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This is dizzying. Over the summer Ford Motor Company had a valuation of <$24B (currently $46B), and yet in comparison to valuations across tech and especially the EV industry, doesn't seem far off what the market will accept for promises of tech-driven progress and growth. SPACs in theory seem like a great escape from the horrors of IPOs, but in the current manic climate it's all but inevitable that millions of retail investors are going to get fleeced when the SPACs collectively fall short of generating the necessary free cash-flow to justify their collective valuation. This could be years out, though, still, so hopefully there'll be some growing into valuations and a gradual come-off instead of a complete meltdown, but history shows we tend to make markets go boom and bust, so don't count on it.

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Yep. I'd say the traditional auto makers are way undervalued relative to Tesla. But what do I know?

The only thing that I can see as an investment thesis is:

1. The whole auto industry is going to rapidly transition to electric only cars (not hybrid, but plug-in)

2. The established automakers are too slow, due to their size, bureaucracy, and relationships with component suppliers, unions, and dealers, to be able to efficiently make this switch

3. Therefore nimble electric vehicle startups are the smart bet.

I disagree with this thesis -- for example it will take several decades just to improve our electricity grid to handle a real rush of PEV, and those electricity utilities are a lot slower and more bureacratic than the mainstream automakers. And that's just one of many arguments against this thesis. Moreover there isn't enough data to suggest that people will accept PEV - you are talking about minuscule volumes so far and are betting everything on extrapolating exponential growth from a small base.

But at least it's not a crazy thesis. A case can be made to a rational person to justify these valuations, even if most rational people are going to be skeptical of this case.

> 2. The established automakers are too slow, due to their size, bureaucracy, and relationships with component suppliers, unions, and dealers, to be able to efficiently make this switch

Literally every major car maker has an EV on the market or is launching one this year. The problem isn’t the car makers, it’s that the market is still early.

Give it 10 years. There’s lots of kinks left to figure out that we take for granted in modern cars.

Most notably cold weather performance, weight, resell value, range, and longevity. Can a modern EV be expected to work fine in 20 years? An ICE can.

And no matter what everyone says, EVs are still kind of impractical. I rented a Tesla for a weekend (in SF) and it was terrible. We spent the whole time chasing chargers and ultimately almost destroyed the car according to the dashboard warnings. Finally found an available charger in the city with 3% battery left.

Yup. Car market moves slowly and requires massive infrastructure. I've never bought a car that was less than 7 years old and I drove it for about a decade. Average vehicle age is 12 years and 1/4 of vehicles on the road are older than 16 years. New cars are only 6% of the market and cars are lasting longer every year, since quality and durability keeps increasing. Really they keep getting better and better.

My best guess is that in 30 years, the majority of cars on the road are still going to be ICE. But in 100 years? Who knows, we might get a fantastic battery breakthrough or perhaps we'll be driving fusion powered cars :P

Not in decent countries. UK is banning new ICE car sales in 9 years. Norway is aiming for a ban in 4 years. Several other EU countries are planning for a 2030 ban.

Tesla don’t really cater for the U.K. or euro market - where’s the fiesta/corsa/golf size range? Or even the focus/fabia/astra size?

The model 3 is too big and too pricey compared to things like the leaf.

I suppose the BMW 3 series and Mercedes C-Class aren't products which cater to the U.K. or Euro market either?

Obviously Tesla doesn't cater to the entire Euro market. But to suggest that Telsa has to cater to all segments in order to be taken seriously is a rather weird bar.

Really minor part of the market.

Those timelines are subject to political winds, not the laws of physics.

Decent countries let markets move as needed because there are far more trade offs than any politician can fathom.

Also I wonder what Norway is going to do if and when their offshore oil export business dries up?

> cars are lasting longer every year, since quality and durability keeps increasing.

This isn't true. Japanese cars don't have the same reliability they did in the 90's. You're not gonna find anything like a 2JZ engine on an affordable car these days.

VW quality seems to be on the verge of falling off a cliff as they seem to be desperate to increase profits without improving quality.

Oddly enough I would mention Korean cars for being especially reliable, but then Hyundai and Kia got hacked the other day, so...

By the data, it IS true, though. Cars—especially the engines—are lasting longer because we're just better at making them. Reliability by manufacturer varies of course. Since the engines are lasting longer, our durability problems now turn to the interiors, which currently can't be updated or refreshed the way say a kitchen can. Would like to see that change.

