Bad news for Tesla, auto OEMs killing hybrids to focus on EVs

Bad news for Tesla, auto OEMs killing hybrids to focus on EVs

At the heart of our investment themes here at Tematica we tend to find a structural change underway. There are several embodied by our Cleaner Living investing theme with one of the more recognizable happening in the auto market as consumers look for non-gas powered solutions. This began with hybrid models, which in hindsight were a baby step or two away from all-gas powered engines that allowed them to meet regulatory mandates. We are, however, seeing an acceleration in the shift toward electric vehicles (EVs) as both General Motors and Volkswagen close out their hybrid efforts to focus their formidable resources on the EV market.

As we can see below, GM in particular is looking to move in the EV market in a meaningful way over the next four years. As we’ve seen in our Digital Lifestyle investing theme with Netflix, a company can enjoy an early mover advantage for a period of time but as the market opportunity presents itself others, like Disney, Apple, Comcast and others, will look to tap into that growing market.

The same holds for Tesla, and the question investors will need to ponder is how it will fare in a far more competitive EV market? Legacy auto makers like GM, Volkswagen, Ford and others are well versed in the competitive auto market. This will be new ground and an new battle ground for Tesla and Elon Musk, and it doesn’t have a legacy car business to help it out.

Auto makers for two decades have leaned on hybrid vehicles to help them comply with regulations on fuel consumption and give customers greener options in the showroom. Now, two of the world’s largest car manufacturers say they see no future for hybrids in their U.S. lineups.

General Motors Co. and Volkswagen AG are concentrating their investment on fully electric cars, viewing hybrids—which save fuel by combining a gasoline engine with an electric motor—as only a bridge to meeting tougher tailpipe-emissions requirements, particularly in China and Europe.

GM plans to launch 20 fully electric vehicles world-wide in the next four years, including plug-in models in the U.S. for the Chevy and Cadillac brands. Volkswagen has committed billions to producing more battery-powered models, including introducing a small plug-in SUV in the U.S. next year and an electric version of its minibus around 2022.

Last week, Continental AG, one of the world’s biggest car-parts makers, said it would cut investment in conventional engine parts because of a faster-than-expected fall in demand—yet another sign the industry is accelerating the shift to electric vehicles.

Source: GM, Volkswagen Say Goodbye to Hybrid Vehicles – WSJ

Volvo joins Tesla as it targets all-electric semi truck in 2019

Volvo joins Tesla as it targets all-electric semi truck in 2019

While Tesla continues to make headlines, progress on electric cars continues but those are not the only vehicles that are being prepped for all-electric solutions. Even as Tesla looks to bring Tesla Semi, a heavy-duty Class 8 truck to market in 2019, others including Daimler, Thor Industries and Volvo are testing their own versions, which in some cases include medium-duty class 6 trucks. Each of these is looking to tap incremental demand to be had as states look to address air quality, which is very much in sync with our Clean Living investing theme.

Much like we have seen with electric cars, the tradeoff between mileage and charge as well as the availability of charging stations will all be factors for the adoption of electric trucks. As that adoption rises, it will necessitate a pick up in demand for lithium as well as wide-bandgap semiconductors, which are all part of our Disruptive Innovators investment theme.

Volvo Trucks released teaser images Wednesday of the electric trucks it plans to bring to California next year as part of a demonstration project, the latest truck manufacturer to publicize its electric plans in the state.

The attraction to California is no accident. The state has set aggressive targets to improve air quality and reduce carbon emissions, particularly those generated from tailpipes.

Daimler Trucks North America said in July it would begin testing 20 fully electric heavy- and medium-duty Freightliner models at the ports of Los Angeles and Long Beach this year. Tesla, which unveiled the Tesla Semi prototype in November 2017 , began testing its prototype semis in California and Nevada earlier this year. Tesla CEO Elon Musk has said production of the Tesla Semi, a Class 8 heavy duty truck, would begin in 2019.

Newcomer Thor Trucks is developing a medium-duty Class-6 electric truck for UPS, which will also be tested in California.

Volvo Trucks plans to test its new electric VNR truck, a refitted version of its diesel-powered VNR model. The electric VNR, which will be based on powertrain technology used in the Volvo FE Electric, will be produced for the North American commercial vehicle market starting in 2020, the company said.

Source: Volvo Trucks teases the all-electric semi truck it’s bringing to California in 2019 | TechCrunch

Data breach exposes vulnerabilities at GM, Ford, Tesla, Toyota and dozens more

Data breach exposes vulnerabilities at GM, Ford, Tesla, Toyota and dozens more

A few months ago in episode 59 of the Cocktail Investing podcast, we discussed the looming cybersecurity threats to be had in the corporate supply chain. After that conversation, we figured it was only a matter of time until a high profile supply chain attack occurred. It was only a matter of months until the vulnerabilities for several automotive companies and their suppliers were exposed. How they address it means more spending associated with our Safety & Security investing theme.

