I realize it sounds pollyannish to say this is a great time to be an investor.
That was my first reaction when a longtime friend and colleague -- who’s turned me on to more than a handful of 100%+ winners over the years -- told me it was.
Everywhere you look there’s reason to fear.
The Dow is sitting near its all-time high. A level where it failed to pass twice before (technical analysts call it “resistance”).
Earnings season has, so far, been dreadful. Apple, Intel, Twitter, and dozens more have failed to leap over artificially low hurdles.
But, my friend had a point, it is a great time to be an investor.
You just have to look at it differently than most.
History Is Rhyming
“We’re lucky. We live in the first wave of the electric car age.”
That’s what he said and, after thinking a bit, it really hit me.
It’s dead on.
We are at the “sweet spot” of something really big here and really lucky to know at what stage where at in this major growth cycle.
Consider the past.
The horseless motor carriage took decades to really catch on.
In 1910, about two decades after Daimler, Benz, and Maybach (the money man whose daughter was named Mercedes) got together, in the USA there were only 479,000 cars on the road.
That’s about one car for every 20 people and, again, it took 20 years to get there.
Between 2010 and 2016 the number of automobiles produced and in use expanded exponentially.
By 2016, U.S. auto production passed more than one million a year.
Again, that’s not 479,000 cars to one million. It’s 479,000 in use to one million produced each year.
That’s not exponential growth, it’s world-changing, fortune-making growth.
The catalyst for that growth then was a major drop in prices led by Ford’s Model T.
In 1908 it was priced at $825 for a base model. By 2016 they were rolling out of the factory for $345.
The 59% drop in price led to an explosion in auto sales.
In fact, Ford sold sold more than 734,000 cars in 1916 which was more than was even on the road just a few years before.
Now, that’s happening all over again. Only in electric vehicles.
Not Just A Hippie Pipe Dream Anymore
The biggest impediment to hybrid and electric car sales has been price.
Specifically, battery prices.
According to data compiled by Bloomberg, the average price for one kilowatt hour (kWh) was $1,000.
The Tesla P85D has 85 kWh battery, so you can figure out how prohibitive that would have been a few years ago.
Battery prices have fallen significantly in the last few years though as production methods and designs improve and economies of scale are achieved.
Last year the average cost of a kWh of power is down to about $350.
That single drop would knock tens of thousands of dollars off the price of an electric vehicle.
Lower prices = more sales.
Just look at the latest Tesla, the Model 3. It’s priced at about $35,000.
According to electrek.co, the average cost per kWh for this latest and greatest battery pack works out to about $190.
The price drop has made all the difference.
The Model 3 now has a reported 400,000 orders from people who put $1,000 down payment to get in line to receive their car in, best case scenario, a year or two.
If the battery would have cost as much as $60,000 like it would have earlier in the decade, there wouldn’t be nearly as many people lined up for them.
This is the major reason we believe electric cars are going to be so big.
The Model T proved how significant price decreases can lead to exponentially more sales.
The same thing is happening in electric cars right now.