And the next bubble is in... Electromobility!




Most of the companies that we see nowadays rocketing have not produced or sold a single car/truck jet they are more worth than Ford and many other car companies combined. Skyrocketing prices since February while sales have been decreasing, unemployment rate rising and recession entering every country in the world makes this bubble even more visible, and somehow many still don´t want to be the 2020 bubble (let's remember more recent bubbles: 2019 cannabis bubble, 2018 Wework, 2017 Bitcoin…*).  We should focus on what these companies are selling and the profit they are making. Of course understanding the impact of the technology is one big important factor of any technological company, but in the auto industry the factories they use and labor are the main costs that are way bigger as in other industries. In other words, it doesn't cost the same to produce a software than a car. 

While the raise of these kinds of cars is something good, we should not like stock raising without any news and duplicating prices in one week (or less). This has always been a red flag of a possible bubble and when all the electric car companies are suffering the same symptom it is clear what is jet to come. 


Why do I think the raise doesn't make sense? As you may have read in my other post, Tesla is a five product company that will for sure change the car industry, but the truth is that at the moment I don't say "do not buy", I will say "buy at you own risk". The idea of the electric car running in our streets is something wonderful… The use of clean technology in our streets is perfect and we can nowadays buy more than 100 car models (hybrid and electric)... but… even if we have a one million miles battery the economy nowadays is not ready for this kind of cars. You must ask yourself a question: how does an electric car move? Uses electricity: are the electrical companies rising as much as the car companies? No (red flag). How is this electricity accumulated in the cars? With batteries. Are the batteries companies (Samsung, LG, Sony, CATL,...)  rising as much as the car companies? No (red flag). Most of the car parts come from third parties (Webasto, Bosch, Brembo,...), are these companies rising as much as the car companies? No (red flag).



Last but not least: It is all about timing. Worldwide during any recession the amount of car sold declines and the amount of money spent in cars is less, being the luxury and middle segment the one most affected. This means that in the coming year (as long as the recession is here) the amount of people spending 50k in a brand new electric Hyundai instead of the very same petrol car for 20k is going to decrease. Less people buying cars, less money to develop new cars, less money to produce, more unpaid debt.

I am an electro fan, driver and all time Tesla fan, I have had many of these companies when their prices were a tenth of the price now. But the prices don't add up anymore to the company performance. If you nevertheless think that the economic situation is not going to bring the electric car down, maybe you should take a look at companies like CATL, American Manganese, Iberdrola, General Electric as they will be the ones rising once we all drive electric. Same reward, less risk.


* Bubble doesn't mean that the product is not worth the money, or that it will go down back to 0. Bubble mean that the meteoric rise of a product does not rely on any other fact than on “buy it, because it only goes up”.