To check out our latest Cocktail Investing podcast, click here.

 

Security researcher UpGuard Cyber Risk disclosed Friday that sensitive documents from more than 100 manufacturing companies, including GM, Fiat Chrysler, Ford, Tesla, Toyota, ThyssenKrupp, and VW were exposed on a publicly accessible server belonging to Level One Robotics.

The exposure via Level One Robotics, which provides industrial automation services, came through rsync, a common file transfer protocol that’s used to backup large data sets, according to UpGuard Cyber Risk. The data breach was first reported by the New York Times.

According to the security researchers, restrictions weren’t placed on the rsync server. This means that any rsync client that connected to the rsync port had access to download this data. UpGuard Cyber Risk published its account of how it discovered the data breach to show how a company within a supply chain can affect large companies with seemingly tight security protocols.

This means if someone knew where to look they could access trade secrets closely protected by automakers.

Source: Data breach exposes trade secrets of carmakers GM, Ford, Tesla, Toyota | TechCrunch

Subscription service comes to Volvo’s cars, but how serious is it?

2017 has been a year for subscription services ranging from razor blades, underwear, bacon and smartphones. Now we’re seeing it expand into upper-end cars with Volvo. While this is an interesting twist and includes insurance as well as maintenance, the monthly price point boxes out those in our Cash-Strapped Consumer and most in the Rise of our Rise & Fall of the Middle Class investing theme as well leaving potential users to our Affordable Luxury theme.

Much like the need for Tesla to bring a mid-tier price point car to market to drive volume and achieve related synergies, the move that will signal how serious Volvo’s subscription efforts are will be if it too moves down to its mid-tier vehicles. Something to watch as the round of annual auto shows commence.

Volvo has a subscription car service, whereby you can get a new vehicle for a flat monthly fee, including insurance, maintenance and service. It’s not the first carmaker to provide this kind of ownership alternative, but it may have the best deal in the business at the moment, with its ‘Care by Volvo’ exclusively for the new XC40 SUV.

The deal works thusly: Pay a monthly fee starting $600 per month, and you get the 2019 XC40, with a range of nice options and upgrades available if you’re willing to pay a bit more.

That subscription price includes everything – vehicle insurance, regular service, and even maintenance fees. You just handle the local taxes, along with any state required registration fees, and you also pay for gas.

Based on my current lease, this sounds like a pretty fantastic deal, given that the trim level you’re getting at $600 per month costs $35,200 to purchase outright, and that’s without taking into consideration any maintenance or insurance and financing fees.

Source: Volvo’s car subscription service sounds like good way to get the new XC40 | TechCrunch

Cocktail Investing Ep. 24: As Amazon becomes the Death Star of retail, the Fed still looks for inflation in a deflationary world

Cocktail Investing Ep. 24: As Amazon becomes the Death Star of retail, the Fed still looks for inflation in a deflationary world

In this week’s program, Tematica’s investing mixologists, Chris Versace and Lenore Hawkins discuss the week’s economic data, relevant political happenings and share where they have spotted a few of the latest Thematic Signals. A few highlights include:

 

  • While most Wall Street economists are still forecasting Q2 GDP to be around 3 percent, the NY Fed’s Nowcast and the Atlanta Fed’s GDPNow are below 2 percent, with an even lower forecast for Q3. We point out what they are likely seeing that the usual Wall Street suspects are missing and why this could be problematic for 2Q 2017 earnings season.
  • With the first half of 2017 almost over, only one other year going all the way back to 1928 has had a smaller maximum drawdown in equity indices during the first half. Find out what tends to happen in years where the first half sees such a steady move up.
  • The yield curve is giving us a very different message from the major equity indices. We discuss what and why this is important for investors.
  • We talk about what is happening in oil, on the demand as well as supply side, and what it means for the economy, geopolitics and earnings expectations for not only oil companies, but the entire S&P 500.
  • We wrap up our discussion with a focus on Amazon (AMZN) on its whirlwind of recent announcements from its acquisition of Whole Foods (WFM) to Nike (NKE) now selling some of it products directly to the online giant. We also explain why Amazon is THE poster child for thematic investing.
  • Finally, as if retail isn’t suffering enough from the retailing Death Star of Amazon, we discuss why a new report on retail and the food & beverage industries is a positive for our Safety & Security investing theme.

 

And be sure to tune into next week’s podcast when Lenore and Chris talk with Security-as-a-Service provider Alert Logic about the evolving world of cybersecurity. All that plus what to focus on next week and of course all the usual Cocktail Investing Podcast goodness.

