2020 will be marked as the end of an era in the automotive industry and the birth of the Electromotive™ industry. In the course of 2020, we will see the biggest transition into EV than at any time in history. As it is being said on CNN Business; “The great electric car race is just beginning.” According to industry sources, between 2019 to 2020 there are about 264 plus EV startups that raised an estimated $24B and estimated to be as many as 800 plus of them by 2025 and they will continue to grow at a rapid pace.
Please note, we are not trying to address this issue from the industry perspective, we are addressing this phenomenon from the investor’s point of view. We find ourselves asking the following; what drives such sharp growth? Is it real?, a “Hype” or just press driven and market enthusiasm? In the brief, we will try to shed some light on the topic from our internal research. Although needless to say, we are not an automotive expert, yet we are investing in technology companies that are trying to join the race.
it was stunning for me to discover that among those 262 plus EV startup companies you will find big brand names off the consumer and commercial electronics industry such as Sony, Sanyo, LG, B&O, Apple, just to name a few, and we might see in the future other companies such as Microsoft, Google, Apple, and other Tech Giants join the race. However, that is yet to change due to consumer demand. In a market survey held a few years ago consumers said: “Yes, U.S. Consumers Will Buy Cars From Apple And Google”. I believe that we might see the consolidation and M&A transactions between big Tech electronics companies and the tradition of automakers creating a complete new Electromotive™ industry. One thing is certain: we’ll be at the core of it all.
The Industry Markers:
We have identified some key driving markers that we assert contribute to the movement or at least influence the direction it is going.
- There is a massive push by the government and customers for a cleaner energy market across the globe as global warming becomes a real and present danger.
- The cost and barrier for entry are much lower for EV and require much less capital than the traditional automotive industry from the past.
- Design, manufacturing, and assembly become much less complex and rely on simpler infrastructure especially with Industry 4.0 and 5.0 technology is just around the corner.
- EV requires much less in maintenance and warranties cost.
- There is a beginning of industry common platforms for the assembly of EV that is accessible to all.
- Autonomous driving technology is easier to implement and perform much simpler and safer in EV than in traditional vehicles with more complex mechanical moving parts.
- As mentioned above, recent consumer surveys there is a huge place for tech brands to take over the segment
As battery technology evolves and travel mileage ability to be extended.
Although on the surface it looks very promising and good for the environment, there are many challenges before anyone (probably more than one) will win the race. Here what we identify some of the key obstacles and barriers along the way:
- Most current electrical grids are not designed to support that kind of a massive shift in a short time frame.
- Most road systems infrastructure globally is not built to support Electromotive™ and will have to be refitted over time and will come with a huge cost.
- Automotive service off the major roads and highways, such as gas stations and service stations, will be forced to massively convert to a complete electric power provider that will require a complete overhaul.
- Battery technology is not there yet and we have a massive issue with waste management and recycling
- Quality and durability and the life cycle of Electromotive™ products are not yet clear and defined.
- The current automotive service providers such as auto shops, dealerships, etc, will be forced to upgrade their entire operation and become much more tech-oriented.
Looking from the wide-angle outlook on this major evolution we identified a select number of Industry sectors we believe present the highest level of opportunities:
- Alternative Electric Power
- Transportation Infrastructure
- Supply chain
- The service & support
- Battery Tech
- Autonomous Tech
It does not mean that there are no other sectors that will experience some level of growth but all the data sources point to the sectors we listed above is a high potential growth sectors.
So our conclusion regarding this major evolution is that progress is inevitable; we have a choice to join the race or missed opportunity. it is clear that one way or another Electromotive™ will become the new industry. What shape or form it will have at the end, we don’t know, yes it is coming and it’s coming to Fast & Fury. Traditional Automotive companies will become big tech companies and some already in the process and possibly a hybrid between consultation makers or technology providers.
So regardless if you believe it or not, you can’t ignore progress!
Legal Disclaimer: All the terms of art are and concepts introduced in this briefing are the property of CitySide Ventures LLC and are in some instances protected by Copyright and Trademark law.
