The real reason the electric vehicle revolution is so hot
Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.
🔌 The frugal fast-charging fantasy 🔌
The Buy/Sell/Hold Analysis
Over the last few months, three big U.S. electric vehicle charging companies have announced multibillion-dollar reverse mergers to take themselves public. In the latest, Volta Industries said Monday that it will go public at a value exceeding $2 billion and walk away with $600 million in cash to build out its charging network. It is part of a massive expansion of EV charging that is underway — one that, according to McKinsey, will grow to as many as nine million U.S. charging points by 2025.
The public consensus about our EV charging future — from industry experts, analysts, and investors — is unusually unified: What we pay for our electric fill-ups is modest and will continue to be, making the prospects of EV ownership much more affordable than the gasoline-propelled past. This is almost certainly true — but only for the next few years. Currently, charging companies supply electricity as a loss leader, since EVs cost considerably more than the equivalent conventional vehicle. While establishing their market, these companies must more or less give away the electricity in order to get people to buy the vehicles and begin building charging brand loyalty. It’s a version of the freemium model — cheap until you are hooked.
But beginning around the middle of the decade, increasingly cheap batteries will bring down EV prices, and the vehicles will begin to cost the same or less than their conventional cousins. EV sales will naturally rise, and they may even go mass-market. At that stage, charging station proprietors will be liberated to raise the price of an electricity fill-up. And they will do so.
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That’s why charging company SPACs are worth $2 billion-plus valuations today: Like broadband, streaming, and cellphone companies today, charging will be a good business, earning high profits to fill up your EV. It’s true that the future of EV ownership will look simpler and cheaper, since electric vehicles contain relatively few parts. But the “fill-up,” as we have come to call buying gasoline, is almost certainly going to cost about the same.
EV fill-ups will probably continue to be cheap for slow, “Level 2” charging — giving you 20-to-40 miles of added battery during the hour you plug in while having a bite at a nearby restaurant or going shopping. But if you want to be at 80% of your battery, and don’t have a big chunk of your day to wait, you will opt for fast-charging, and that is where you will pay the big bucks. As evidence, look no further than Europe, where EV sales are the highest in the world. One widely dispersed charging network is Ionity: When you charge your 75 kWh EV to 80% of capacity from 10%, it will cost you roughly $50, a third cheaper than gasoline, say, in France, and around the same on average as filling your whole tank in the U.S.
Volta currently has about 2,000 chargers at some 500 sites in 23 states, and now has the money to add a lot more, including 100 fast charging points this year alone. Tyler Lancaster, a principal with Energize Ventures and a lead investor in Volta, told me that under the startup’s current business model, it earns its money selling digital advertising that motorists watch on screens while they are filling up. In the future, he said, Volta will raise prices for fast charging, but only a bit. “Fast charging won’t be free, but it will be priced modestly per kWh,” he said.
Lancaster disagrees with my thesis that fast-charging prices are likely to be modeled on the tank of gasoline. The argument is that, in most cases, people will charge up at home while they sleep at night, while parked at work, or while out on errands. But think of how people really behave: Suddenly, you realize you’re late for a meeting, late to drive the kids somewhere, or (before the pandemic) late to get to work. You forgot to fill up the car. Without much of a thought, you zip down to the gas station, pump a bit of gas, and you are on your way. That is the EV future — a frequent demand for fast charging, supplied at a premium.
— Steve LeVine, who also writes The Mobilist, a blog about the future of batteries, electric cars, and driverless vehicles
⚡ Shopify transcends its platform. The Canadian company wooing merchants away from Amazon and helping small businesses pivot to e-commerce announced on Tuesday that retailers would now be able to take payments using its Shop Pay checkout experience on Facebook and Instagram. For Shopify, it’s a compelling pitch to brands and business owners that advertise on social media. As for Facebook, expect the social media giant to wield the feature as a weapon in its ongoing fight with Apple over its new privacy features, bolstering its claim that Apple’s rules will ultimately hurt small businesses. Buy.
⚡ The beverage industry is running dry. Dutch brewing behemoth Heineken announced Wednesday that it had a net loss of roughly $130 million last year, selling 30% less beer in the last three months of 2020 compared to the same period in 2019. The company also plans to cut 8,000 jobs across the business; in a statement to BBC, it cited pandemic restrictions and bar closures for its sales dip. Coca-Cola has similarly felt a winter squeeze: According to the Wall Street Journal, the beverage giant saw revenue fall 9% in 2020, with worldwide volumes dipping 3% in the fourth quarter. Early vaccination efforts may have caused a momentary sigh of relief across business at large, but the light at the end of the tunnel is still a ways away for industries dependent on restaurants, offices, schools, and stores fully reopening. Sell.
