Is Porsche about to kill off Tesla? How disruptive tech works
By Tim Worstall
10:49, 28 December 2022
At one level the idea that Porsche (P911) is about to kill off Tesla (TSLA) is ridiculous.
No, the manufacturer of toys for middle-aged hairdressers is not going to ruin a mass market car manufacturer.
It could be true if we considered the other Porsche (PAH3) as well – what used to be the parent of VW (VOW3). Combined, they might just be a danger as and when they roll out the EV versions of all of their vehicles. But even there, who do we think is going to buy a Skoda in preference to a Tesla?
What is your sentiment on TSLA?
Porsche (P911) share price chart
Disruptive technology
But in another sense, there’s a very good chance that Porsche really is going to shaft Tesla. This is not in terms of sales, or market competition for which brand of car we buy.
Rather, there’s ‘something’ going on that is going to cause considerable rethink about whether we want to have an electric vehicle at all. And that is, obviously, a threat to the Tesla vision of the future.
This is not, by the way, to issue some doom and gloom warning about TSLA. It is, rather, to point out a hugely important thing about investment decisions. Technological changes can seemingly come out of nowhere. Techs can blindside, markets to disrupt what otherwise would appear to be entirely sensible business plans.
The particular ‘something’ I'm referring to here is this:
A more important point about this being:
Tesla (TSLA) share price chart
While that’s before taxes, current European prices for petrol are about $2 a litre. And, at current energy prices, internal combustion engines are cheaper to run when you factor in electric cars are both more expensive to buy and also have much worse depreciation rates.
The point here being not that EVs and petrol are now running head-to-head in costs. Rather, that we've now got at least the beginnings of an entirely rival technology to EVs, one that still meets climate targets.
This has always been logically possible, if wind and/or solar gets cheap enough then it would be economically viable to use that to drive electrolysis plants which produce green hydrogen. Once we've got that then it's both cheap and well known how to make all the more complex hydrocarbons. We've known, as a civilisation, how to do this for a century at least.
Who suffers from disruption?
Now, my point is not, in fact, that this tech is about to sweep Tesla away. Quite apart from anything else I think that Tesla has – against all the odds – managed to get to the mass manufacturing stage where it’s going to be around for decades. OK, fine. But my point is still twofold for us as either investors or traders.
We've, once again, a new tech here which is going to upset a lot of business plans. That new tech might not succeed and maybe it might do so. But we've got to think about it simply because, if it does, it shafts so may other business ideas out there.
So, who might suffer if this wind power (or solar)-to-hydrogen-to-synthfuels works?
Well, one idea is that the marginal EV producers aren’t going to gain a foothold. So, Rivian (RIVN) or Nio (NIO) might well find their plans don’t work out. Or, in fact, they get shafted.
Rivian (RIVN) share price chart
…and who might benefit?
But that's not quite enough, we'd also like to think about who might benefit from this.
Well, assume that aviation has to change to batteries (actually, a ludicrous idea for planes but still). Suddenly that century and more of jet engine experience inside Rolls Royce (RR) is worthless. Airbus (AIR) has some problems as plane design would have to be hugely different too. It’s not just that all that accumulated experience in those companies becomes less valuable. It’s also that the grand insights that make this new world of battery powered planes work might not be within either of those companies. In fact, we’d probably bet that it wouldn’t be.
Rolls Royce (RR) share price chart
Now work this the other way around. We’ve got a way of making jet fuel that is carbon neutral. OK, it’s a bit more expensive than the current method but it is carbon neutral – so, therefore, it will be allowed to continue.
So, who benefits from this new system of making jet fuel? It’s not necessarily the people who make the fuel. That’s likely to become a manufacturing process at normal manufacturing margins. But the people who own the secret sauce to make good use of jet fuel – airframe manufacturers, jet engine manufacturers – become very much more attractive investments. Or, as this realisation spreads through the markets, trades.
Given the time of year this is when we’re all supposed to sit back and think a bit. So, here's that big though for the coming year – heck, decade. Technology does indeed change over time. So, we’ve got to think about which techs are likely to change, keep an eye out for which are, then think through who would benefit from their doing so.
So, Porsche has just demoed a windmill to carbon neutral petrol station. OK, who gains from that? My answer would be Rolls Royce – those jet engines get to keep rolling. Now, I might be right or wrong about that but the logic stands. This also being one of the things that makes investing – trading – so interesting. It’s not just that the major beneficiary isn’t even involved in the tech change, they’re not even in the same industry. Isn’t that fun?
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