Companies mentioned on the Podcast
  • Amazon (AMZN)
  • Amplify Snack Brands (BETR)
  • Apple (AAPL)
  • Bonobos
  • BP (BP)
  • Chevron (CVX)
  • Dick’s Sporting Goods (DKS)
  • Finish Line (FINL)
  • Foot Locker (FL)
  • Kroger (KR)
  • Marathon Oil (MRO)
  • Nike (NKE)
  • Sprouts Farmers Market (SFM)
  • Safeway Inc.
  • United Natural Foods (UNFI)
  • Wal-Mart (WMT)
  • Yum Brands (YUM)

 

Resources for this podcast:
Chris Versace Tematica Research Founder and Chief Investment Officer
Lenore Hawkins Tematica Research Chief Macro Strategist
Is a Safer, More Entertaining and Eventually Autonomous Car Near?

Is a Safer, More Entertaining and Eventually Autonomous Car Near?

It seems every day we hear about the inevitability of the autonomous car, a member of our Disruptive Technology investing theme, with many hoping that it will usher in a new area of safety.  According to the Association for Safe International Road Travel, 3,287 people die, on average, every day in road crashes. That translates into 1.3 million deaths annually with an additional 20-50 million injured or disabled. Globally, road crashes are the 9th leading cause of death.

Clearly, there is room for improvement and Apple’s (AAPL) CEO Tim Cook agrees, citing the auto industry as ripe for a major disruption in a recent interview on Bloomberg Television. According to Cook, there are three vectors of change intersecting: autonomous driving, electrification of the auto and ride-sharing. From our thematic investing lens, this is where Disruptive Technologies meet the Connected Society.

Cook revealed that his company is focusing on autonomous systems, referring to it as a very important core technology that is probably one of the most difficult AI (Artificial Intelligence) projects to work on. Apple has hired over 1,000 engineers to work on the technology and just this April secured a permit from the California DMV to test three self-driving sports-utility vehicles. The company is clearly also focused on the ride-sharing vector of change, as last year Apple invested $1 billion — pretty much chump change for the company these days — in Didi Chuxing, the biggest ride-hailing service in China. As for electrification, it remains to be seen if Apple will develop their own electric vehicles or partner and sell their technology.

Apple is not alone, as the electrification leader Tesla (TSLA) continues to break new ground and Alphabet (GOOGL) is working on autonomous technology in partnerships with Fiat Chrysler Automobiles (FCAU)and Lyft. BMW (BMWYY), in cooperation with Intel (INTC), reports that it intends to have Level 3, 4 and even 5 capabilities for self-driving by 2021. Level 3 is defined as conditional automation that requires a driver to intervene in certain situations, but aren’t obligated to be constantly monitoring progress. Level 4 is full autonomy, while Level 5 requires zero input from a driver to navigate city and highway roads and is expected to be at least on par with the performance level of a human driver.

 

A Conversation with One of the Pioneers of In-Car Information & Entertainment

To better understand the evolution of the smarter vehicle, on a recent episode of Cocktail Investing, Tematica Research’s Chris Versace and Lenore Hawkins spoke with Ted Cardenas, Senior Vice President of Marketing, Car Electronics Division at Pioneer Electronics Corp (PNCOY). Given that about 95 percent of his company’s business is related to auto and the company will reach its 80th anniversary next year, we thought he’d have some valuable insight. This is the company that introduced the consumer laser disc in 1979, the car CD player in 1984 and GPS car navigation in 1990, with around four decades in the car entertainment space.

Ted pointed out to us that compared to home or office-based technologies, the car is a seriously brutal local for innovation where electronics need to be able to withstand extremes in temperatures, moisture and vibrations – not exactly the friendliest environment! We discussed how the increasingly Connected Society allows for not just millions of on-demand songs, but also delivered the “killer app” of real-time traffic information thanks to all those GPS enabled smart phones tagging along with their drivers.

The Connected Society has materially changed product development for the car as well as it also means connected companies. The need for higher and higher speed data networks and the innovations that allow for and take advantage of them means that companies no longer have to, or should for that matter, go it alone. Each company is only part of the solution as we see more specialization taking place with the consumer benefiting from a simple, usually intuitive solution in which all the complexity has been blissfully hidden.

In this new development paradigm, relationships are increasingly important as companies specialize within the solution set and we’ve seen some of the complexity offloaded to smartphones, allowing for greater flexibility as consumer can choose which device best fits their needs. For Pioneer, this means offering in-dash multimedia receivers that are compatible with popular smartphone interfaces and apps such as Apple CarPlay®, Android Auto ™, and Waze®, as well as features such as Bluetooth® music streaming, hands-free calling, Spotify® and Pandora®.

