We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.
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This weeks issue: Meta Platforms, Metaverse, stock earnings, U.S. speaker race, Interest rates, Yield curve, Bond market, 60/40 portfolio, EV market, GM and Ford versus EVs, Rivian profitability, Rivian net income, Energy market, SPR, Oil prices, Biden administration energy policy, Servicing debt, Interest payments grow for everyone.
The business of producing and selling vehicles has evolved since the early 1900s. Companies have increased efficiency and optimized the assembly line. Successful companies like Ford have survived many cycles. Despite this track record of success and evolution, many green activists believe traditional vehicle producers will disappear and all we will eventually be left with are new-aged renewable vehicle producers like Tesla, Rivian, and Lucid Motors. We all know Tesla has been a massive success and will continue to lead the green vehicle revolution, but we do not think its competitors will all do the same. We think the marketplace will be very competitive and will include most traditional vehicle producers who have adopted electric vehicles and are producing cheap renewable options. Although the process might be slow and will have issues, we believe the assembly lines, supply chains, and technology that traditional automakers already have give them a large advantage over up-and-coming EV companies who are in their infancy.
Larger traditional automakers have the advantage of economies of scale as they have already invested in developing supply chains, and assembly lines, and are also already well-known to consumers. This cuts some of the costs that will be incurred. These companies are also mature, and their shareholders do not want to see large negative cash flows and unprofitability versus new-stage developers who are expected to be unprofitable and to be burning through cash.