The Electric Vehicle Market is Poised For Massive Change
The Electric Vehicle Market is Poised For Massive Change
Right now, we see a period of change for the Electric Vehicle (EV) industry today. It’s transitioning from unbridled growth to consolidation. And it’s a painful transition. EV startup Frisker Inc. (OTCPK: FSRN) just declared bankruptcy.
Back in 2020, this company told investors that it would be in production by 2022 and generate $10.4 billion in revenue by 2024. In 2021, shares were over $23 each. Today, they are at $0.02 each:
However, Frisker isn’t the model for the industry. In China, demand remains strong.
In 2024, analysts project China’s EVs and plug-in hybrid sales to grow 22% in 2024 to reach 11 million vehicles. In 2023, EV sales grew by 36% and stood at 7.7 million EVs. As sales slow, the industry faces several new challenges:
- Declining Prices – Several major EV makers are cutting prices to increase sales.
- Intensifying Competition – The number of EV makers exploded over the past decade.
- Market Consolidation – larger companies should acquire smaller EV makers.
- Protectionism and Tariffs – Governments like the U.S. and the E.U. are levying tariffs to protect domestic EVs from Chinese manufacturers.
These issues led to a selloff in EV makers. We can see that in the Global X Autonomous & Electric Vehicle ETF performance. The fund is down 21% from its high in 2021 and its well off its 52-week high.
However, we at Mangrove Investor believe this is an emerging opportunity.
There will be casualties from this, like Fisker. Companies will merge, others will go bankrupt. But a select few will grow massively. We believe the “secret sauce” for success in the EV market will be those companies that make their own batteries.
EV Makers with In-House Battery Manufacturing Will Dominate the Market
This is a truth that Tesla understands – EV makers must control their battery costs. Today the battery makes up as much as 40% of the cost of an EV. That’s too much of the cost of manufacturing, and too big an opportunity to profit.
Right now, the entire value of a used EV is in the battery. That second-hand market is rapidly emerging, as the fleet of EVs ages. That’s a market that few car makers can participate in because they don’t make the batteries.
However, few EV makers also make batteries. Daimler, General Motors, Volkswagen Ford, Stellantis, and Tesla are on that short list. We see these companies as winners in the EV race, as many of the others disappear.
For the Good,
The Mangrove Investor Team
Numbers You Need to Know
$10,000
50,000 miles
50%
Chinese automakers account for more than half of the electric vehicles (EVs) produced in the world. As they build scale, cost advantages, and expertise, speculation is rising that Chinese EV brands will eventually flood the global market. (World Economic Forum)
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