Huge New Risk for EV Stocks | I'm Nervous.

hey everyone kevin here many of you know

that i'm a big time investor in electric

vehicles that's because we know that

electric vehicles are going to be the

future of our society but they're not

tomorrow's future

they're like the 2020 to 20 50 and

60 future that means we're just at the

beginning

of this transition to evs now we know

that states like california want to ban

the sale of ice vehicles by 2035

but a that's ambitious and b that

doesn't mean we still won't have gas

used cars on the roads and quite frankly

with an ambitious target

that might get pushed back and the

biggest roadblock for electric vehicles

which is changing my investment strategy

which we're going to be talking about in

this video

has to do with batteries now before we

get into the details and the research

that i've done regarding batteries i

want to give a huge shout out to all of

those of you in the stocks and

psychology of money course

who joined me in a voice chat this

morning where we brainstormed some of

the ideas

for this video i sent out an alert and a

huge thank you to the about 100 of you

who instantly showed up to start talking

about batteries

it was fun look forward to doing that

again in the future check out those

courses

linked down below in that course coupon

code as well all right so let's talk

about this

we know and then this is where i think

it's worth drawing the problem here so

let's just

draw the problem really quick we oh

you gotta love bringing the ipad out

with a pencil okay here here's the thing

electric vehicle growth right now is

expected to

be an exponential growth curve if we

take the average annual compounded rate

of growth between

2020 and 2025

we get about an estimate of a 36 percent

year-over-year

growth for electric vehicles and we

expect this growth rate

to increase as we go along the

exponential curve here so it's really if

i just take the slice here we get about

a 36 percent estimate

for electric vehicle growth sales growth

and this is per bloomberg

the problem with this is we have big

issues when it comes

to batteries you would think that hey if

we're going to grow electric vehicle

demand and sales at 36 that we'd be able

to grow battery

or battery manufacturing capacities at

about that percentage right

well unfortunately the answer to that is

no

take a look at this oops that's weeble

which by the way you can get two free

stocks with weeble when you deposit 100

uh the projected global growth

rate for battery production is only 14.1

percent

the projected annual growth rate for

battery production in china

is 33 so china is expected to grow

at the most appropriate rate to actually

provide the batteries that we need to

support our ev

transition but the world as an average

is woefully behind

part of that has to do with america but

not just

because america is america and we're

behind

on developing batteries but because of

the liberties that we have in america

that actually make it a lot harder for

us to create the facilities and minds

that we need

to create more battery supplane strength

see

usually when i talk about battery supply

shortages

i generally hear people respond with hey

well we can mine in arizona or nevada or

there are

mines in canada we can use or you know

what

we can we can recycle batteries but

here's the problem

we've got to be real about battery

manufacturing it's a very very

complicated process

battery manufacturing is the opposite of

manufacturing a commodity right now

even though batteries should be a

commodity every manufacturer has

different quality different prices

different fire risk different

transportation risk different install

instructions different chemicals

different shapes of batteries

everybody's doing something different

and it's a disaster take a look

at the electric vehicle battery supply

chain analysis

folks are like oh well we could just

mine more right it's not that easy

that's just one piece of the puzzle

we also have human rights violation

concerns regarding the mining of cobalt

and child labor which is also an issue

nickel has also fallen and actually even

lithium ions

have fallen under that same kind of

scrutiny but specifically cobalt is

usually referred to as this

uh as having these human rights

violation concerns

but then beyond actually just mining the

materials you've got to actually

put together or supply the components

the cathodes the anodes the separators

and if you search for separator

shortages right now

you're blown away with battery separator

shortages

it's literally it's not just a supply

chain issue that we're having with chips

right now

it's not just an issue with batteries

but it's all of the parts within

batteries as well

we're not mining enough we have issues

within the actual products

that go within batteries then we have to

manufacture the batteries then we have

to manufacture the battery packs

which tesla is trying to mix from their

production by doing structural batteries

but that's going to create its own

challenges then you've got to actually

assemble the products

which tesla would obviously still do but

so do other electric vehicle companies

then you've got to put together the

vehicle then you get a vehicle but so

the point of

this whole chart here is to say that for

folks who are like hey well we could

recycle batteries well wait a minute

that comes after this whole process the

reality is if we were to

recycle all of the electric vehicle

batteries that existed right now we

probably wouldn't even have enough

batteries

to create the vehicles that we're trying

to create this year

