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Electric Vehicles to Flood the Mid-Central Electric Valley in 2025

Thomas Paulson
Sep 16, 2022
Electric Vehicles to Flood the Mid-Central Electric Valley in 2025

  • Continuing what is a transformational year for the Electric Vehicle (EV) space, we heard from Rivian, Tesla, Ford, Fiskers, and GM this week. Rivian shared that 90% of its customers have never owned a pickup truck before and 90% have not owned an EV. This suggests significant consumer interest and the high need by EV brands to increase the consumer’s knowledge of the product feel and features, as well as to ramp the manufacturing capacity to match supply to demand. Currently, there is little need for showrooms and advertising given the current high level of demand relative to just very early levels of production. Tesla wait times are over a year. The demand for showrooms and TV spots won’t become high until 2025 as EV production levels should then be substantial at well over 3M units in the US and with sales penetration at will over 20% (i.e., competition will be fierce). Showrooms and services (including charging times and plug points) will be the weapons in this brawl.
  • Shown in the chart below is 4-week rolling visits to Tesla's showroom on a per location basis. This year's visits are producing 3.7K monthly averages compared to 4.2K in 2019. The decline could be due to greater brand awareness (less window shopping), known wait times (also less window shopping), increased competition, consumers waiting for lower prices, migration from these showrooms current trade areas, and many other hypotheses.

  • When we did a quick review of the Tesla locations, the per location declines (on average) appear to be the result of (1) out-migration from some big pre-pandemic downtown locations like San Francisco; and (2) international summer travel by Tesla's more affluent prospect/customer base. Should the out-migration hypothesis bear out, Tesla will be looking a new set of showrooms in in-migration markets.
  • Tesla reiterated that its plants in Berlin and Austin will be able to produce over 550K units per year by the end of 2023. As its Fremont plant currently does that capacity, the projections for the new plants strike us as a low bar. We also know that Tesla is scouting for a new location for an additional plant in the U.S. with plans to start digging this year. Assuming that the third U.S. plant comes online by the end of 2025, Tesla’s US production capacity will be over 1.5M units, or 9% of total new vehicle sales in the U.S. (16M).
  • GM CEO Mary Barra stated that the company remains on track to produce one million EV units by 2025 in North America and surpass $25B+ in revenue, implying that its EV portfolio volume will be made up of a substantial number of lower-priced models which will allow them to get to mass adoption by consumers. Additionally, Barra shared, "Between the vertical integration strategy that we have for all the raw materials as well as our battery plants, we'll be creating thousands of new jobs in places like California, Ohio, Tennessee, Michigan, Texas and more states we haven't announced yet."
  • Rivian also commented, in support of our EV Electric Valley theme that the EVs are going to have a profound impact on the topology of domestic supply and production in the US. (Rivian is expected to produce over 200K consumer units by the end of 2025).
  • Part shortages and supply chain issues has been a huge snafu for the entire automotive industry over the past 2.5 years, but especially for EV producers and Rivian in particular. Thankfully, most managements at this week’s conferences said that those part and supply headwinds are easing and that 2022 production plans were on track.

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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