Surprise! Electric Vehicle global sales continue to rise in spite of pandemic - InvestorIntel

Surprise! Electric Vehicle
global sales continue to rise
in spite of pandemic…
COVID-19 is causing huge disruptions to the global economy.
Today I look at how COVID-19 (coronavirus) is impacting global
electric vehicle (EV) sales and the EV metals supply chain.
This includes a review of the EV metals: lithium, cobalt,
graphite, nickel, neodymium and praseodymium

Global electric vehicle (EV) sales

Somewhat surprisingly global electric car sales actually rose
by 16% in February, compared to February 2019. The results
were a mixed bag. China’s electric car sales plummeted 65% YoY
and Europe sales boomed, rising a massive 111% YoY.

China usually makes up about 50% of global EV sales, and in
February 2020 much of China was locked down due to
coronavirus. This explains the dramatic fall in sales. Europe
may follow to some degree in March EV sales, as coronavirus
then moved to Europe during March, and China improved.

Also in March, we have seen a number of high profile EV
manufacturers such as Tesla and Volkswagen close down some of
their factories. This will impact March and April sales to
some degree.

Tesla temporarily suspended production at Freemont and New
York, but said superchargers, Nevada Gigafactory and their
service centers would remain open. Tesla even started sourcing
ventilators and donated hundreds of ventilators to California
and New York City, as they began Model Y deliveries in the US.

My expectation is we will see weaker March EV sales from
Europe, but stronger from China. As the coronavirus fades away

(hopefully before mid 2020) we will see very strong EV sales
by H2, 2020 and into 2021.

Tesla Model Y US deliveries began in March 2020 amid the
coronavirus chaos

Impact on EV metals

The key EV metals (lithium, cobalt, graphite, nickel, and
NdPr) have all been slightly but not severely impacted by
COVID-19.

Demand

Demand has surprisingly remained solid helped by the strong
February global electric car sales. Demand temporarily shifted
in February towards Europe as China slowed. I expect this to
reverse somewhat in March and April. Despite generally overall
solid EV metals demand so far in 2020, many of the EV metals
are still working off oversupply from 2019, which has led to
lower prices for lithium, cobalt, and nickel in early 2020.
Nickel has also been more impacted by the global slowdown,
given its key demand is for stainless steel.

Supply

Whilst most mines have remained open there have been some
logistical supply issues as well as some government shutdowns.
For example Argentina temporarily closed its mining sector
which temporarily impacted several lithium miners operating in
Argentina. The ban has now been lifted for miners deemed as
“essential”. Chile and Australia have remained open. The DRC
has remained open, as has Namibia despite some cautions they
may close.

With regards to logistics and processing, China’s supply chain
has been only mildly impacted, as not all of China was
shutdown.

EV subsidies

We began 2020 with new German subsidies as well as tougher
emission targets in Europe and China. This has helped 2020 EV
sales. In March we had two significant new announcements:

     March 11, 2020 – The UK extended EV subsidies through to
     the 2022-23 financial year, with a grant of up to 35% of
     the vehicle’s value, capped at £3,500 ($4,500).
     March 31, 2020 – China decided to extend the validity
     period of the subsidies on new energy purchases and NEV
     purchase tax exemption for two years.

Note: The new Chinese 2 year subsidy extension news is still
not widely known, and it will be a very significant boost to
the Chinese EV sector.

Lithium-ion battery prices forecast by Bloomberg to fall to
USD 100/kWh by 2023 making electric cars purchase price
competitive to conventional cars by 2023

Source

Closing remarks

Despite the world currently being in or close to a recession,
the EV sector has been doing surprisingly well. At least as
far as EV sales and EV metals demand and supply. In terms of
pricing, the EV metals are lower and the EV metal miners have
also been heavily sold off.

Given that the share market has priced most EV metal miners
very low, the EV trend remains strong, and EV subsidies have
been extended or increased; I expect once the fear of
coronavirus passes the EV and EV metals sector will rebound
very strongly.

EV/Internal Combustion Engine (ICE) purchase price parity is
just around the corner (2022-23). This means it will soon be
the same price or cheaper to own an EV, with all the benefits

of much lower running and service costs. Investors would be
wise to take a second look at the sector before it booms again
soon.

The EV disruption continues
to roll on…

An update on the EV sector and a look at
the latest electric cars from the
Canadian International AutoShow in
Toronto
The electric vehicle (EV) roller coaster ride has continued
the past few months with near-record December 2019 sales
followed by a coronavirus led sales slump in January 2020.
Meanwhile, more governments have moved to ban the Internal
Combustion Engine (ICE) vehicles, and tougher emissions
standards have now come into force in Europe and China
motivating car manufacturers to sell more electric cars.

