Tesla has been one of the greatest cash burners in history…
Dr. Walter Snyder – www.swissfinancialconsulting.ch
Wally`s Newsletter No. 188
The stock price is based on the assumption that electric motors in cars will soon replace internal combustion engines and that this change will mean huge revenues and profits for Mr Musk. Investors believe that their money should be in stocks that have the potential for future capital gains. There is a problem with this theory, and that is that other car manufacturers can relatively quickly put electric cars on the road. It is highly likely that Mr Musk`s plan may go awry.
Another problem is that internal combustion engines have become much more efficient due to improved engineering. There are also engines that can use gas instead of petrol and those that can use both. One can also expect that car makers will be launching advertising campaigns in order to market the electric cars that will soon be produced in large numbers. Tesla customers might cancel their orders.
Investors can also reckon that manufacturers of electrical equipment like transformers and cables will be busy filling orders that will result from the need to reinforce the electrical grid not only in the US, which already has a good bit of redundancy, but also in Europe, which is not ready to supply all the power needed to recharge millions of car batteries.
The battery industry will also flourish as battery makers will be under pressure to enlarge their manufacturing capacity. Investment in this sector also has very good long-term prospects. Since lithium is one of the main ingredients for new generation batteries, investors could also examine the prospect of placing funds in lithium mines. Chinese companies have been active in buying in this sector.
Given that the disruption caused by the introduction of electric cars is going to be widespread, it would be a good idea to sell shares in companies that depend on supplying parts and assistance for internal combustion engines and that includes things like fuel additives, mufflers and spark plugs. The time to sell shares in such companies is right now.
It is also probable that self-driving cars will sooner or later become common, and this means that companies producing the software and GPS-related hardware for such vehicles have a profitable future. “The early bird gets the worm.”