Ford is toast. Chrysler is toast. Many European carmakers are toast. Some Japanese carmakers — also toast.
By “toast,” I mean that these companies are on their way to oblivion. Some will go slowly, others quickly. Whatever the speed, these companies are finished, and you should stay away.
And the reason you should stay away is because I believe that the car industry is about to experience an “iPhone moment.” Here’s what I mean…
It’s so long ago now that no one can even remember what the state of the cellphone industry was back before the iPhone came out.
Here’s what it looked like pre-iPhone: Nokia and BlackBerry phones dominated sales. In terms of what a phone did, they were rudimentary. You could use your phone to call someone. With BlackBerry, you had a messaging system too.
And then on June 29, 2007, Apple started selling the iPhone.
Nokia and BlackBerry phones stopped selling slowly at first, and then their market shares cratered. The companies’ stocks plateaued and then crashed, and no one even thinks to buy one of their phones today.
The car industry is going to experience the same thing, where one company’s products are going to completely and utterly transform the market. All hell will break loose, not just for car companies, but also for auto parts companies and stores, car dealers, and the entire chain of businesses that revolve around gasoline-based mechanical cars. And this moment is coming soon…
The Model 3 Moment
The event that’s going to transform the car market the way the market for smartphones was transformed … is the coming release of the Tesla Model 3.
I’ve told you in previous articles that the Model 3, an electric self-driving car, is going to be a product that breaks new ground for the car market. And what I mean by breaking new ground is that it’s going to radically alter the cost of owning a car.
Please note my phrasing: the cost of owning a car. That’s different than the cost of buying a car.
You see, the cost of a gasoline-powered mechanical car goes beyond the price you pay when you buy it. You have to get the oil changed every 3,000 miles. That costs $20, and you’ll do that five times a year for $100 total. You’ll need a tune-up every 10,000 miles, and that’ll cost $250. Replacing brake and transmission fluids … another few hundred. Put it all together, and you spend $1,000 to $2,000 on your gasoline-powered car every year.
Then there’s the cost of gasoline, which you have to pump into your car week in and week out. Over five or 10 years, you’ll spend another $10,000 to $20,000 to use your car.
Now, one reason for the extra costs is because your gas car engine transmission has over 1,000 moving parts. Contrast that to an electric vehicle (EV) transmission like the one in the Model 3, which has just three moving parts.
Yes … three! That’s a huge advantage in two ways that tie into why I believe the car industry is ready to be massively disrupted soon.
First, it’s cheaper to build an EV transmission, which means an EV carmaker is going to be more profitable than a traditional carmaker.
Second, the cost of maintaining an EV is lower too because of the fact that their transmissions have so few parts.
And you don’t need to take my word for it. Analysts at UBS, a major Wall Street investment firm, released a research report that laid this out in black and white. Their research shows that General Motors’ Bolt EV was $4,600 cheaper to put together than what they first estimated. GM loses money on these cars now because it is still scaling to build EV cars in big quantities. When production gets up to scale, UBS said it’ll be even cheaper to make these cars … and more profitable.
And UBS’ research on Tesla shows that with versions of the Model 3 that have extra features, Tesla is expected to make a profit. I can tell you that most people in the car industry will be stunned to see this. The stock market, however, gets it … which is why you’ve seen Tesla’s stock soar while the stocks of most carmakers slump, the stocks of most car dealers who deal in gas cars slump and auto parts companies’ stocks slump. Here’s the final kicker: UBS raised its EV sales forecast by 50% — 50%! — for 2025 as a result.
Now, I’ve been telling you about the coming bedlam in the car market since March, when I warned you to stay away from these stocks. That’s been good advice, as the stocks of most carmakers, auto parts companies and auto dealers are down since then … in some cases by double digits. I’ve also been telling you about a secret group of companies in the electricity industry that are going to be massive beneficiaries of this coming shift to EVs … and last week, I showed the best-positioned company to readers of my new service, True Momentum.
Editor, Profits Unlimited