How to screen potential qualifiers for electric vehicles? 11 criteria

electric vehicle

A few days ago, I published an article “The future of the electric vehicle industry” on my blog, which caused a lot of responses. Many people expressed their agreement with the future of electric vehicles through public or private (more) messages. There is no dispute about this. However, the main distress of the friends who left messages is that hope I can talk about my views on the major players in global electric vehicles and potential prospects in the future. After these days of consideration, I wrote this article you see now.

EV’s supply chain

Let’s take a look at the typical supply chain of electric vehicle components:

AreaSupply chain
BatteryMaterial, battery cell, battery management, charging, battery swapping
Auto semiconductorImage photography, sensing, car infotainment system, power transmission system, security system, network connection, navigation, display, self-driving car, artificial intelligence system
Electric motorGenerator, starter motor, electric motor module, motor control system, gear, stator rotor
PowertrainWire harness, power system, power components, electronic control
InteriorHVAC, compressor, condenser, heat dissipation
SecurityPassenger safety, infotainment, body control, master computer
BodyMeters, seats, lights, meters, brakes, springs, shock absorbers, fasteners, forging
Whole vehicleBody, wheel, rim, tire, shell, frame, sheet metal, painting

Screening criteria

With the current technological development of electric vehicles, when screening potential electric vehicle manufacturers, investors can include the following screening criteria:

What kind of new energy vehicles are produced

Because this will determine the future of the company, producing cars is not producing biscuits and candies. Electric vehicles can be divided into BEV (pure electric vehicle), HEV (hybrid electric vehicle), PHEV (plug-in hybrid electric vehicle) and REEV (range-extended electric vehicle) according to different power supply methods and proportions. In addition, there are vehicle types that can generate energy from the vehicle body, such as fuel cell vehicles or solar cell vehicles.

Overall design of the future

Is the overall design of the car in line with the trend? What is the ability of autonomous driving? In addition to considering future industry and technology development trends for core components, does the cost meet the requirements for mass production?

Mass production capacity

How many factories does the company have? What is the annual output? Are there mass-production factories on three continents? What is the annual output in 2025? What about after 2030? How credible is the mass production plan?

Supply chain

Are there enough suppliers that must consider the supply chain including batteries, chips, motors, and the same necessary components as other traditional cars? Is it too concentrated? Investors especially need to pay special attention to the battery part.

Sufficient car models

Does the manufacturer provide enough car models for consumers to choose? For example, Americans like to drive pickup trucks, Europe likes to drive ordinary cars, China’s SUVs are selling well in recent years, and Japan prefers small, fuel-efficient small cars. In addition to the cars of general consumers, are there any sports cars or luxury cars with higher profits? Is the main vehicle model produced by the company aimed at business trucks? How many long-term corporate customer orders are there?

Endurance

Due to advances in technology, endurance continues to improve every year. At present, any electric vehicle with a battery life of less than 400 kilometers will hardly have a market (except for special considerations). It has even been reported that some cities in mainland China do not allow electric vehicles with too low battery life to be listed. Electric vehicles are currently subject to the inherent limitations of batteries, and their endurance in alpine and cold regions will also decline rapidly.

Charging network

Does it provide fast charging? Does it provide two-way charging capability? Is there a huge charging network (including charging piles, charging stations, home charging)? Is it compatible with other manufacturers’ charging networks? Can I swap the battery?

Pricing and subsidy policy

Basically, at present, all countries in the world will provide large direct subsidies to consumers who purchase electric vehicles, because if subsidies are not provided, the price of electric vehicles will not be able to compete with the price of ordinary fuel vehicles. As countries ban the sale of traditional internal combustion engines, the subsidy policies for electric vehicles in countries around the world will change significantly.

Long-term profitability

How much of the company’s current income is derived from various government subsidies or tax relief? How long can it last? What is the financial situation after deduction of subsidies? What is the company’s gross profit margin, operating profit margin, and net profit margin? How does it compare with the industry peers? Non-industry income like?

For example, if Tesla (ticker: TSLA) does not include the income of carbon rights, the company has never been profitable. It cannot be used as a constituent stock of the S&P 500 Index, which will have a great impact on the company’s stock rating and liquidity. The automobile manufacturing industry is a typical long-term high-capital investment manufacturing industry. It must have a long-term profit plan, otherwise it will be difficult to survive.

Sales and service network

This is one of the important factors that must be taken into consideration when buying a car. Do you use a traditional car sales network? Or can it provide direct sales channels (some countries do not allow direct sales through the Internet due to legal restrictions)? Is there enough after-sale service network? How about the after-sales service? Those services are free of charge? What is the new car warranty policy? Are there any monthly fees? Are the charges reasonable?

Company reputation

What is the company’s past reputation? Are there enough loyal customers?

Global EV Sales Ranking

People must be very curious, who are the 2021 leading groups of electric vehicles shipping in the world? In terms of sales volume, Tesla currently has the largest sales of electric vehicles in the world, Shanghai Automotive (SAIC, China stock code 600104) ranks second, the third is Volkswagen (ticker: VWAGY), the fourth is BMW (ticker: BMWYY), and the fifth is Stellatis (ticker: STLA), a joint venture among Italy, the United States and France.

electric vehicle
credit: Joenomias

Mosr EV manufacture are money-losing

The average gross profit margin of the global automotive industry is 27.9%, while the net profit margin is only 2.6%.

Please note: We are discussing this topic here based on current technology, legal supervision, and emerging participants. Five years later, it will be completely different. After all, the farther the distance is, the greater the probability that the prediction will be wrong. The chairman of Nidec, a major electric motor manufacturer, recently stated that the price of pure electric vehicles will be reduced to one-fifth of the current price by 2030. Automobile production is the most basic manufacturing industry in all countries, and it cannot be mass-produced immediately within two or three years.

In addition, the complexity of the upstream and downstream supply chains of the automotive industry is even greater than that of the electronics industry. The most important thing is that there will not be too many electric vehicle factories with a scale and long-term profitability that can survive in the future; after a century of competition and mergers in the United States, there are now only three big remaining.

Like in mainland China, almost all technology giants or consortia have joined the ranks of electric vehicle production or cooperation in different ways, afraid of missing this future trend and huge market. There is even an ridiculous situation in which Evergrande Motors (Hong Kong stock code 0708), which has never sold a car and has debts comparable to Iraq’s entire country, has a market value of 36.2 billion U.S. dollars on 6/25/2021.

The figure after the peak plunged 60%). Therefore, ten years later, there will not be too many survivors. In the history of the transition from a horse-drawn carriage to a car, the same journey has been experienced. Within ten years from now, there will be strict knockouts.

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