Ferg's Finds
This is a short weekly email that covers a few things I’ve found interesting during the week.
Article(s)
I came across this in one of my bookmarked folders, and it's just as good on the second read: Contrarianism; ESG investing; coal; and climate change.
Podcast/Video
Yes, this is a paid podcast, but its 100% worth it: The Grant Williams Podcast: Shifts Happen - Luke Gromen.
Quote(s)
"People are all alike in their promises. It is only in their deeds that they differ.”
- Moliere
Tweet
When ideological employees programme an AI, the results get interesting.
ChatGPT was similar, although it was corrected following the below going viral.
GPT guidelines now say it should "provide this argument without qualifiers."
Charts
I've continued to collect these consolidation charts after coming across this article: 15 Charts that Disturb Us about American 'Capitalism' and soon after reading Jonathan Tepper's book The Myth of Capitalism: Monopolies and the Death of Competition (which I highly recommend).
Something I'm Pondering
I’m pondering the levels of demand for EVs moving forward.
Both Apple scrapping its EV program and Mercedes slamming the brakes on its own EV manufacturing have been announced in the last few days.
Apple to Wind Down Electric Car Effort After Decade long Odyssey
In the end, Apple was facing a cooling market for EVs. Sales growth lost steam in recent months after high prices and a lack of charging infrastructure discouraged mainstream buyers from shifting to all-electric vehicles.
Domestic EV sales growth will decelerate to 11% this year from an estimated 47% growth rate in 2023, according to a forecast by UBS AG.
Mercedes-Benz delays electrification goal, beefs up combustion engine line-up
"It's true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand," General Motors CEO Mary Barra said on an earnings call Tuesday.
One company I've paid close attention to throughout this whole EV saga has been Toyota.
Five years ago, I noticed they were quietly refusing to join the full EV sector, arguing Hybrids made more sense.
Take this 2019 article: Toyota Has a Surprising Explanation for Not Selling Any Electric Cars (Yet)
Toyota is able to produce enough batteries for 28,000 electric vehicles each year-or for 1.5 million hybrid cars. Per Toyota, selling 1.5 million hybrid cars reduces carbon emissions by a third more than selling 28,000 EVs. Put another way, the company is generating a more positive environmental impact by selling many times more gas-electric hybrid cars than it would by selling far fewer EVs (and therefore, far more fully gasoline- or diesel-powered vehicles), while also providing its customers more practical vehicles (because of no range or charging anxieties) at more affordable prices. There are only so many batteries to go around, after all.
Toyota has side stepped the whole EV price war by sticking with hybrids (EVs where only 0.92% of sales in 2023), and Toyota forecasts 10% rise in profits this fiscal year.
Take this, which is supposedly a leaked dealer document about the brand's electrification strategy lays out exactly why.
Yes, BYD knocking at $11,000 Seagulls with sodium-ion batteries has my attention (BYD breaks ground on its first sodium-ion EV battery plant).
Louis-Vincent Gave has me even questioning that story with this piece he made available after his Macro Voices interview: The EV Implosion
Part of the reason the market for EVs has become saturated so quickly may be that demand for electric vehicles is starting to stall, both in China and around the world. In China, while EV sales to state entities—provincial governments, municipalities, state-owned enterprises—have remained strong, sales to individuals have been disappointing, as Chinese households appear to have turned more towards hybrids. This is probably because few among China’s urban population—the class that can typically afford an EV—own designated parking spots where their cars can be charged.
Takeaway?
My take hasn’t really changed since I wrote this piece: Fantasy Demand vs Real Demand
Where I broke demand down into three categories:
Fantasy demand (policy driven extrapolation, with wind, solar and EVs).
Knowable demand (Operating nuclear reactors + those under construction).
Ignored/inconvenient demand (Fossil fuel demand, particularly coal).
It should be no surprise to anyone who has followed my work that all investments are in industries with knowable and/or ignored/inconvenient demand.
I hope you're all having a great week.
Cheers,
Ferg
P.S. If you’re interested in my story and why I started this Substack, you can read the story here.
What a great article Ferg, thanks for sharing. Immediately got me thinking about whether you ever had Lyall on Crux, and it seems that you did, must have been before I joined.
I’ll be watching that interview now, if anyone else is interested here is the link.
https://youtu.be/kEbeAmlKfYA