I’ve been seeing this ad for a couple days now from Hilary Kramer, who is pitching her GameChangers newsletter ($77 for the first year) with a bold promise:
“The 2,500-Mile Electric Car
“Charges in minutes and you could drive it for months.
“Hard to believe? You bet.
“But it could be coming to a showroom near you sooner than you think…”
Throwing around big numbers when it comes to electric cars tends to work well for newsletter publishers, as we’ve seen from Paul Mampilly’s oft-repeated pitch about a “12 million mile battery”, but which one is Kramer teasing here?
It’s one of those “it’s coming faster than you think” pitches that isn’t all that clear about the timeline, of course, but here’s how she puts the big picture dream:
“The 4,125% profits investors have made in Tesla pale in comparison to what lies ahead, as the world continues to race toward the all-electric future.
“A future powered by 2,500-mile-range electric cars that you can drive for months and charge in minutes.”
So no, to be clear, that does not exist today, and it won’t exist next year. Maybe it’s in a lab somewhere (there’s certainly an ongoing PR battle about whether secretive Quantumscape is close to those battery dreams, and they’re just one of the higher-profile hopefuls), and I’m sure fast-charging technology and battery technology will continue to improve, but we’re a long way from a 2,500 mile range and “charge in minutes” technology.
Who knows what the future holds — Kramer says that…
“Battery technology is advancing at a pace that will ultimately disrupt the auto industry in ways you simply cannot imagine.”
And that’s true of all technologies, really, our imagination in the early days often fails to anticipate an accelerating rate of change — the iPhone, after all, was laughed off as a toy compared to the much more practical and market-dominating Blackberry, and that was less than 15 years ago.
And everyone, from governments to auto industry leaders, is eager to lead the EV revolution over the next decade, with GM, Mercedes, Volkswagen and most of the other biggies promising to push harder on electric vehicles, in some cases selling only electric vehicles within 10-15 years… and with the new administration in Washington pushing clean energy incentives and infrastructure investments that might help to speed up that transition. So who knows, maybe the pace of evolution will accelerate again.
So what’s the key to this EV revolution? According to Kramer’s pitch, it’s China…
“China is the world’s main producer of not only electric motors, but batteries as well.
“This is why GM, Toyota, Mercedes and Tesla is there.
“Warren Buffett is there as well.
“This is why you need to be there too, because the pathway to profits runs through China.
“If you missed the 4,125% profits Tesla made over the past 12 years, you’re getting a valuable second chance to grab those kinds of profits in a Chinese company that one day could produce a 2,500-mile electric car and change the world forever.”
So yes, this is one of the Chinese EV makers being teased today… more on that market from the ad:
“China’s EV sales are forecast to reach 1.8 million units in 2021, up 40% from a year earlierAre you getting our free Daily Update
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“China’s EV sales could reach 6 million units in 2025
“All of this is driven by China’s own road map for an electric future, which forecasts energy vehicles to comprise 20% of total new car sales by 2025.
“But here’s the thing:
“The majority of those cars will be affordable vehicles — one that the average Chinese person can afford on their national average annual salary of $14,000 — putting the $100,000 Tesla out of the reach of the Chinese worker!
“This is why we expect Chinese electric cars to outsell their American counterparts. Our No. 1 company could be the biggest profit taker of all.
“Ironically, the reason isn’t technology. It’s the size of the market, rate of growth, low price offerings, marketing and most of all, BRANDING.”
So what’s this Chinese electric vehicle company she’s talking about? Let’s see what other clues she drops…
“With 200% gains over the past five months, our No. 1 pick is already on its way to big gains….
“A home-grown Chinese company
“Dominates the $45 billion Chinese electric car market
“Focus on the self-driving strategy”
And apparently a big part of the appeal is that they’re making electric SUVs, not sedans:
“Think the Tesla of China, only at a lower price point, that competes with gas-powered SUVs, the largest segment by volume in China.”
We also get some ownership hints, like a note that as of the September disclosures Credit Suisse owned 10.52% of the shares (and, with 9,990,793 shares worth $173,739,890, we can do the math and say that the stock price was around $17 at the end of September).
And, of course, the crazy promise of “next Tesla” potential gets repeated many times:
“If the company can maintain its 48% compounded growth rate, as we forecast, then we could see its stock price double every year for the next five years just as Tesla has since 2016.”
So who is it being pitched today? Thinkolator sez Hilary Kramer is teasing Li Auto (LI), which went public in the US last July at $11.50, was indeed at around $17 in late September, and after a big surge last year in the EV bubble enthusiasm is back down to the $19s.
So what’s up with that “200% gains over the past five months” bit from the ad? That must mean that Kramer penned these words in late November, when the stock was in the low $40s… and, yes, for at least one hot minute, did gain 200% in about five months. That may turn out to be the beginning of great things eventually, someday, but if you had bought on that enthusiasm in November you’d be sitting on 50%+ losses and probably feeling a little grumpy.
Here’s how Li Auto describes itself:
“Li Auto Inc. is an innovator in China’s new energy vehicle market. The Company designs, develops, manufactures, and sells premium smart electric vehicles. Through innovations in product, technology, and business model, the Company provides families with safe, convenient, and refined products and services. Li Auto is a pioneer to successfully commercialize extended-range electric vehicles in China. Its first model, Li ONE, is a six-seat, large premium electric SUV equipped with a range extension system and cutting-edge smart vehicle solutions. The Company started volume production of Li ONE in November 2019 and delivered over 33,500 Li ONEs as of December 31, 2020. The Company leverages technology to create value for its users. It concentrates its in-house development efforts on its proprietary range extension system, next-generation electric vehicle technology, and smart vehicle solutions. Beyond Li ONE, the Company aims to expand its product line by developing new vehicles, including BEVs and EREVs, to target a broader consumer base.”
The expectation is that Li sales this year will roughly double, hitting close to $3 billion, but there’s also some fear that all automakers will continue to be bedeviled by semiconductor shortages that are slowing production, and that it might be worse for the smaller ones, like Li, who have less weight to throw around. Their financials look pretty decent with current expectations, they’re only losing a little bit of money at this pace of ~5,000 vehicles a month, and analysts expect them to be profitable in 2022.
The three major Chinese EV stocks that are US-traded, Li, Xpeng (XPEV) and NIO (NIO), pretty much all trade together — they soared as deliveries picked up and enthusiasm crested late last year and into January, and the collapsed as worries about chip shortages and deliveries and valuations, and perhaps competition, have picked at their shares this year. I’d say NIO is the darling thanks to its larger size and established presence in the US markets, and LI the smallest and most “value-priced” (6X forward sales, versus 12X for NIO), but they’re all trading on sentiment in a volatile sector.
This is what that has looked like on the charts so far this year (NIO in blue, LI in orange, XPEV in red, and we’ll throw in BYD (BYDDF, in green), which is the one Buffett’s Berkshire Hathaway has owned for more t