The latest EV news

     2019 global electric car sales were ~2.2m, up ~10% on
     2018. Tesla Model 3 was the electric car sales leader by
     far, selling almost 3x its nearest competitor.
     China announced that “China will not cut NEV subsidies
     in July 2020.”
     Indonesian President Jokowi announced: “Only green
     vehicles for Indonesia’s new capital.”
     The UK announced: “Britain will ban sales of new
     gasoline and diesel cars from 2035 — five years earlier

than planned.”
     Yesterday Reuters reported: “Singapore aims to phase out
     petrol and diesel vehicles by 2040.”
     Toyota (TM) makes a new A$571.18 million bet on electric
     flying taxis, and Hyundai Uber electric air taxi service
     is planned to launch by 2023.
     Tesla in talks to use CATL’s cobalt-free batteries in
     China-made cars – sources.

Hyundai Uber electric air taxi service is planned to launch by
2023

The latest electric cars from the 2020 Canadian International
AutoShow in Toronto

InvestorIntel has been busy at the show checking out all the
latest electric cars to show our readers.

InvestorIntel CEO Tracy Weslosky was there and had this to
say:

“The love affair with the car continues if crowds are any

indication. Genuinely impressed by the BMW i8 aesthetically, I
am told that it’s ‘barely’ electric so that places me back
standing at the Porsche. This said, while electric cars were
front and center stage and everyone is in the game, my Father
who accompanied me — wanted to look at the Buicks. I liked the
bike with sneakers.”

Some of the cars on show in Toronto this week

Lexus LF-30 electric concept car

The BMW Vision iNext incorporates Autonomous driving,
Connectivity, Electrification and Services (ACES)

BMW i8 hybrid with a small range – production may end soon

Audi Q5 hybrid

GM Bolt – 100% EV

Porsche e-mobility (Porsche Taycan 100% EV)

The sneakers bike that Tracy liked

Closing remarks

Nobody said a revolution was easy. The EV revolution (or
“evolution”) is certainly happening, but with plenty of
associated dramas. As usual, Tesla is at the center of
attention with its genius leader Elon Musk. In the past few
months, Tesla’s stock price has rocketed from below USD$ 200
to above USD$ 800 at present, “burning the shorts” as they
lost billions of dollars, with Elon left smiling and even
dancing in Shanghai.

The EV disruption continues to roll on despite short term
setbacks and is in for an amazing ride ahead with sales likely
to rise as much as 10 fold in the 2020’s decade.

Tesla hits new highs with Elon Musk proving the skeptics wrong

Source

Elon Musk dancing in Shanghai after Tesla stock quadrupled in
price the past 8 months

Source

Dominating global electric
car sales – can anyone catch
Tesla?
When looking at 2019 electric car sales there can be no doubt
that Tesla (NASDAQ: TSLA) is dominating global sales. Tesla is
number 1 in global electric car sales, number 1 in US sales,
and number 1 in Europe. Model 3 sales are almost triple the
next model, and in the US Tesla sales make up a massive 75–85%
market share. In this article, I take a look if anyone can
catch up with Tesla as we head into the 2020s.

Tesla is number 1 globally with 16% market share, and Tesla
Model 3 sales are almost triple the nearest competitor (2019
YTD, as of end of October)

Why is Tesla dominating?

     Brand, style, performance and quality – Model S won the
     best car ever, and Tesla is now famous for stunning
     looking cars with top tier performance.
     Range and efficiency – Tesla’s cars achieve more range
     per kWh than any of their competitors. They just won an

award for the most efficient global electric car ever.
     Charging network – Tesla has by far the world’s most
     expansive charging network.

To summarize the above, Tesla is dominating as they are at
least 5 years ahead of their competition. Only the Chinese BYD
Co., BAIC, SAIC, Geely pose a challenge. The ICE manufacturers
have been asleep at the wheel in past years making compliance
cars. Volkswagen, BMW, Renault/Nissan, and Hyundai/Kia are
making better progress in recent years, but will still take
some years to try and catch up with Tesla.

Tesla Model 3 – Recently rated the most efficient electric car
ever

Tesla in 2020

By early 2020 we will see Tesla’s Shanghai China gigafactory
start ramping up production of Model 3. Tesla began Model 3
sales in China in October 2019, with some early production
models released in November 2019. Production capacity at the

Shanghai factory is set to rise to 250,000 initially, with a
capacity of 500,000 cars a year.

This has the potential to boost Tesla’s global dominance even
further. By the end of 2020, Tesla will also be selling (or
soon to start producing) Model Y SUV. Tesla state: “Model Y
production is expected to begin in late 2020 for North
America, and in early 2021 for Europe and China.”