Bentley is leading the charge to batteries. British carmakers must join it
Carmakers talk a good game. Even the biggest petrolhead automotive executives are now practiced at conjuring images of a zero-emissions future, but that future always seems to be just a bit further off. And even while they increase the production of electric cars, many insist that there is a stubbornly long line of consumers who will still want the internal combustion engines that also happen to boost their makers’ profits.
There are obvious exceptions, led by Tesla, the US electric car pioneer, as well as a bevy of Chinese imitators. In the UK, Bentley last week became the first to break ranks. On Thursday it announced that its Crewe factory would stop making internal-combustion-engined cars completely by 2030, making it the first large British carmaker to do so.
The decision means Bentley, known for 12-cylinder engines that slurp petrol by the gallon, is now the unlikely trailblazer for the British car industry’s move beyond oil. Yet for the rest of UK automotive, big questions remain over the electric future.
There is no doubt that the change is coming. The British government is nearing a decision on whether to ban internal combustion engines completely as early as 2030, with a formal announcement possible as soon as this week. Meanwhile the nations of the EU – the destination for most UK car exports – are also bringing in bans. The main markets for the UK’s petrol and diesel products are drying up quickly.
However, the only other major British car plant that is close to going all-in on electric car production (at least in public) is Jaguar Land Rover’s Castle Bromwich factory. Industry insiders doubt that many others will be able to match Bentley’s move.
The rest of the British automotive map is pockmarked with gaping investment holes. Among the plants awaiting decisions on their futures are Vauxhall in Ellesmere Port and Nissan in Sunderland. The overseas owners of both have made it clear that the fate of these UK operations will be dependent on a Brexit deal. Even if the UK somehow avoids a no-deal Brexit or the costly tariffs that the car industry fears, the legacy of four years of lost investment has almost certainly slowed the transition.
By 2030 production costs for electrics will be lower than fossil-fuel cars, making it easier for the mass-volume players to change
An alarming proportion of people employed in the British car industry – well over half, or 105,000 people – is still heavily dependent on producing internal combustion engines. At the same time, there is still no fully funded project to build domestic “gigafactories”, as Tesla calls them, capable of churning out hundreds of thousands of batteries every year.
Yet for all the challenges it faces, the UK still has a chance to retain and even grow its automotive industry. The UK has a genuinely strong engineering workforce and a fairly sturdy supply chain, which mean it can make up some of the lost ground on electric vehicles. The most striking evidence of this is the clutch of startups – Arrival, Volta Trucks and the (Coventry-based) London Electric Vehicle Company – which are bringing battery vans to production.
It is easier for a luxury carmaker to go electric than the mass-market plants that have the ability to produce hundreds of thousands of cars a year. Bentleys start at £130,000 and can cost well over £240,000, giving it a lot of leeway to absorb extra battery costs. But by 2030 production costs for electrics will be lower than fossil-fuel cars, making it easier for the mass-volume players to make the change.
Rapidly falling costs are combining with consumers who are becoming increasingly comfortable with electric cars and regulations that are genuinely pushing progress. The reasons to stick with fossil fuels are falling away.
Bentley has got ahead of the curve, helped by being part of Germany’s Volkswagen group, which has the might to spend billions of euros on battery procurement. But other UK car manufacturers have a choice: embrace the transition to electric cars now, or wait until the last moment and risk missing the chance.
The collapse of Ant Group listing reflects poorly on Beijing
Ant Group was supposed to be the biggest stock market listing in history. An astonishing $37bn was going to be raised and this whizzy Chinese payments company would be worth more than $300bn, on a par with US giant JP Morgan.
Since the listing was going to be a Shanghai and Hong Kong affair, Beijing would demonstrate that its private companies didn’t need international investors to raise serious sums. And Jack Ma, the billionaire who spun Ant out of his Alibaba creation in 2011, would cement his status as a titan for the 21st century.