⚡ SpaceX’s intended cash cow will leave beta this year. On Tuesday, Elon Musk’s space transport company began accepting $99 preorders to sign up for Starlink, its ambitious internet service satellite constellation that launched a public beta in October. SpaceX plans for the project to span 12,000 satellites by 2027 and bring in annual revenue of over $30 billion by 2025, in the best case scenario effectively bankrolling the company’s lofty (and expensive) goal of reaching Mars. Over 10,000 customers signed up for the beta within three months of launch according to CNBC, so there’s at least a proof of concept fueling its speedy transition from testing to release. Buy.
⚡ Twitter and Facebook rush to copy Clubhouse. Soon after Twitter and Facebook announced earlier this month that they were mimicking Substack by respectively acquiring and developing their own newsletter products, both companies jumped at the chance to copy another buzzy startup: Clubhouse, the audio chat social app, which is red hot after recent appearances from Elon Musk, Robinhood CEO Vlad Tenev, and Mark Zuckerberg himself. Earlier this week, Twitter began expanding the beta rollout of Spaces, its version of the live audio social experience that Clubhouse is making popular, and on Wednesday, the New York Times reported that Facebook was developing its own version of the product. Seems like the only innovating the social media incumbents are capable of these days is hitting copy and paste. Sell.
📈 The Number: 61%
That’s the projected decrease in Chinese Lunar New Year travel compared to 2019, reports CNN.
China’s Ministry of Transport is predicting around 1.15 billion trips during the new year travel season, which lasts about 40 days and starts around two weeks before the Year of the Ox kicks off on February 12. That would make the travel figure for this Lunar New Year the lowest since the government began to release official statistics in 2003. Traditionally, the season is marked by lots of travel, particularly from city-based workers heading back home to celebrate with family. But this year, the government is discouraging “nonessential” travel.
In 2020, the arrival of the Year of the Rat coincided with a pivotal moment in the early spread of the coronavirus: A vigorous travel season was well underway before Wuhan was locked down just before Lunar New Year’s day, and many were stranded far from their jobs as restrictions kicked in. This year, a variety of national and local restrictions and rules — ranging from proof of a negative Covid-19 test to two-week mandatory quarantines — aim to prevent a sequel. But for many Chinese, the holiday is the only time of year they are able to reunite with kin — “the equivalent of Thanksgiving, Christmas and New Year’s Eve combined,” CNN notes. Not surprisingly, many are deeply unhappy with the restrictions. One social media user groused at the government: “What are your brains made of?” Hopefully, by the time the Year of the Tiger begins in February 2022, we’ll all be feeling more celebratory.
— Rob Walker
📖 Marker Read of the Week: How a shadow army of ghost kitchens took over America’s restaurants.
🔎 Marker’s New Fixation 🔎
If you’re among the 96 million people who tuned into last Sunday’s Super Bowl XLV, chances are high you saw at least one of the many commercials plugging Paramount+. The revamped version of the CBS All Access streaming platform is set to launch March 4, and as a product of ViacomCBS, its recurring Super Bowl ads featured a motley crew of the company’s intellectual property and real-world talent hiking up “Paramount Mountain”: Dora the Explorer, Jersey Shore’s Snooki, Beavis and Butt-Head, Survivor’s Jeff Probst, and Patrick Stewart, to name just a few. No disrespect to Sir Patrick — I am the namesake of Star Trek’s Jean-Luc Picard, after all — but although the ad did feature some contemporary celebrities and characters, it largely read like a Wikipedia page for mid-tier pop culture icons from the 90s and 2000s. Paramount+ is daring to answer the question, “What would Peacock look like without The Office?” Unfortunately, it looks like a confused and lethargic attempt to woo audiences by half-heartedly pointing to shapes and figures we recognize but which no longer evoke an emotional response. ViacomCBS may hope its platform’s copycat name can ride on the coattails of Disney+, but Paramount lacks Disney’s name recognition, storied IP, generation-spanning devotees, and, crucially, a sign that it’s willing to create new, exclusive content like The Mandalorian that drives genuine hype. Until it does, it’d better pray that viewers already signed up for some combination of Netflix, Disney+, Amazon Prime Video, and HBO Max are willing to dish out for yet another streaming package just to see the same Beavis and Butt-Head videos they’ve been watching on YouTube for years.
— Jean-Luc Bouchard, Senior Editor, Marker
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