The Expert Podcast

Do you like EVs? Are you against electric vehicles? Are you an old-school gas and fumes driver or are you a greeny and like saving the environment? Whatever your perspective is, there's some things happening that obviously you've heard about - governments, car companies, everybody is pushing to get millions of electric vehicles on the road. And we've talked about this before. Right now the current fleet of vehicles owned by U.S. consumers is about one percent electric plug-in electric - one percent.
Pretty low number. Many influential forces in the automotive industry are trying to get that number higher with the eventuality of having 100% electric. We've talked before about how Washington state wants it done by 2030. Other states are pushing for relatively fast adoption of electric vehicles. We've talked before about how there might not be enough chargers, but what about this? Rivian, which is a new manufacturer of electric vehicles, says the supply chain is not ready yet for batteries. If the U.S. is looking to sell millions of EVs, the supply chain isn't built for that, meaning that there's not enough battery production, not enough battery factories.
All of the manufacturing companies are trying to lock up supplies of raw material, and right now most of the materials that go into batteries are cobalt, lithium, and nickel. Those are the things - sometimes there's other materials - but all the world's production represents under 10% of what will be needed in 10 years, meaning 90 to 95% of the supply chain does not exist. That's no small piece of data. That means that for all of the forces that are out there - government agencies, car companies, electric companies, even environmentally conscious consumers who would love to wave a magic wand and want all vehicles to be electric on the road - whether or not that's an honorable goal or virtuous goal or not, that's not the subject of this video. The question is, even if everybody in the world agreed that yeah, we should be all electric right away, if the manufacturing capacity for the batteries, which is the most important part of the vehicle, doesn't even exist, how you gonna do it?
This is not a small industry. It's not like a mom-and-pop coffee shop that you can open up 20 coffee shops in a week. This is manufacturing batteries at a large scale and the raw materials that go into it. Let's look at one other hypothetical. Let's suppose that magically there were 50 battery manufacturing plants in the U.S. tomorrow. Tesla just opened one up in Texas last week, but let's say there's 50 more of them that magically were permitted, built, constructed, ramped up, employees trained, everything - and that takes years by the way - but let's say magic was done overnight. Are the raw materials available for that kind of volume? Are the raw materials available for that kind of volume? Well, those raw materials - cobalt, lithium, graphite, all the raw materials - I don't know if anybody's measured to see how much of that there is in the world to see if there's enough to make all the batteries that are needed. But even if there is, are there the mining supply chains to do that?
Well, let's look at another comparative supply chain: computer chips for gasoline cars. Computer chips for gasoline cars are a product that has been manufactured at least a decade. Some cars 20 years, they have chips in them. 30 years. So the chip industry has been making computer chips and semiconductors for motor vehicles for, let's just say 15 years - it's more than that, but let's just say 15 years. After 15 years, one small blip in the system - pandemic - threw that whole community of manufacturers out of whack. That whole industry is discombobulated. So now you drive by your local Ford dealer, Toyota dealer, Honda dealer, and there used to be 400 cars on the lot - now there's 40. Because of one supply chain item, which is a chip that's about that big, tiny chip. And now you want to create a new industry to make batteries, which are much bigger than that. The batteries are the size of, you know, suitcases - they're big. And it's an industry that doesn't exist already, and you want to create 90 percent of that industry overnight without even knowing if it's even possible. That could be a problem.
If it is a problem, how does it affect you? Well, who cares? I don't want electric vehicle anyways. Great, no problem. Well, is it? What if your state, like Washington, wants to have no gas vehicles on the road in eight years? What if the price of gas goes up to fifteen dollars a gallon because the petroleum industry stops producing gasoline because there's not enough demand for it? What if mechanics at dealerships that fix gasoline cars stop working on them because there's no market for it? Now what do you do with your gasoline internal combustion vehicle? Those are all questions that you might think it only matters what the government's doing or manufacturers are doing, but it could affect you.
If you do want to buy an electric vehicle, how does the fact that there may not be capacity to build what's called a critical mass available - critical mass means there's enough of them on the road where it becomes a common thing - and there's not going to be a lot of charging stations or repair shops or superchargers or whatever other things you need for electric vehicles. You know, no industry is going to build a lot of support mechanism for EVs until there's a critical mass on the road - a lot of them on the road. And if you buy one, it never gets to where there's a lot of them on the road, you could be stuck with like a white elephant where there's not enough places to charge it where you live or where you visit or where you travel.
Remember Betamax? Sony Beta tapes? Probably not, because VCR tapes became the norm, so nobody's building Betamax recorders or players. Even now, CDs and to some extent DVDs - used to buy a computer and have a CD player, DVD player - now they don't make them anymore. So electric vehicles run the risk of do you put the cart before the horse? Do you build the charging stations, the battery plants, or do you sell the cars first?
In most industries, you build up the demand for the product first and then you fill the demand. If you're trying to force the demand initially, what happens if it doesn't work out? What if the demand changes? And you might think, well, that's something that's pretty solid - there's a demand. Well, is it really? In today's news - this is being recorded April of 2022 - the news is coming out that Netflix is maybe going out of business. By the time you watch this, maybe it found a way out, but subscribers are bailing from Netflix left and right. You know, two or three years ago, you couldn't find a more darling stock internet company than Netflix. They had everything you want - remote movies are not being as popular because nobody wants to go into movie theaters, lockdowns, people want to be at home, digital instant gratification of movies. So Netflix was like, seemed like they were poised to be an ideal product service. Well, now Netflix found itself on the other side of supply and demand.
And with electric vehicles, we're not talking about a digital product that, well, nobody buys it, it's just, you know, it's in the ether. These are actual vehicles that somebody pays 40, 50, 60, 70,000 dollars for, a vehicle that we don't know yet what the adoption rate is going to be. Plug-in EVs have been around for four or five years. One percent of people have them. One percent. When Apple first came out with the iPhone, which didn't exist before, within a year or two it was like 40 or 50 percent of the market because it was demand driven.
Electric vehicles are not getting that same level of "yeah, I gotta have one." Some people are - Tesla, Prius, some people want them - but it's not the same viral craving for electric vehicles like the iPhone or that form factor of a phone. Look, before the iPhone came out, every phone was a flip phone, had buttons on it. Nobody thought that they needed a screen phone. Now everything is - whether it's an iPhone or an Android or any other manufacturers - everything has a screen, nothing has buttons anymore. That form factor is now the way phones are because demand made it happen.
You know, electric vehicles have been out really plug-ins since '14, '15, '16, maybe. You could pretty much buy whatever you wanted. Porsche has one, Prius has one, all levels of the economic scale they have electric vehicles. One percent of them are on the road. People aren't banging down the doors for electric vehicles, even with gasoline prices at five or six dollars. Most new vehicle transactions are gasoline.
So look, this is just an observation. It's not an opinion about are EVs better, worse, environment - that's another issue. The question is really paying attention to what's going on in the market and what are the trends that are forcing EVs. Are going to be a thing or they're not a thing? Put your comments, let us know what you think. This is just one person's hot air opinion of what they're seeing. We'd love to hear more of what you are seeing and what your opinion is on all this. Do you have an EV? Do you like it? Do you regret it? Do you have a gas car and think EVs are, you know, tofu chopping hippies? Let us know what you think. Love to hear the discussion.