But it didn’t happen. The listing was pulled on Tuesday, two days before launch, for reasons that are not wholly clear. Only the immediate cause is obvious: Chinese regulators announced new rules on capital and liquidity that would fundamentally alter the demands on Ant’s online lending business. It would have to accept more credit risk, and thus behave more like a bank than a nimble processor of loans that sit on other institutions’ balance sheets.
The unexplained part is why the regulatory drama only happened at the last minute. Chinese regulators know Ant’s business model inside out. Why launch a major regulatory shakeup less than 48 hours before the most high-profile listing of a Chinese financial firm?
Most observers assume Ma upset the authorities with a speech last month in which he railed against China’s regulators and described the country’s banks as having a “pawnshop mentality”. In other words, Beijing decided Ma overstepped the mark and needed to be reminded of the state’s power and reach.
Maybe, but the shambolic process also reflects badly on Beijing. If the regulations were unfit, why weren’t they fixed before Ant danced down the aisle to a listing? If the problem was Ma’s damning assessment of the country’s banks, is that because his analysis was basically correct? Neither explanation looks good.
Sunak’s housing market could see its roof fall in
Britain’s property market often has a knack of defying gravity. As the second coronavirus wave sends the UK economy into a double-dip recession, UK house prices have hit a fresh record high – accelerating at their fastest rate in four years, according to Halifax. This is, however, unlikely to last.
Despite the economy shrinking by 20% this spring and redundancies rising at the fastest rate on record, the average price of a property has increased by £18,000 in the past 12 months – far more than a full-time minimum wage worker earns.
But the rise is expected to come to an abrupt halt as the second lockdown and increased unemployment stop the market in its tracks.
Over the coming months, the chancellor, Rishi Sunak, must act to ensure the expected slowdown in property doesn’t become an outright collapse and risk dragging down the banking system. A financial crisis on top of economic meltdown is the last thing Britain needs.
It is tempting to hope that a swift correction would help young first-time buyers get on to the property ladder. However, as research from the Resolution Foundation has demonstrated, this is unlikely. Price falls would help some, but many more would also see their earnings fall and savings eradicated.
The problems are, in part, of the chancellor’s own making. The stamp duty cut Sunak announced this summer – which lasts until March – threw fuel on to an already overheated property market.
The lifting of the first lockdown was always going to release some pent-up demand, and people reappraising their living conditions and deciding they wanted more space fuelled a further surge in interest.
But the chancellor has propelled the housing market higher and constructed a double cliff-edge in March, when both the furlough extension and the stamp duty cut expire. He must tread carefully to defuse these time bombs. Otherwise, a boom and bust chancellorship will be all but guaranteed.
The Opportunity Iceberg!
One of the things that I have noticed in the past few years is that in the early-stage investments, there is a phenomenon I call – The “Iceberg” effect. Many new investors become fascinated by companies that get in the spotlight and press and are considered to be a good investment. Although some of them are, yet it can be an optical illusion. One of the first things that I have learned about investing in the stock market is to look for undervalued companies with growth potential that have significant cash on their balance sheet. I see that there are some similarities with early-stage investing.
Like the Iceberg, there is a larger mass below the water surface that is hiding from the investor’s view. Finding those hidden opportunities can be very rewarding in their terms and much more reasonable deals with valuations and higher multiples of potential returns – in other words, finding the undervalue startups with high growth potential. Some called them camels vs. unicorns, they are less sexy, at least visually, yet camels can go to distance with very little water in their system, they are much more sturdy, durable, and indestructible – those the ones I am seeking.
The game in early-stage investments is to stretch your capital in terms of investing a smaller amount to get a larger position. With Camels, you can do it, unicorns come with much higher price tags. Camels are the type of startups that are focusing on building their business and building their customer base, doing the right things and taking the right action without even knowing they are doing so, just spending their time, energy, and capital building a solid business foundation. Instead of spending time chasing funding, they are building their business and the capital will find them.
My fellow investors, there is a much bigger mass underneath the surface than what is being seen on the top. Take time to uncover these Camels!
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