Today, I want to talk to you about Tesla’s $25,000 electric vehicle (EV) that’s apparently coming out in the next couple years.
Some people are calling it the “Model 2.” And the cool thing about it is there won’t be a steering wheel or pedals — the car will completely rely on autonomous driving.
At only $25,000, that’s a remarkable price for a fully self-driving vehicle.
In today’s Market Insights video, I discuss how the Model 2 will affect the EV market and what it means for tech investors.
(If you’d prefer to read a transcript, click here.)
Hey everyone. Steve Fernandez here with this week’s edition of Market Insights.
Ian King is in the studio today recording a presentation. Apparently, it’s pretty good. So, you’re not going to want to miss that. Stay tuned for it in the coming weeks.
Today, I want to talk to you about some news about Tesla, specifically CEO Elon Musk revealing a $25,000 vehicle that, apparently, is on the horizon in the next couple of years.
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Tesla’s Newest EV
So, as I mentioned, Musk gave us some information about this $25,000 vehicle that Tesla plans on producing in the next couple of years. There was a rumor going around last month that Tesla was going to be producing this vehicle in a Chinese Gigafactory. And there was even a concept car photo dropped to the public, and it resembles a hatchback.
Musk put 2023 as the year that he expects this vehicle to go into production. Some people are calling it the “Model 2.” I’m not sure if that name is going to stick, but let’s call it the Model 2 for now.
The cool thing about the Model 2 is that there’s not going to be a steering wheel or pedals. So, that means this fully self-driving feature has to be the real deal.
If Musk thinks this is doable in the next couple of years at $25,000, that’s a pretty remarkable price considering if you were to go out and buy full self-driving functionality now, which is likely not as sophisticated as this will be, that would cost you $10,000.
Prices are being brought down for EV!
So, it’s pretty remarkable when you think about the price point that Tesla is targeting now. I think that this is going to force other EV automakers to really bring down their prices on new vehicles. So, I expect to see that as well in the coming years. Otherwise, it’s just logical that Tesla will really, really go far with the market share gain here.
Now, with new vehicles right now — and this isn’t electric vehicles, this is new vehicles in general —costing $40,000, a $25,000 vehicle in 2023 would really confirm the thesis that a lot of industry experts are providing, which is that gas powered vehicles will be more expensive than electric vehicles by 2023. So, Musk’s commentary kind of confirms that idea.
And what’s this going to do for consumers, and what’s this going to do for investors?
Well, according to a car survey that I was reading from March of this year, 71% of people are expecting to buy an EV in the future. I think that it’ll be closer to 100% eventually, but what that tells you is people are open-minded about buying an EV.
What I saw as well was that for over half of these people that want to buy EV, cost is going to be a big consideration in that purchasing decision. In addition, they’re caring about the accessibility of public charging. So, those are the two things that are really the gripes right now for going out and buying an electric vehicle.
And if you hadn’t seen it, President Joe Biden has set aside a big chunk of change to build up the infrastructure in the U.S. He wants to have 500,000 public vehicle chargers, and he already put aside $7.5 billion to get that done. So, we’ll see how that goes. But that kind of takes away the gripe that there won’t be enough public charging out there.
Now, with cheaper vehicles, I expect that these people that do want to buy EVs, they’ll likely move up their decision to buy an electric vehicle, and that will happen sooner than it would have before. The average total ownership period — I looked this up — for a vehicle in general is about eight years. If you think about, you know, there are nine years left in this decade, we’re going to see a lot of people buy a new electric vehicle in that time frame.
With about 4.75% of new vehicle sales electric right now, I expect that to be closer to 6% by the end of the year and easily over 50% by the end of the decade, conservatively speaking.
Should you invest in mining companies?
For investors, I think the best way to play this is not necessarily the auto manufacturers, especially if prices are going to be lower. I mean, that could hurt their margins, especially for the people that are trying to compete with Tesla. Lowering their retail price without really offsetting too much of their cost is going to hurt their bottom line.
I think the pick-and-shovel or the supplier companies are really the companies you want to target with your money. So, for example, semiconductors are one angle that you could play. Metals are another, specifically heavy metals. And if you look at this chart, you can see that metals and semiconductors have really rallied substantially over the last couple of years.
So, I expect that move to continue in the future as well. And I actually really like metals over semiconductors, and there’s a couple of reasons for that.
First of all, there’s a semiconductor shortage right now that’s expected to continue into next year. But it’s a lot easier for U.S. companies to produce semiconductors. About 50% of global production of semiconductors is from U.S. companies.
If you compare that to metal production or metal mining, it doesn’t even compare. Most of metal mining is done globally. For example, the top five metal miners are all international companies. They’re not U.S. companies. So, from a supply standpoint, it’s a lot easier for a U.S. company to supply semiconductors, and that shortage will likely resolve itself.
Over the coming months and years, with metals and commodities it’s not that easy. It’s a lot harder for a company to, you know, put up a mine or get more resources from the ground, which are finite, as opposed to, say, silicon, which is used in semiconductors, which you can almost get out of thin air. It’s one of the most abundant elements on Earth.
What amplifies that supply shortage problem is the concentration of production in international companies. So, if the U.S. wants to separate themselves from the world in terms of the supply chain, I think everyone can agree that it’s in the U.S.’s best interest to supply some of these things themselves as opposed to being at the mercy of other companies.
If for some reason other companies want to limit supply or if they’re unable to meet demand, well, the U.S. shouldn’t have to pay the price there. So, this is providing a U.S. producer a really big opportunity to step in and fill the gap for U.S. mining.
Now, in Strategic Fortunes, which is a service where Ian King and I research stocks and recommend stocks, we pay a lot of attention to these mining companies. You can check Ian’s presentation here. It’s a presentation on a rare earth metal producer inside China that accounts for 85% of the rare earth metal production. And it’s really in the U.S.’s best interest to bring some of that production back onto home soil.
So, you don’t want to miss that presentation. Go ahead and give it a look.
Until next week, thanks for tuning in. I’ll talk to you next time.
Research Analyst, Strategic Fortunes