You're right, the data does seem to support you.

https://www.cbsnews.com/news/cars-now-last-longer-than-ever-...

I rag on body styling but in terms of engine power, efficiency, safety, durability, features, and interior quality, cars have gotten much, much better. The launch of new innovative disruption first from Japan, then Korea, and now homegrown competitors like Tesla has really improved competition and driven more innovation in the industry. The new tech is also getting insane, with hand gestures recognition, cameras everywhere, blind spot sensors. It's a great time to drive a car.

There are cons as well. Manufacturers are mostly moving away from buttons, which is arguably a safety issue. It's harder to find hydraulic steering so we're left with the muted electronic racks you find today. They have all sorts of technology you find useful, but I actually spent a significant chunk of time figuring out how to remove the modem in my car. Oh, and they're typically much heavier, the bane of any performance vehicle (and bad for the environment, fuel economy, and safety for pedestrians).

The 2JZs cost Porsche money new. Here in New Zealand Japanese imports could be had for a massive discount but they were never an affordable car.

The 2JZ is a ridiculous bargain for the value, even today. I'm not sure what you consider Porsche money but you can get a brand new 2JZ for 4 digits.

The other engine that comes to mind is the LS1, which was also developed in the 90s and is still used by GM today.

Outside of those two I'd start looking at supercars (I don't mean Porsche, I mean Koenigsegg) for engines that are as impressive.

What's so impressive about 2JZ?

Ability to handle vastly more power than from the factory with bolt-on upgrades.

Extreme reliability and ability to handle massive amounts of power.

For my situation an EV is MORE practical--no gas stations. In four years, only done a small handful of trips longer than 300 miles (range of car). I'd bet the most common US car trip originates from a home where the car can charge and is under 30 miles. Most US consumers who switch to EV are likely to feel it was an overall experience upgrade.

Any car is a symphony of parts with varying durability, and if anything an EV will have fewer parts. So I think for the traditional manufactures doing ICE & EV cars, we'll see the EVs last longer outside the battery. That's the nexus of the longevity worry and I'm interested in whether newer solid-state batteries for cars start to solve for overall lifespan?

No gas stations is a huge downside. If you run out of juice, you're waiting for a flatbed tow truck to take you to a charging station. With a hybrid you can call AAA or you can walk to a gas station and grab a gallon of dead dinosaurs.

I don't understand the insistence on being "fully EV." Just toss a 5 gallon tank and a small gas engine and generator in in every electric vehicle until batteries have a chance to iterate a generation or two.

> No gas stations is a huge downside. If you run out of juice, you're waiting for a flatbed tow truck to take you to a charging station. With a hybrid you can call AAA or you can walk to a gas station and grab a gallon of dead dinosaurs.

Another possible solution is a mobile off-grid charging station. A van or truck or trailer full of batteries and charging equipment. If you run out of charge, it comes to you, you plug your EV into it, it charges your batteries enough to make it to the nearest on-grid charging station. Quite possibly a better option than a tow truck.

https://lightningemotors.com/lightning-mobile/

(You could even have a truck with a generator set and charger for mobile emergency charging. Not so environmentally friendly, but it would work.)

AAA piloted such a service, but there wasn't enough demand when you can tow an EV to a charger without the cost of rolling batteries on wheels to the EV [1].

[1] https://www.caranddriver.com/news/a15346575/placebo-on-wheel... ("Placebo on Wheels: AAA Charging Trucks Seek to Remedy EV Range Anxiety, Prove Mostly Unneeded")

If they tried again in the future, when EV adoption is greater, they might have more success.

It is hard to say whether the failure of the idea is because it is never going to work, or because the market wasn't ready for it yet.

> Quite possibly a better option than a tow truck

If they can get it down to 10 minutes, then yes, the wait time is better than load, attach, tow, detach sequence

It only needs to be enough to get you to a dedicated charge station. We are already at 10 minutes for the use case afaik.

We have driven our Teslas tens of thousands of miles and have never once been in fear of running out of juice. I can even charge at any 120V outlet in a pinch with the mobile connector [1]. In the very unlikely event of running the car down to 0% SOC, AAA will tow me to the nearest Supercharger [2], J1772 charger [3], 220V outlet, or our high power wall charger at home.

