Updated: Dec 29, 2021
Disclaimer: Please note that the opinions expressed by the author in this article do not constitute financial advice and are solely for educational purposes only. When buying shares, the value of your investment may go down as well as up and you may get back less than you invest.
It does not take a genius to notice that the world is transitioning towards Electric Vehicles (EVs). As the global climate crisis rages on, the governmental pressure on banning combustion engine vehicles is becoming increasingly apparent. But who are the key players in the world of EVs? And, what factors would one consider when conducting fundamental analysis on them? Well, worry no longer as in this article I will be taking a deeper look at the EV industry.
A look at Tesla
Let us begin by looking at the world’s largest EV manufacturer, Tesla. The company was founded in July 2003 by Martin Eberhard and Marc Tarpenning. The key idea behind Tesla at the time was that they would be “a car manufacturer that is also a technology company”. Now, it’s very easy to sit there today and say “wow, what a great idea”, but you must remember that this was during an era where the interior of Mercedes-Benz’s C Class still had a basic monochrome display. It wasn’t until 2004 when Elon Musk invested $6.5 million into the company, becoming the company’s largest share holder.
But enough about history, let us look at what makes Tesla so special.
Well, the most obvious factor would be Tesla’s Supercharger network. Recharging has long been one of the downsides of owning an EV. Thus, owning a Tesla makes the day-to-day life of an electric car owner much easier as it gives you access to some 30,000+ rapid charging stations around the world, that would otherwise be unavailable in any other car. Well that used to be the case but, since November 2021, Tesla now allows drivers of other EVs to use the Supercharger network. Whilst only a small pilot project at ten Supercharger stations in the Netherlands for now, the effects of this decision will be huge. This is because it removes one of the key exclusive features, or “economic moats”, of Tesla’s business model. But, it does make other EV manufacturers reliant on Tesla and their network, at least until charging infrastructure is properly developed to the same level that petrol stations are. So now that the Supercharger network may be becoming open, what else makes Tesla special?
Another factor that makes Tesla stand out is the insane performance of the cars. The recently released Tesla Model S Plaid can go from zero to sixty mph in just 1.99 seconds, and has a peak power figure of 1020hp. These are figures that are usually reserved for the upper echelon of the hypercar segment, but Tesla is bringing this sort of performance to a more affordable (well, relatively affordable) market. The technology on a Tesla is also a major selling point, the cars are loaded with large centre screens as well as sensors allowing for autonomous driving. So there are many reasons as to why Tesla is leading the EV market. However, will this lead last as we venture into an all electric future? Tesla has notoriously struggled with build quality relative to other luxury car manufacturers. The traditional car companies have over a century’s more experience in building cars and thus they can build much higher quality cars. The heritage and desirability of some traditional car manufacturers will make them a big player in the EV market once they switch over, and this switch is already beginning.
A look at the broader EV market
Now, lets take a look at the Germans. For a long time now, German cars have been respected and desired due to their excellent build quality as well as their luxurious comfort. BMW, Audi, Mercedes-Benz and Porsche have all began producing electric cars. Audi with the release of various “e-tron” cars; BMW with various “i” badged cars such as the i4 M50 ; Mercedes-Benz with various “EQ” cars, particularly the EQS; and Porsche with the Taycan. All of these cars present the excellent build quality that we’ve come to expect of German cars, whilst also providing a very long range and interesting new technologies. For example the Mercedes-Benz's EQS has the longest range of any EV in the world at 485 miles, which competes with some petrol powered cars. It also has a very futuristic looking interior, with flashy technology, such as mirrors that can be adjusted by just looking at the desired mirror and using a trackpad. Gimmicky? Yes, but one cannot deny that it is very impressive and is definitely a cool party trick for Mercedes to show off. The German EVs also come with sensors which allow for semi-autonomous driving in the form of adaptive cruise control, which brakes and accelerates when needed and can steer to keep you in lane.
So the German manufacturers are closing the gap between them and Tesla in terms of technology and range, but how about performance? Tesla are still ahead of their competitors in this regard, holding the lap record for production EVs around Germany’s Nurburgring with the Model S Plaid. However competition in this regard is beginning to emerge. BMW’s M division, Audi’s RS division, Mercedes’ AMG and Porsche are all now making performance versions of their EVs. Whilst they’re not as fast as the Model S Plaid, one cannot help but think that it is only a matter of time before they catch up, as they have been making performance cars long before Tesla existed. And with the slow trickle down from Mercedes’ F1 team, hybrid and electric technology is beginning to make an appearance in their road cars, with the recently released AMG Project One.
However, Tesla are looking to take the performance of their cars to the next level too, with the upcoming release of the Roadster 2. This hypercar will rival the Rimac Nevera for the title of quickest production car in the world. I’ll now provide some stats for those of you who like numbers. The Roadster 2 will reportedly go from zero to sixty mph in just 1.9 seconds with a top speed over 250mph, all this with an alleged range of 620 miles! The Nevera, on the other hand, produces a mind boggling 1914hp, going from zero to sixty mph in 1.97 seconds with a top speed of 258mph. Both manufacturers claim to be the quickest accelerating production car, which is interesting as the Roadster 2 hasn’t actually been produced yet. But there’s one thing you need to remember here, the Nevera costs $2.4 million whilst the Roadster 2 will apparently only cost $200,000. Again, this shows how Tesla is bringing monster-like performance to markets in an affordable way.
There are a few other dark horses in the EV market- for example, Volvo-owned Polestar and the partly Amazon-owned Rivian. The latter recently went public on the stock market. It was a highly anticipated IPO (initial public offering), and it closed its first day on the market with a valuation of approximately $86 billion, larger than the market capitalisation of Ford. Neither of these manufacturers can quite compete with Tesla in terms of being a superior EV producer yet, but it is definitely worth keeping an eye on them both as they are backed by very wealthy companies.
But what is the point of me telling you all this? Well, Tesla currently leads the EV market and they are a major player in the EV stock market. They are ahead of the competition in terms of technology, performance and infrastructure. However, the gap is rapidly closing, and when looking at a company to invest in, one cannot ignore the impact of the traditional manufacturers especially when looking at the quality of the EVs they can build already, despite being new to this sector. The EV market will be growing rapidly over the next ten years, especially as the UK government have banned the purchase of new petrol and diesel vehicles after 2030, and it will be important to consider all of the information I’ve mentioned here when considering who to invest in.
So, given all the information above, who do you think will reign supreme over the EV market in the coming years?