Tesla in 2021

By the end of 2021, Tesla should be producing the Tesla
Cybertruck pickup. Also, Tesla should be starting to produce
some small volumes of the Tesla Semi and Roadster 2. The
latter two may be delayed into 2022, we will see.

Tesla models to come – Model Y, Roadster 2, Cybertruck, and
Semi

Tesla is already leading the pack by a significant margin (5%
ahead of BYD co). As we head into 2020 that lead may increase
with Model 3 sales starting in China. Once Model Y production

starts sales should surge again, then again with the cyber
pickup truck, Roadster 2, and Semi.

Add in Tesla’s growing energy storage business with Powerwall,
Powerpack, and Megapack and it is hard not to see Tesla
continuing to dominate electric vehicles (EVs) and Energy
Storage (ES) for the next decade ahead.

Valuation is hard to assess given the accumulating debt, small
profit at this stage, and large CapEx ahead. But one thing
looks certain – Tesla is set to be the most popular electric
vehicle company for the next decade as all its competitors
scramble to catch up.

What do you think? Can anyone catch up with Tesla?

Note: The author is long Tesla (TSLA).

Electric pickup trucks are
coming soon – The Tesla
pickup reveal is on November
21
Electric bikes, sedans and SUVs are all now regularly seen on
our roads, but soon we will start to see electric trucks of
all types and sizes.

The Tesla electric pickup truck

This coming November 21 is the Tesla (NASDAQ: TSLA) all-
electric pickup truck reveal. The Tesla pickup, also nicknamed
the “Cybertruck”, is said to look like something from the

movie Blade Runner. In October Elon Musk tweeted: “Cybertruck
doesn’t look like anything I’ve seen bouncing around the
Internet. It’s closer to an armored personnel carrier from the
future.”

The base model price is said to be under US$50,000. Range is
expected to be between 400 and 500 miles depending on the
version. Production dates are yet to be released.

Elon has said the e-pickup truck will be “a better truck than
an F-150 in terms of truck-like functionality, and be a better
sports car than a standard (Porsche) 911.”

Other Tesla products expected soon are the Tesla Roadster 2
and Tesla Semi (said to be entering production in 2020), as
well as Tesla Model Y (deliveries starting possibly in late
2020).

The Tesla electric pick up truck mystery – What will it look
like?

The Rivian electric pickup truck

Another electric truck coming soon that has already had a
great response from the public is the Rivian electric pickup
truck, known as the ‘Rivian R1T pickup’. It will have a range
of ~400 miles, 4 electric motors which will accelerate from
0-60mph in just 3 seconds, and a starting price of US$69,000.
It is currently in the testing stage and first deliveries are
set to begin in late 2020. Both Amazon and Ford are backers of
the company which is still not yet listed.

The Rivian R1T pickup will be perfect for taking on a road
trip

The all-electric Ford F-150

Even the current US pickup truck leader Ford is racing to have
an electric pickup as soon as possible. Ford is the undisputed
leader in US conventional pickup truck sales.

The key takeaway for investors is that the electrification of
the entire transport fleet is coming, noting long range planes
will be conventional or hybrid. Electric pickup trucks are
just around the corner.

Based on past performance Tesla is the one to beat, given they
dominate the US electric car market sales with 57% market
share, and are the global number 1 electric car seller with
16% global market share. Tesla previously disrupted the luxury
large sedan market with Model S, and is now disrupting the
small and mid-size luxury sedan market with Model 3. Rivian
(private) look to have a great niche product for those on a
high budget, and Ford should benefit from their loyal pickup
customer base, but certainly look likely to lose market share.

For now my money is on Tesla. Tesla Model 3 sales is
dominating the luxury car market of conventional cars in the
US and its production in China is about to begin. They have a
great pipeline of new EV products ahead (Semi, Roadster 2,
Pickup, and Model Y), their energy storage products
(Powerwall, Powerpack, and now Megapack), as well as their
solar roof. Tesla was profitable last quarter but still has a
lofty forecast 2021 PE of 49, and an analyst’s consensus
“hold” and price target of US$285. I think this price target
will be upgraded if China Model 3 sales go well, and Tesla’s
profits start to increase each quarter.

Tesla   is  Using  Nortel’s
Business Plan (that’s not a

good thing)
Those who don’t learn from history are doomed to repeat it, so
let’s use Nortel’s history to learn why Tesla, Inc. may be
about to drive itself into deep trouble.