Range anxiety is overblown and well past its expiration date as a concern for EV uptake. Tesla is selling half a million vehicles a year, and yet, we hear very little of folks running out of power on the side of the road. Go figure.

> I don't understand the insistence on being "fully EV." Just toss a 5 gallon tank and a small gas engine and generator in in every electric vehicle until batteries have a chance to iterate a generation or two.

Automakers have sold hybrids for two decades. The evidence does not support enabling selling hybrids for another two decades instead of moving to EVs now.

[1] https://www.tesla.com/support/home-charging-installation/mob...

[2] https://supercharge.info/map

[3] https://plugshare.com/

> Range anxiety is overblown and well past its expiration date as a concern for EV uptake. Tesla is selling half a million vehicles a year

It might be overblown but since USA is a 3rd world country the lack of infrastructure for EVs becomes a real problem unless you’re a suburbanite with a garage.

When we rented a Tesla it was a public holiday which meant all the big parking garages in SF that showed up on Tesla’s map were closed. We had to limp around the whole city while the car yelled at us that we’re about to permanently damage the battery. When we finally found a charger it was a $20 uber ride home.

Overall “fantastic” experience.

I’m sure you’re aware that San Francisco is not representative of most of the United States. Roughly 70% of all housing units in the US have a garage.

Your edge case had a poor experience, but it isn’t the norm.

Yes I agree EVs make a great commuter car. It’s just the exact opposite of how I ever use a car.

And in cities, which is where most people live, the EV infrastructure is not quite there yet. Making them impractical for 82% of Americans according to a quick google search on “percent of urban americans”

https://www.statista.com/statistics/269967/urbanization-in-t...

That said, I didn’t look into how dense these supoosed urban areas are and how many garages there are. Could be they count places like Mountain View as urban.

> we hear very little of folks running out of power on the side of the road.

I have a friend that owns a towing company. They recently added a dedicated flatbed for dead electrics because "X mile range" trip planning doesn't account for going up mountains.

Can’t speak for all EVs, but Tesla vehicles do take into account elevation climbs and descents when route planning and estimating range.

Good point though, more range and charging stations are still needed in mountainous regions.

Tesla is trying to say the computers parts in their cars are actually consumables that need to be replaced. They argued eMMCs were consumables and would require a $2000 fix. The regulators had to step in and fore their hand to do recalls.

Car manufacturers will need to keep their service centers happy by putting in serviceable parts. Tesla’s the only large exception since they lack a dealer network but they will eventually play the same game.

> Most notably cold weather performance, weight, resell value, range, and longevity.

Just from my perspective, owning an EV:

- cold weather performance: Yeah, range is decreased. You deal with it. I can still drive to my grandparents cabin with one fast charge that finishes before I've bought all the groceries I need for the stay. Day-to-day it's better than ICE. Never any problems starting the car, and you can pre-heat it, which is a huge plus.

- weight: Our EV is about 100kg heavier than the gasoline variant I think, but it's not designed from ground-up to be an EV. I think you can get 40-50kWh EVs without much weight penalty now. Not that added weight is a big problem for personal cars. Since the weight is so low, it's a benefit to roll resistance.

- range: Sure, this could always be better. But for a lot of people, once you get an EV, and get used to it, you start to flip your thinking from "I should buy one with the longest range I can afford" to "Dealing with charging isn't so bad after all, I should get an EV with the smallest range that's still practical, otherwise most of the battery is dead weight most of the time"

- longevity: "Can a modern EV be expected to work fine in 20 years? An ICE can." - OK, sure, it might still be running. But from my parents experience with 15+ year old cars it's not something I'm keen on dealing with. There are a lot of parts that starts to wear down around that time, and they had a lot of issues with expensive repairs that was barely worth it. The first Nissan Leafs are 10 years old now, and despite a bad battery architecture they're doing quite fine. If the batteries last that long, I think I'd rather have a 20 year EV than a 20 year ICE. The range might be crap, but it can still be useful as a second car for local errands, and it'll probably be much less likely to fail unexpectedly. You might also see third party affordable battery replacements be available in 5-10 years. If you replace the battery the car is essentially as good as new with regards to the drivetrain. Maybe even better than new, since batteries get better/cheaper over time.