Pioneer isn’t just innovating within entertainment and communications as the company is also developing advanced driver assist for both OEM and aftermarket, allowing owners of older cars to benefit from the latest in safety improvements. When asked about his expectations around the timeline for the truly driverless car, Ted framed his analysis in the context of the evolution of in-car GPS systems – an evolution by degrees rather than a binary event.

The first GPS systems were developed by Pioneer and were used to figure out where you were on a map, but could not provide point-to-point directions. Those first systems also didn’t provide 100% coverage, so drivers could find themselves driving into a GPS void when traveling in areas not covered by the devices internal maps. Over time the map coverage became increasingly more complete and turn-by-turn directions evolved from available only in highly-trafficked areas into the most remote. He suspects we will see something similar with driver-assist that will offer more thorough assistance in more populated areas with less as one gets into more rural areas. Over time the level of assistance and coverage areas will expand.

Finally, we discussed how the increasingly smart car will also do more of the heavy lifting when it comes to maintenance, providing a more seamless driver experience that not only provides autonomous transportation, but monitors and schedules its own maintenance needs. We likely not alone in looking forward to the day when we no longer find ourselves noticing that little oil change reminder sticker a few months and few thousand miles late. The car of the future will be safer, smarter and a lot more entertaining.

 

Companies mentioned on the Podcast

  • Alphabet (AAPL)
  • Apple (AAPL)
  • BMW (BMWYY)
  • Fiat Chrysler Automobiles (FCAU)
  • Intel (INTC)
  • Pandora (P)
  • Pioneer Electronics (PNCOY)
  • Tesla Motors (TSLA)
Cocktail Investing Ep. 23: The Evolution of the Safer, More Entertaining and Eventually Autonomous Car

Cocktail Investing Ep. 23: The Evolution of the Safer, More Entertaining and Eventually Autonomous Car

It seems every day we hear about the inevitability of the autonomous car, a component of our Disruptive Technology investing theme, with many hoping that it will usher in a new area of safety.  To better understand the evolution of the smarter vehicle, Tematica Research’s mixologists Chris Versace and Lenore Hawkins spoke with Ted Cardenas, Senior Vice President of Marketing, Car Electronics Division at Pioneer Electronics Corp (PNCOY).

Pioneer isn’t just innovating within entertainment and communications as the company is also developing advanced driver assist for both OEM and aftermarket, allowing owners of older cars to benefit from the latest in safety improvements. When asked about his expectations around the timeline for the truly driverless car, Ted framed his analysis in the context of the evolution of in-car GPS systems – an evolution by degrees rather than a binary event.

 

Companies mentioned on the Podcast
  • Alphabet (AAPL)
  • Apple (AAPL)
  • BMW (BMWYY)
  • Fiat Chrysler Automobiles (FCAU)
  • Intel (INTC)
  • Pandora (P)
  • Pioneer Electronics (PNCOY)
  • Tesla Motors (TSLA)

 

Resources for this podcast:
  • Chris Versace – @_ChrisVersace
  • Lenore Hawkins – @EllesEconomy
  • Tematica Research – https://www.tematicaresearch.com
  • Pioneer Electronics – http://www.pioneerelectronics.com/PUSA/

 

Chris Versace Tematica Research Founder and Chief Investment Officer
Lenore Hawkins Tematica Research Chief Macro Strategist
Electric cars not expected to hit the mainstream until 2025?

Electric cars not expected to hit the mainstream until 2025?

We’ve heard quite a bit about the move to electric cars. Heck before its recently approved merger with Solar City, Tesla was essentially just an electric car company. Granted they are beautiful cars, but hardly ones that have hit the mainstream. We’ve seen competitive efforts from Chevrolet with the Volt and Honda is slated to have an all-electric vehicle hit the market in 2017.

It would appear the expected tipping point for this market is sooner than later, but as we’ve often seen in the past with Disruptive Technologies they tend to hit that tipping point later than expected. There are several factors involved including product price points, ample supply of parts to ensure adequate production and that little thing that incentivizes suppliers to produce those parts… something called profits. If we factor that last part into the equation, it’s possible the electric car market will indeed take longer to hit the mainstream.

German automotive supplier Continental (CONG.DE) will continue to post losses with products for electric cars until at least 2019, its Chief Executive Elmar Degenhart told German weekly magazine WirtschaftsWoche.

“The shift from combustion engines to electro-mobility will only massively take off between 2025 and 2030. Sometime between there, the number of combustion engines around the world will peak and then moderately decline,” the magazine quoted Degenhart as saying.

Source: Continental sees no profit from e-car products before 2020: CEO | Reuters