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Investing in the Future of Electric Cars

A Very Serious Warning About Tesla

Written by Jeff Siegel
Posted July 11, 2017

I’ve never seen more people wish for a young company to fail.

Tesla (NASDAQ: TSLA), the outfit that had the audacity to deliver one of the most impressive vehicles since the Model T, has been a target for overzealous shorts and knuckle-dragging luddites since before the company even went public.

I’m not sure whether it’s because cutting-edge technologies threaten the status quo or because there’s this odd desire amongst so many people in this country to criticize progress, but Kim Jong-un’s haircut has enjoyed less criticism than Tesla and its CEO, Elon Musk.

In fact, last week, Tesla foes were quick to jump on the news that Tesla’s deliveries in the first half of 2017 came in at the lower end of its forecast. Never mind the fact that deliveries still increased 53% year over year. Such an accomplishment for any other company would draw applause.

Of course, in all fairness, Tesla stock is still overvalued.

As a consumer and a fan of technological innovation, I find Tesla to be an incredibly exciting company. But as an investor, the stock is just too risky for me.

Crushing It!

When Tesla first went public, I screamed from the rooftops to buy the stock. I knew this thing would crush it. And it did.

Those who bought shares when the stock debuted are now sitting on gains in excess of 650%. But that was a long time ago. And today, I do find Tesla’s stock to be overvalued.

But don’t let the current and somewhat absurd valuation of Tesla’s stock distract you from the overall electric car market, which continues to crush it.

Yes, there are some analysts who still push the lie that electric vehicle growth is struggling. But nothing could be further from the truth.

Consider the following...

  • In 2016, U.S. electric vehicle sales soared 37%.
  • By the end of 2016, there were nearly 30 different electric vehicles on the market, with Tesla taking the lead with the most models sold.
  • From 2012 to 2016, the U.S. electric vehicle market grew at a compound annual growth rate of 32%.

And here’s the best part...

We’re still in the earliest stages of growth.

A Bold Move?

Last week, the smartest people in the room published the results of their latest electric vehicle research.

Data from Bloomberg New Energy Finance — the most credible group of researchers in the alternative energy space — now indicate that electric vehicles will accelerate to 54% of new car sales by 2040.

Here are some highlights of the report:

  • Based on this 54% figure, electric vehicles will displace 8 million barrels of transport fuel per day and add 5% to global electricity consumption.
  • In the second half of the 2020s, consumers will find that upfront selling prices for electric vehicles are comparable to or lower than those for average internal combustion vehicles in nearly every major market.
  • Global forecasts show electric vehicle sales growing from 700,000 in 2016 to 3 million by 2021.
  • By the second half of the 2020s, electric cars will be cheaper to own on a lifetime-cost basis than internal combustion vehicles.

The good folks over at New Energy Finance also noted that electric vehicle batteries are set to plunge in price, thereby building on recent cost declines.

Since 2010, lithium-ion battery prices have fallen 73% per kWh. Manufacturing improvements and more than a doubling in battery energy density are set to cause a further fall of more than 70% by 2030.

The result will be rapidly rising market shares for electric vehicles in the biggest markets, even with oil prices staying low. BNEF sees them accounting for nearly 67% of new car sales in Europe by 2040, and for 58% in of sales in the U.S. and 51% in China by the same date.

The question for Tesla enthusiasts, however, is will Tesla continue to be the dominant seller of electric vehicles by 2040?

It’s difficult to say, especially now that every major automaker has an electric car in the showroom or in production. In fact, Volvo just announced last week that by 2019, it will only sell hybrid and electric vehicles.

Some have suggested that’s a pretty bold move. But there’s nothing bold about adapting to the transition of the personal transportation market. It’s not bold. It’s smart. And investors would be wise to take this transition seriously.

To a new way of life and a new generation of wealth...

Jeff Siegel Signature

Jeff Siegel
Energy and Capital

P.S. While I’m certainly bullish on the electric vehicle market, I’m even more bullish on the legal cannabis market. I’ve been writing about legal cannabis stocks for years, but we’re now officially less than one year away from full-scale legalization in Canada. I’ve written an e-book on how you can profit from the Canadian cannabis boom. You can get a sneak peek at that book here, or you can see my latest instructional video on cannabis investing here.

Make no mistake; no market is growing faster than the legal cannabis market. So unless you hate money, I strongly recommend getting some exposure to this space. My latest e-book actually lists 46 legal cannabis stocks you can invest in right now. Check it out here.

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