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EV and Mid-Central Electric Valley Updates (Plus Samsung's Push into Texas)

Thomas Paulson
Jul 22, 2022
EV and Mid-Central Electric Valley Updates (Plus Samsung's Push into Texas)

Tesla: The Race is on and Tesla Still Leads (For Now)

  • Tesla wasn’t districted by Twitter, shots on Mars, or setting up Elon Musk’s low-earth orbital (LEO) satellite internet service. The company reported solid 2Q22 results and production levels, despite the shutdown at their critical Shanghai factory (which was back to full capacity in June). Tesla demonstrated continued pricing with revenue per unit ($53.7K) and contribution margin per unit ($13.8K) – both solid. These are attractive figures that will keep the competitors coming.
  • On pricing Musk observed, "We've raised our prices quite a few times. They're frankly at embarrassing levels. But we've also had a lot of supply chain and production trucks and as we've got crazy inflation. So, I'm hopeful – this is not a promise or anything – but I'm hopeful that at some point, we can reduce the prices a little bit.
  • The race is "ahead" because the production target for this year remains around 1.5M units, with 50% annual growth for the next several years, and as Berlin and Austin (1K+ units/week) are ramping up. Tesla raised its installed annual capacity estimates across its factories to 1.9M overall (by year-end 2022 and up from there).
  • The Cybertruck delivery start has now been pushed into the middle of next year (which will incentivize Ford, GM, and Rivian to push harder in the near term to broaden their advantage).
  • On full self-driving (FSD) autonomy, the recent job cuts at Tesla FSD combined with the departure of head of AI Andrej Karpathy is consistent with a slower adoption timeline/path to scale for autonomous vehicles, an additional disruptive risk to the auto ecosystem.

Ford: Sharpens Its Sword on the Blue Ridge Mountains

  • Ford announced a significant restructuring to fund its transition to EVs and Ford Model e. The company also reiterated that it was on track for a production capacity of 600K EVs by late 2023 and 2M by the end of 2026. Funding this transition calls for an investment of over $50B.

  • That investment is to include an additional U.S. plant (to be disclosed at some future point), in addition to its previously announced battery plants in Kentucky and Tennessee.
  • Ford didn’t have an update on reports of a significant cut to its white-collar ICE (internal combustion engine) workforce to the tune of 4K-8K ($175K per full-time employee x 6K = $1B), and other expense cuts (marketing, etc.). We suspect that this is due to ongoing discussions with the dealerships about consolidation and the conversion of certain ones to Ford Model e exclusive dealers.

Samsung: It's Always Bigger in Texas

  • The Wall Street Journal wrote an article about Samsung's floated plans for a $200B investment (yes, $200 billion) in Texas for eleven new chip plants over the next two decades. (They currently have two in the state and our currently building a third $17B plant near Austin.)
  • On the broader narrative of re-shoring chip production, the Financial Times had a good piece which noted, "Hence the growing alarm in Congress – and America’s C-suite – about the fact that almost all advanced chip production is currently located in Taiwan, which is being threatened by a newly assertive China." Or as Warner says: "The vulnerability of Taiwan has been driven home by the invasion of Ukraine." You can find our previous analysis on the CHIPs Act here.

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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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