If you’re reading this, you’ve heard of Tesla. It has been a
stock market marvel. The past five years have seen wealth
created for long-holding shareholders – 5 years ago, Tesla was
trading around USD$45 a share, and today it’s around $297. The
chart from Nasdaq shows for the last year Tesla has been the
poster child for “choppy”, as its stock price has oscillated
with amplitude between $390 and $245 per share.

Tesla’s PromotionMachine has been sleeping at the factory
trying to convince the investing public that revenue and
earnings will ultimately catch up with the stock price. Bears
and shorts are convinced the last part of that sentence is
backwards.

Tesla is at a difficult stage of its existence as it tries to
go from start-up to establishment. It needs to show the
doubters that it has revenue, that the pre-orders for the
Model 3’s are not being cancelled and are actually being
converted to sales, and that the Holy Grail of positive cash
flow is glowing in the road ahead. The latest Q2 was Tesla’s
most productive in its history.

The problem is, Tesla has had and continues to have horrific
issues on the shop floor. Production, while up, remains far
behind the original and the revised targets. Panasonic and the
Cobalt Cliff have something to do with this, but Tesla has
acknowledged the production failures are mainly a function of
over-automating the shop floor to a point of unmanageability.

Tesla and its CEO Elon Musk need this year to be an
operational success. The company can’t run forever on
champagne wishes and caviar dreams. It must show Wall Street
and the global green investing community that it can dent the
Detroit Big Boys, it can take a run at Honda and Toyota, that
German engineering is secondary to American gee-whiz know-how.

Litigation lawyers will tell you when the facts are against
you, pound the law. When the law is against you, pound the
facts. When the facts and the law are against you, pound the
table. Tesla looks like it’s opting for the table pounding.

The Wall Street Journal reported recently that Tesla, “has
asked some suppliers to refund a portion of what the electric-
car company has spent previously”. WSJ also reported that
Tesla confirmed it is seeking price reductions from suppliers
for projects, some of which date back to 2016, and some of
which haven’t been completed.

Did   we   mention   that   Tesla   is   burning   through   about
USD$1,000,000,000 per quarter, with only about $2.7B in the
bank ? And don’t look at the convertible debt pricing issues
lurking over the horizon…

What Tesla needs is a much higher stock price, for the
inevitable equity financing and to help with those pesky
convertible debt problems.

Bring Nortel back into the picture. Visit the Wikipedia page
for Nortel for links to the painful facts below.

Nortel Networks Inc. (then called the Northern Electric and

Manufacturing Company Limited) was partially spun out of a
predecessor to mighty BCE Inc. in 1895 (yes, 123 years ago),
and completely spun out from BCE in the internet madness of
the year 2000. It was a huge financial win for BCE. Nortel
ultimately made equipment for the heavy-breathing internet
industry – switches and multi-protocol optical networks.

Nortel was a strange chimera, a combination R&D – manufacturer
– vendor; much like Tesla is today. The hype machine was
running well ahead of the financial statements as the company
was worth roughly one-third of all companies then listed on
the Toronto Stock Exchange.

You remember what happened next, right?

Sufficient cash flow and revenue failed to materialize.
Nortel’s market cap went from close to $400B to only $5B, and
ultimately Nortel filed in court in Canada and the USA for
protection from its creditors. Goodbye, over 95,000 jobs
worldwide.

The bankruptcy process ended in 2017, by when over
$2,000,000,000 had been chewed up in the process, including
legal fees.

Prior to bankruptcy, one of Nortel’s operational problems was
negative cash flow. Despite growing revenue, over the years
its cash flow never did catch up to the expected glowing
future and the soaring stock price. The car-wreck crash in the
stock price, followed by the creditor protection process, were
reflections of that failure.

Nortel’s management team used every tool at hand to bring new
revenue onto the P&L. Some of those tools could not be used
today under new accounting standards such as under IFRS 15.
Back then, one of the tools available to increase revenue was
to vendor finance its own customers.

That vendor financing worked like this. Internet usage was

booming, so websites and networks needed better equipment
capable of processing the growing loads. Nortel and its
advanced optical technology were the solution, but the
equipment was very expensive. Not many start-ups had $10M to
spend on a network switch, but without all those start-ups
buying equipment Nortel couldn’t hit its targets which would
have lead to a cratering of its stock price.

Nortel’s fix was to finance those start-ups and deliver the
switches before receiving full payment. In some cases up to
80% of the purchase price was financed, which meant Nortel was
using its working capital to sell at a loss to gain future
cash and to buttress the current revenue number.

As always, after the boom comes the bust. Internet stocks
tanked in 2000, killing many of Nortel’s customers and wiping
billions in financing off Nortel’s financial statements. The
cash flow that seemed so clear just months before failed to
materialize, eventually taking Nortel into the sad tale of
creditor protection.

