- Last week, we learned from J.P. Morgan’s Automotive Conference that consumer demand remains strong, industry supply chain conditions are normalizing, but supply won’t match demand till the end of 2023, and prices will remain high until 2024.
- On dealerships, while there are substantive long-term concerns about the dealership model (DTC, fewer breaks and fixes, etc.) these businesses generate substantial FCF and offer multiple options with what to do with their excess capital generation. This allows dealers to build stock when production increases, whereas online-only retailers such as Carvana, Vroom, and Shift do not generate free cash flow, and their cost of capital has recently appreciated spectacularly. Online-only car dealers will be encumbered in adding inventory, as well as in increasing marketing spend (i.e., surviving takes precedent over growth).
- GM shared that it expects to produce 1M EVs in North America in 2025 compared to its current level around 100K, with the growth coming from Hummer, Silverado, and Lyriq as well as lower priced models like the Bolt, Blazer, and Equinox.
- The prediction that struck us the most was IHS’ forecast calls for Tesla’s share of the U.S. battery electric vehicle market to decline from 71% in 2021 to just 10% by 2030, as the number of industry-wide EV nameplates explodes higher, from 26 in 2021 to 250+ in 2030. That's a lot of consumer choice.
