Thread by @EnlightnedINV

1/n)
The Electric Mobility dilemma of Legacy vs New-Age

There is no doubt that Legacy Auto businesses might be able to leverage their scale, capital & experience to roll out EVs faster than EV startups..

But does that make them a better investment?

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#Megatrends #investing

2/n)

Historically, disruptive #innovation has always come from outside the traditional bounds of the industry.

From #Apple's iPhone📱 & #Amazon's AWS☁️ to
#SpaceX's Reusable Rockets🚀, the incumbents have more often than not, failed to innovate and/or spot the disruptors.

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3/n)

In case of Electric Mobility though, there's one critical factor that's keeping incumbents in the race: POLICY📜

Since EVs are now a necessity to reduce global #carbonfootprint & control the #ClimateCrisis, incumbents have no option but to cannibalize their products.

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4/n)

If it wasn't for policy, most companies wouldn't release climate pledges and announce #EV products at the rapid pace we're witnessing now.
#ClimateChange has been a known phenomenon for decades now. The only OEM taking & acting on this for long has been #Tesla.

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5/n)

A complete transition from gas guzzlers to #carbonneutral vehicles is no longer a debate. It is an inevitability. And although the the base for all new-age #mobility businesses may be small, the TAM is as big as the entire vehicle stock of about 2 billion vehicles.

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6/n)

While the large sales base of legacy auto companies look attractive, those numbers are deceptive. Simply put, those legacy sales will rapidly decline and will need to be replaced with EV sales. Basically, most of them will be replacing their sales, not increasing it.

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7/n)

For example,
If a company sold 5million gas guzzlers today, over the next decade sales would ideally go from 5million to zero. So just to keep their revenue base intact, they'd first need to sell apx 5million EVs annually within the decade & only then look for growth.

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8/n)

On the other hand,
Every #EV that a company like #Tesla sells, adds to their revenue from day one since they have no legacy sales to replace. Obviously, these new-age companies need to be making products the consumer wants and can afford. Consumer is king after all.

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9/n)

Of course, some auto dinosaurs may have better strategies than most but eventually, gas guzzlers are going to rapidly go extinct & these companies are valued today on their legacy auto sales & cash flows. That is clearly not the best way to price in future value.

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10/n)

Simply put,
For every #EV sold by legacy automakers, there will be a loss of more than one gas guzzler on the P&L.

This is considering their products are capable of matching up to those of leading new-age #auto companies.

Only outpaced cannibalization can succeed.

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11/n)

Today,
New-Age auto OEM's & Ancillaries may be small and may be priced @ "unreasonable valuations" if you wear your traditional investors hat. But majority of legacy auto have no strategy to compete in this disruptive, agile & #tech-savvy world of new-age #mobility.

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12/n)

In fact the only thing the legacy auto lobby has done in the past is spend on marketing campaigns to make disruptors like @tesla & @elonmusk look bad and engage them in controversies that would possibly slow them down. Corporate Bullying at its best.

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13/13)

The world as we know it is rapidly changing and technological #innovation is devouring everything around us. #ClimateChange truly is a disruptive force and the new-age auto entrepreneurs are leading the charge ⚡ to build #sustainable mobilty empires.

Pick em wisely ♻️