There has been a tsunami of special purpose acquisition companies (SPACs) in 2020, with the biggest concentration of those in the ultrahot electric vehicle (EV) and EV supplier industry. An army of companies is racing to quickly get funded, commercialize and become “the next Tesla.”
Tesla “FOMO” has created a mob of copycats all over the world, with many trading at eye-popping valuations on little to no revenue, creating an environment reminiscent of the 2000 Tech Bubble. Every day, a new pundit calls for an epic collapse once this supposed EV bubble pops, but the stocks simply go higher.
In addition to “Tesla fever,” the enthusiasm for EV-related companies has been driven by the election of a Biden White House (which is seen as highly supportive of the industry in the U.S.) and a rapidly recovering Chinese economy where EV sales are booming as the authoritarian government implements huge regulatory incentives to entice citizens to choose an EV.
To be sure, EVs do hold great promise because as much as half of the global auto fleet may transition from internal combustion engines (ICEs) to EVs in the coming 10 to 15 years. Thus, the optimism is not entirely misplaced in our view, it is just that the speculation is unbridled. There will undoubtedly be massive winners and losers from the dozens of contenders in the emerging EV industry, with a chosen few likely to become the next Amazon or Tesla. However, most of these EV companies are likely to come plummeting back down to earth as the market discovers that some of the emperors have no clothes.
In today’s special topic, we aim to give readers a brief overview of this vast and emerging landscape, including laying out the sub-industries, the players involved, their valuations and our opinion on the space.
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