because there just aren't that many

batteries to recycle right now

this is a growing uh growing issue that

we're having and it's getting worse and

worse by the day

and so obviously you can see that the

supply chain process is a very

complicated one and this is not

an issue that can be solved by just

saying well we're going to go mine our

own lithium like tesla suggests

it's also not going to be solved by

somebody like quantum scape going hey

we're

working on a solid state battery great

first challenge with quantum scape is

they don't even know yet what material

they want to use to work with their

lithium metal anode

they're considering sulfides they're

considering ceramics they've had success

in tests with ceramics but you're

talking lab tests not actually

production tests of real batteries

you're talking about

controlled environment lab we don't know

the stability of this solid state

technology yet

and even if tomorrow quantum escape is

like boom we gotta produce battery pack

great how much more does it cost does it

cost 3x the cost of a normal

lithium iron battery that i could get

cheaply from china

right now we import 48 of the batteries

well of the batteries that we import in

the united states 48

of our imports come directly from china

okay we get to use those cheap batteries

here in america to help fulfill our

battery demand

but this creates issues because it's not

just a matter of

coming up with new technology or new

mines it's the fact that

oh my gosh we need batteries at cost

parity to what we can get from china

and we've had so many issues getting

enough batteries that we had

audi halt productions well they in

february halted production of their suv

e-tron

a jaguar halted production of their

i-pace due to lack of battery

materials in their work with lg ken

which is a polish facility

uh that they use uh and it's a south

korean company

and then we also had neo in china halt

their production facility for five days

due to chip shortages

despite the fact that china has been

rumored to be hoarding certain chips in

china

which you would think would be

beneficial to chinese companies yet

neo still shuts down so it's kind of

like wait a minute when we start putting

all the pieces of the puzzle together

we realize we don't even have a clear

picture as to what this puzzle is going

to look like

we've got a disaster we have such a

disaster that the biden administration

issued executive order 14017 to

do a 100-day review and then maybe

address the vulnerabilities of our

battery manufacturing facilities

in the united states or capabilities in

the united states but let's be real

how hard is it to actually get things

done in the united states

when it comes to creating new facilities

consider this

the new york times did an expose on

exactly this the new york times

multiple times has found and reported on

the fact that when we try to create new

battery manufacturing facilities in the

united states

or new mining facilities in the united

states we end up getting

lawsuits upon lawsuits to try to block

companies from actually developing new

mines or new factories in certain areas

because people don't want mines in

certain areas they don't want factories

in certain areas

or they're competitors suing them and

all of a sudden united states companies

get bogged down in multi-year lawsuits

whereas at the same time

china is able to use their communist

might and go or build a new battery

facilities

so we've got a big problem we've got a

massive problem

because we do not have enough batteries

and the question is

what do we do how do we properly invest

to hedge the fact that we do not have

enough batteries

and the rate of growth of battery

production worldwide

especially in the united states is way

too

slow well i mean it's beneficial to know

that

companies like tesla have the might to

be in talks with

multiple different battery suppliers

they can diversify they can use catl

just like

a neo can use catl but they can also

work with panasonic on

in their nevada gigafactory to supply

and make their own batteries here in

nevada

we know that giga texas and giga berlin

will also be manufacturing hubs

and we believe that tesla is also

considering sourcing supplies

from russia to help them with their

manufacturing in berlin

so tesla is trying to do whatever they

can to avoid supply chain interruptions

to their battery manufacturing

but the bottom line is when it comes to

battery manufacturing we

know battery manufacturing takes a crap

ton of money and it takes a crap ton of

skill

which fortunately tesla has but i cannot

say the same thing

about a company like cciv or workhorse

or lordstown motors or fisker or

arkamoto or some of the smaller

companies that are trying to get their

hands on batteries

but maybe can't get the best quality

batteries or even the proper quantity of

batteries that they need

because potentially they get replaced or

sort of blocked out

by massive companies whether that's ford

gm

mercedes bmw or tesla who can offer

massive multi-year guaranteed contracts

to battery manufacturers

and so the first concern i have is that

larger and even traditional automakers

and the larger ones like tesla that are

in evs they're going to have a big

advantage over smaller companies when it

comes to actually sourcing the batteries

that they need

to prevent their supply chains from

being disrupted

even neo though because you think well

hey neo is a big one in china and

they're they're chinese so maybe they'll

get more

more benefits from china maybe china

will soon just kick tesla out

after all they've kind of been laying

the groundwork with their massive fud

