining. If you thought the big players would make the switch to EVs seamlessly, then think again.

Of course, the tide is now turning, and most businesses are planning for an electric future (See: “Volkswagen to Voltswagen – Yes, You Can Teach an Old Dog New Tricks”). Volkswagen, one of the most respected brands in the motoring world, wants half of its vehicle sales to be electric by 2030 and has committed vast amounts of investment to ensure it is on the right side of this change.

There are alternatives, though. VHS vs Betamax, HD DVD vs Blu-Ray, and Xbox vs PlayStation are all familiar historic battles for the consumer. Hydrogen fuel, an alternative to petroleum, has all the green credentials of an electric powered vehicle. Nonetheless, it has perhaps entered the race too late and is losing out to the network effect of EV charging stations (See: “Hydrogen vs Electric: The Charging Space, Race”). With more appropriate uses in commercial vehicles, it might not suffer the fate of previous second fiddle technologies. It is certainly one to watch.

As the most valuable car company in the world, Tesla’s investors are placing a lot of hope in its ability to come out on top. The next decade will be a crucial time for all participants as they race to the finish. Tesla owners are here to experience a slice of the future, but car consumers are loyal to their trusted brand. If one thing is for certain, it’s about to get interesting.

This article was taken from the Summer 2021 issue of 1875. To subscribe to our investment publications, please visit www.redmayne.co.uk/publications.
Electric Vehicles: The Race is On
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