Nortel, like Tesla, artificially distorted its own business
model by causing elements in its supply chain to finance its
activities. Nortel used its clients, Tesla is using its
suppliers.

Tesla declined to provide the markets with a copy of the
recent memo but confirmed it is seeking price reductions from
certain suppliers for historic projects, some of which date
back to 2016, and it is engaged in discussions concerning
future pricing based on production ramp-up.

The automotive industry is a highly competitive margin-driven
business, and Tesla is looking to save a buck / make a buck
anywhere it can, as it should. While it’s true that ongoing
discussions with Tier 1, 2 and 3 suppliers are common, asking
suppliers for cash back is closed-system cannibalistic
behaviour, and reeks of desperation. As Tesla’s cash dwindles

and its options slowly disappear, Tesla must fix its
manufacturing issues and create real value by executing on its
business plan, not by parasitically sucking cash out of the
system by draining its suppliers.

Nortel taught the lesson. Will Tesla learn from it or repeat
it?

Lithium demand is surging but
soon supply should catch up
The first wave of the lithium boom has come and gone. This saw
tremendous gains for early investors who got in before 2016
and rode the wave all the way through to the end of 2017. Then
in 2018 we have had endless negative reports on the sector,
many of which seem miss-informed or plain wrong. The
underlying theme is that many groups are totally
underestimating the speed of change towards electric vehicles,
and hence the surging lithium demand.

By way of example many see the EV sector as growing slowly,
when in reality global electric car sales grew by 58% last
year, and by 59% in Q1 2018. The number of EV models available
is set to jump from 155 at the end of 2017 to 289 by 2022.
Another sign demand there is the 30 new lithium-ion
gigafactories on the way.

Lithium demand

My lithium demand model based on some reasonable assumptions
such as 15% EV penetration by the end of 2025 (China already
hit 3.7% in April 2018, and global EV penetration should
exceed 2% in 2018), forecasts Lithium Carbonate Equivalent

(LCE) from Electric Vehicles (EVs) to reach 1.1mtpa by the end
of 2025. By way of a comparison in May last year Roskill
tripled their forecast for LCE demand to ~1mtpa by 2026.

Roskill lithium demand forecast ~1Mt LCE by 2026

The key to understand is that demand is not just from booming
electric car sales. There is plenty more demand from other EVs
– e-buses, e-trucks, e-ships and e-boats, e-bikes, soon e-
planes, the energy storage and electronics sectors.

For now e-buses especially in China have been a huge demand
driver for lithium. Soon we will have e-semis and all kinds of
electric trucks. Just this last week Daimler announced two new
electric trucks for the US market to take on the Tesla semi
that was slated for 2019 production. A full size electric
semi-truck will need about 10-16 times more batteries (and
hence lithium) than an electric car.

Daimler’s new electric semi truck set to go into production by
2021

Lithium supply

Meanwhile lithium supply at the mining level is responding to
the surging demand picture described above. In 2018 we will
see four new lithium miners become producers – Tawana
Resources NL, AMG Advanced Metallurgical Group, Altura Mining
Limited and Pilbara Minerals Limited. This will certainly
boost lithium spodumene supply; however most industry experts
see a shortage of converting capacity.

In any event the boosted 2018 lithium supply should bring the
lithium demand/supply situation back to a more balanced level,
and some moderation in lithium prices (especially China
lithium spot prices). In 2019 we are likely to see some
expansion from existing lithium miners to meet the demand
surge, and by 2020/2021 some new lithium juniors such as
Lithium Americas Corp., Bacanora Minerals Ltd. and some others
like Nemaska Lithium Inc., A.I.S. Resources Limited, Neo

Lithium reach production.

We may also see further consolidation in the sector such as
the SQM/Kidman joint venture deal. New lithium processing
plants are also on the way, such as the Tianqi/Albemarle
Kwinana facility in Western Australia currently under
construction. SQM/Kidman also recently announced plans for a
new Kwinana lithium processing facility.

In conclusion, EV uptake and lithium demand will be a lot
stronger than what many currently think. Due to surging
lithium demand the supply response has been very strong. This
should mean that new lithium supply should be able to keep up
with demand from now to 2020. We may see periods of small over
or under-supply, and the LCE contract price range between
US$12,000 and US$20,000/tonne. Currently it is at US
$16,400/tonne. For investors this will mean the lithium miners
that can expand production, and the juniors that can make it
to production should still reward investors very well. As we
move further into the new EV and energy storage world the
lithium miners sector should have an excellent one to two
decades ahead.