Ok, smal EV start ups sqeezed out. Agree. I don't believe that this will result in a drastic change to the pricing and ROIC dynamics of the industry.
What would you put the odds for Toyota, VW, BMW, DAI, GM, F, RNO etc. not beeing around in ten years producing cars (EVs..)? Several of them has gov ownership + long history of bust and bailout.
I believe the dynamics of the auto industry do not permit a shift towards an oligopolistic market structure with any kind of pricing power. It appears we have a difference of opinion on this matter. I must admit that I don't find your arguments particularly persuasive.
It's actually well detailed in the note, there are tons of EV startups in China, as well some in the US, which are burning loads of cash. Clearly these could be eliminated.
Then Tesla only will have to compete with the traditional manufacturers in EVs. Will all them successfully transition? I strongly doubt that. Some of them are barely surviving in normal environments. And they're even worse at innovation or adapting. Cash injections by governments might be possible, at least for a while.. It's not like governments' balance sheets are looking tremendously healthy.
"The risk to these numbers is that Tesla will go into a protracted price war with new and higher cost competitors to drive them out of the market. This could be sensible from a long-term viewpoint, it would allow Tesla to take a large market share of the EV market by eliminating competition. However, this could bring weakness in the share price in the near term."
Which competitors do you believe can be effectively "eliminated" through a price war? The incumbent players are largely government-backed entities from Germany, Japan, South Korea, US and China.
Let's consider the case of Hyundai/Kia as an example. They engaged in a price war supported by substantial financial resources. However, their efforts resulted in a mere increase in market share and a reduction in the industry's return on invested capital (ROIC).
Excellent company breakdown!
Ok, smal EV start ups sqeezed out. Agree. I don't believe that this will result in a drastic change to the pricing and ROIC dynamics of the industry.
What would you put the odds for Toyota, VW, BMW, DAI, GM, F, RNO etc. not beeing around in ten years producing cars (EVs..)? Several of them has gov ownership + long history of bust and bailout.
I believe the dynamics of the auto industry do not permit a shift towards an oligopolistic market structure with any kind of pricing power. It appears we have a difference of opinion on this matter. I must admit that I don't find your arguments particularly persuasive.
It's actually well detailed in the note, there are tons of EV startups in China, as well some in the US, which are burning loads of cash. Clearly these could be eliminated.
Then Tesla only will have to compete with the traditional manufacturers in EVs. Will all them successfully transition? I strongly doubt that. Some of them are barely surviving in normal environments. And they're even worse at innovation or adapting. Cash injections by governments might be possible, at least for a while.. It's not like governments' balance sheets are looking tremendously healthy.
"The risk to these numbers is that Tesla will go into a protracted price war with new and higher cost competitors to drive them out of the market. This could be sensible from a long-term viewpoint, it would allow Tesla to take a large market share of the EV market by eliminating competition. However, this could bring weakness in the share price in the near term."
Which competitors do you believe can be effectively "eliminated" through a price war? The incumbent players are largely government-backed entities from Germany, Japan, South Korea, US and China.
Let's consider the case of Hyundai/Kia as an example. They engaged in a price war supported by substantial financial resources. However, their efforts resulted in a mere increase in market share and a reduction in the industry's return on invested capital (ROIC).