Many folks know that I’m a car guy. I even have a collection of sports cars at my Florida home. So, you can imagine how excited I was for the IAA Mobility 2021 event in Munich last week. Every year (with the exception of 2020), well-known auto companies like Volkswagen AG (VWAGY), Ford Motors (F), Toyota (TM), BMW and Audi unveil their latest automobile innovations. This ranges from fancy sports cars to hybrids to electric vehicles (EVs).
This year, the auto giants did not disappoint. For example, Volkswagen’s fully electric car, ID. LIFE.
But cool cars aside, there was another running theme during the IAA Mobility event: concerns over the growing chip shortage.
The reason why the chip shortage is such a problem for the auto makers is because new cars need more chips. For some perspective, a Ford Focus uses roughly 300 semiconductor chips, but a Mach-e utilizes almost 3,000 semiconductor chips. In other words, the EV boom is exasperating the global semiconductor chips shortage.
The global chip shortage has forced auto manufacturers to either reduce production or shut down plants completely in North America and Europe. In fact, 17 plants in Michigan, Kentucky, Kansas, Mexico, Canada and Germany have been impacted significantly by the shortage. Ford Motors and General Motors (GM) have both temporarily shuttered plants this year. Analysts anticipate that about four million vehicles will not be produced this year, which totals approximately $110 billion in sales.
Given this, I was very interested to hear what some of the big auto executives had to say at an auto show in Munich last week about the chip shortage. And boy, they did not hold back.
For example, Daimler CEO Ola Lallenius said, “Several chip suppliers have been referring to structural problems with demand. He also noted that “This could influence 2022 and [the situation] may be more relaxed in 2023.”
BMW CEO Oliver Zipse commented that “the general tightness of the supply chains will continue in the next six to 12 months.” Volkswagen CEO Herbert Diess said, “The Internet of Things is growing and the capacity ramp-up will take time. It will probably be a bottleneck for the next months and years to come.”
Tesla (TSLA) is supposedly trying to work around the shortage by reprogramming its EVs to utilize less semiconductor chips, but, unfortunately, its Shanghai plant still had to curtail production due to a lack of semiconductor chips. Ford Europe Chairman Gunnar Hermann estimated that the chip shortage could continue into 2024, adding that it’s difficult to pinpoint exactly when it will end. Regarding shortages, he said, “It’s not only semiconductors,” and added that lithium, plastics and steel are all in relatively short supply.
As a result, Diess believes that it was “impossible” for the company’s electric transformation to happen any faster. He stated, “Electrification is the way forward. There’s no other alternative. No competitor is serious about any alternatives anymore.” However, Diess seemed clearly frustrated with the lack of lithium-ion batteries now available, which is slowing its ability to launch new EV models.
With more EV models now available via VW Group’s Audi, Porsche, Seat and VW brands, its Bentley and Lamborghini brands may have to slow their upcoming EV models due to a lack of lithium-ion batteries. In 2021, VW Group has sold more EVs in Europe than Tesla, but it has lost market share in China, largely due to the semiconductor chip shortage. Overall, the electrification of vehicles may be characterized by perpetual shortages for several years, due to the lack of semiconductor chips as well as lithium, nickel and cobalt.
Even with the semiconductor shortage, the big auto companies do not seem to be backing away from building the batteries that will go with the electric vehicles. Case in point: Toyota is planning on spending $9 billion over the next decade to build factories for electric car batteries as it ramps up to sell two million EVs by 2030. Although Toyota has not specified how many battery plants it would build, it did say it planned 10 EV production lines by 2025 and would eventually have 70 EV production lines. Naturally, one factory can have multiple production lines.
Now, building an electric vehicle battery is no easy feat, which Masahiko Maedo, Toyota’s CTO, is finding out firsthand. The company is dealing with development challenges, in particular, the solid-state battery’s lifespan. Maeda added that Toyota was seeking to sell an EV with a solid-state battery this decade. He commented, “We cannot be optimistic yet. There are a lot of difficulties we are facing,” and concluded by saying, “We are looking for the best material for solid-state batteries.”
Interestingly, Ford, GM and Volkswagen have also said that they plan to build their own battery factories. These future battery plants will most likely be built in conjunction with their battery suppliers.
So, while automakers try to work through the chip shortage, it looks like there’s a battery battle brewing. As an investor, if you bet on the right battery maker, you could make a lot of money down the road. I believe I have found that winner, and it’s likely one you wouldn’t expect. I recommended this stock in Growth Investor just last month, and with the stock still trading below my current buy limit, now is an excellent time to jump in.
I should add that I also have several semiconductor chip companies that are well-positioned to benefit from the current chip shortage. So, my Growth Investor subscribers have a unique opportunity to benefit from the EV trend and the chip shortage.
P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.
On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.
What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.
Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.
It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.
It doesn’t matter if you have $500 in savings or $5 million. You can benefit from the information in this video.
It’s free to watch, and by doing so, I know you’ll be ahead of everyone else struggling to understand what is really going on.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
General Motors (GM), Volkswagen AG (VWAGY)