https://www.youtube.com/watch?v=2qPF11PmP8k

- "And no matter what everyone says, EVs are still kind of impractical": True-ish, but that depends a lot on infrastructure. Here in Norway it's really not much of a problem at all. Half the supermarkets and all the shopping malls around me have fast chargers. Even IKEA has a bunch of them. Every road-side McDonalds. I think most apartment complexes have set up for doing over-night charging, you just need to pay for the charging box and installation. Even with out-door parking. This has ramped up really quickly the last 5 years. You just need that critical mass of EVs, and some government support (which for the US should hopefully be better the next 4 years). Remember that most of the charging stations models and companies didn't even exist when Norway really started ramping up 5 years back. It's getting easier every year.

The technology is good enough IMO. It's mostly about marketing and infrastructure. Most people prefer EVs after getting used to them. There's a lot of small benefits people aren't aware of (such as scheduled pre-heating in winter)

I think the US has bigger challenges than the rest of the world for a bunch of reasons (inefficient government, long-distance driving at high speeds, suburban sprawl, a love for SUVs, etc.). But even there I think you can start to see EVs taking off within 5 years with a bit of a push.

There's a strong argument that it's simply the lack of advertising of EVs, educating and manipulating the public to buy them, that's a major cause for their slower adoption; Tesla doesn't spend money on advertising - that may have to change once all the major ones are pushing ads on people, that of course increases sale price to cover the cost - so maybe Tesla won't.

Traditional car companies are valued the old-fashioned way, on future earnings. Tesla is not.

I'm mostly on board with your formulation, but I'd tweak it some. I'd say the thesis is:

1. Battery electric vehicles are the inevitable future, so you can invest now (when it's possibly too early) or invest later (when it will definitely be more expensive). So far, the market seems to be on board with investing now.

2. Established automakers are ripe for disruption in the classic sense, not because they're too slow or too bureaucratic, but due to their opportunity costs. They make money now selling ICE vehicles and lose money when they try to sell electric vehicles. It feels like the Apple II to Mac transition but they don't have a Steve Jobs at the helm to force the issue.

3. Therefore, electric vehicle manufacturers are the smart bet for the long haul.

And, for what it's worth, as an EV owner, I'm absolutely on board with this thesis. Infrastructure changes will come fast once demand is there.

I'm having a hard time understanding why investing later would be more expensive than investing now.

Unless you're taking into account the opportunity cost, I would expect the cost of investing in an electric infrastructure to be lower once the kinks have been worked out by early adopters.

On top of having a brand new set of expertise to shop for, the traditional automakers also will have to modify their existing factories. They'll have to do that eventually, but there might be some massive cost associated with adapting factories to the wrong tech.

I'm talking about stock investors. People tend to buy on anticipation, so the folks who get in early drive up the price for the folks who are waiting for a sure thing.

And what if fuel cell electric vehicles became the future? Wouldn't you have completely gotten it wrong?

Doesn't this just ignore Enterprise value? Ford has something around $160Bn in debt, so the real enterprise value of Ford is close to £200Bn. A hot new startup is probably still a little over-valued at 10% of Ford, but I don't think you're comparing like for like because Lucid doesn't have a huge amount of debt on its balance sheet (I don't think)

This doesn't make any sense. These companies are valued at their market capitalization -- i.e., the number of outstanding shares multiplied by the price per share. Enterprise value is a metric, but it's not clear why you're proposing to take 10% of "that" (not sure you nailed EV, either) and compare it to the SPAC's market cap. The parent was talking about free cash flow, from which it is generally agreed market cap should be derived in an efficient market with perfect information.

The market is factoring in that debt. So if Ford magically cancelled out its $160B, its market value would rise significantly.

So I guess one could compare its post-debt estimated value to this new startup as a upper bound since the startup doesn’t have that debt.

But auto making requires lots of capital so avoiding debt will likely not be possible as the company grows. Although if they keep valuations they can just sell stock and avoid debt.

No. The market only cares about Ford's debt in so much as (1) Fords debt service reduces free cash flow and (1) it threatens a potential bankruptcy that could wipe out equity in the worst case. Sure, cancelling the debt would eliminate the debt service and significantly increase Ford's free cash flow, its market cap should increase, but only if doing so was free.

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