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This One-Time King Is in Danger of Becoming Just Another Electric Vehicle Company

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Dave Gilbert here, Editor of Smart Money. 

Here we are in the peak of driving season and gas prices are actually coming down. 

Don’t feel like celebrating? I don’t blame you. That’s still a lot of pain at the pump, and various reports show that Americans are driving less because of it, and they’re considering alternatives like electric vehicles. 

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A gallon of gas still costs $4.75 on average. Yes, that’s down 5% from the mid-June all-time highs… but it’s still more than 50% higher than last year at this time. 

If you happen to own a Toyota Tundra with its 32.2-gallon tank, you’re out an eye-crossing $153 for a fill-up. 

According to Cox Automotive – a huge private company (nearly $20 billion in annual revenue) that owns Kelley Blue Book and Autotrader, among other brands – shopping for EVs has shot up 73% since January, which was before gas prices shot through the roof. 

Public acceptance of and interest in EVs seems to be accelerating with record-high gas prices, and automakers around the world are pouring tons of money into research and development of EVs. According to a Reuters analysis, manufacturers around the world are planning to spend more than half a trillion dollars on EVs and batteries through the rest of this decade. 

Jaguar wants to be all-electric by 2025. Audi by 2026. Volvo by 2030. Volkswagen and General Motors (Chevrolet, Buick, Cadillac, and GMC) by 2035. And on and on. 

Of course, when it comes to EVs, most people think of Tesla Inc. (TSLA) 

But this king of EVs might be usurped sooner than we think… 

Changing Times for the Electric Vehicle Leader 

Tesla also happens to be the most traded stock in the market, at least according to daily price volume. 

Yesterday, Tesla’s price volume (number of shares traded multiplied by the price per share) was nearly $15.5 million. The next closest is Apple Inc. (AAPL), whose price volume was not even 60% Tesla’s at just over $9 million.  

Supply-chain disruptions have limited Tesla’s production, though the recent lifting of some lockdowns in China may help alleviate at least a portion of the problem.  

In addition, Tesla’s competition – which was very little at one time – now amounts to the entire auto industry.  

Here’s Eric Fry’s take… 

Tesla is a technological marvel, sociological icon, and stock market darling… all wrapped into one. That’s why it sells for a stratospheric 92.5 times earnings, even after the stock market washout clipped more than 30% from its market value. 

For years, the company has been in a league of its own, which has inspired investors to pay almost any price to be part of the team. 

But Tesla is no longer as thoroughly unique as it once was. 

Although it remains the world’s leading EV brand, it faces intensifying global competition. 

For example, Volkswagen already produces about 80% as many EVs as Tesla, and it will likely become the world’s leading EV manufacturer within the next two years. 

Every other major automobile company in the world is also ramping up EV production and introducing dozens of competing models.  

In other words, Tesla is entering a new chapter in its corporate history, and I suspect this new chapter will be much less enriching to its shareholders than the previous one. 

Tesla is about to become just a “car company” among many other car companies, which may not be sexy enough to maintain the stock’s premium valuation. 

Because of the intensifying competition, Tesla will lose some of its cachet and novelty, which is probably why cofounder Elon Musk has diverted his attention to new hobbies, like launching hostile takeovers for social media companies and offering unsolicited political commentary. 

In fact, the headlines recently have screamed how Tesla is no longer the global leader in EV sales.  

According to data from the first half of the year, Tesla’s 564,743 vehicles delivered trailed the 638,157 electric vehicles delivered by Chinese automaker BYD. 

That’s a bit misleading, as nearly half of BYD’s sales were actually hybrids, whereas Tesla’s are 100% electric. Still, the competition appears to be gaining fast in the rearview mirror – from startups like Rivian Automotive Inc. (RIVN) to the dominant automakers like Toyota Motors Corp. (TM). 

Instead of trying to pick the ultimate EV winner, it might time to think about Eric’s strategy of investing in companies that are providing the metals essential to batteries and energy storage, what he calls the “Second Electric Revolution…” 

I’m talking about the massive worldwide transition from combustion-based modes of power generation to renewable modes that fuel an array of electric- and battery-based technologies. 

EV and energy storage technologies – a major part of the “Technochasm” theme we talk about here – require vast amounts of metals like lithium, copper, nickel, and manganese. The average battery-electric vehicle, for example, contains about 180 pounds of copper – that’s about half as much as the average American home. 

Add it all up, and Eric continues to see the boom in EVs and energy storage creating major “echo booms” in several metal markets. 

Sincerely,  

Dave 

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