over tesla cameras spying on

military installations in china which i

think we all agree is total fun but

tesla's already

working on by setting up chinese

localized servers we know there was a

ton of tesla brake fud when we had a

protester

stomping on top of a tesla complaining

that teslas were low quality but

wouldn't let their vehicle be inspected

by tesla

so we don't even know if what they're

saying is total bull crap or who they

were paid by

or what happened with the vehicle

because we don't have access to the

vehicle

other than electronic logs that show

that the tesla was able to actually

break multiple times prior to an

incident with the vehicle

but apparently the customer's like yeah

well i still don't want you invest

inspecting my car so sorry went on a

little bit of a tesla rampage ramp there

but the point is yeah sure who knows

maybe

maybe china is realizing the same thing

maybe china realizes crap

even though we can grow our battery

manufacturing capacity quickly

we might not have enough for tesla and

our homegrown

ev manufacturers whether that's through

pyd or through the jac manufacturing

plants

neo by extension or directly or x-ping

maybe maybe at some point when tesla

gets their situation sorted out in china

they won't need tesla anymore

so tesla's certainly got a

diversification risk that they've got to

consider as well which i'm sure they do

and this is why we have gigafactories

coming to texas and berlin and we're not

just seeing more pop

up in china and so before i get to my

conclusion i want to say

look i believe that the larger auto

manufacturers like tesla and

the old guard of auto manufacturers are

going to have an advantage

securing the appropriate supply chains

that they need to get the amount of

batteries they need

i believe that creates a significant

risk for smaller companies

i also believe that the entire electric

vehicle industry is going to get bogged

down by

a lack of batteries and that potentially

the ones

most able to get through any kind of

supply chain shortages

are those taking control of making sure

they get enough contracts for batteries

now

but also vertically integrating their

supply chains which is

really the only one really doing that is

tesla right now

we know that because most of the other

companies

whether that's mercedes or bmw and their

partnerships with other battery

facilities

or neo with their partnership with a

catl

and potentially a couple other battery

facilities that they're working on

getting contracts with or have already

gotten contracts with

we know that the bigger more mighty the

company the more likely they are to be

able to solve this problem

and prevent massive issues from a

battery shortage so

how in conclusion how like how do we

invest

what do we do we have a battery crisis

we have a battery shortage it's going to

take a long time to solve

we can't just turn around and start

mining lithium and go yeah we got more

stuff for batteries

there's a whole lot more to this so how

do we handle this how do we invest going

forward

so my take number one

i'm done with options contracts on

electric vehicles now i still have a lot

of call options on electric vehicles

neo tesla cciv but i think it's a

mistake to continue to focus on option

contracts

that's because i strongly believe in the

electric vehicle revolution

but i'm very uncertain about the

short-term time frames

and what kind of bottlenecks are going

to potentially delay

growth in electric vehicle companies

which can be heavily priced in

pre-priced into option contracts but

then not get realized because of

supply chain constraints that pop up and

so i believe that

you know maybe over the next year we're

still okay with the amount of battery

supply we have compared to ev production

but as eevee production ramps and we get

more and more tesla gigafactories we get

more factories from lucid we get more

factories from neo

uh we know that jac in partnership with

volkswagen is planning on releasing or

or

opening a new factory later this year

the more factories we get the more

demand there's going to be on batteries

and so i think there's going to be a

2022 to 2023 risk

of supply chain shortages for batteries

we're going to literally go from covet

supply chain disruptions

port disruptions and chip disruptions

straight into battery supply chain

issues and those are going to take

two to four years to really resolve

themselves

to where we actually have enough battery

supply production

to make sure that we're not hampering ev

growth and so this makes me very nervous

about even long option contracts now i

still have my long option contracts i

still plan to hold them

until probably through the end of this

year

sometime between september and december

is when i'll rotate out of my option

contracts

as long as everything goes according to

my script i mean my plan

i mean my hope i mean my desire of what

happens in the stock market

but we'll see but the point is i am a

little bit concerned

that these battery supply chain issues

are going to

hold back options growth something that

might not be priced into options today

and that there's a big risk in investing

too heavily in ev

related options and so as soon as i can

i would like to rotate my options to

shares the next thing that i want to

consider is

i've got to make sure that i'm not

overly exposed to this battery supply

chain risk because

if in two years we have this massive

battery supply blockade

and it's holding up companies from end

phase from being able to produce their

highly profitable

battery packs then guess what happens

then i lose money on my

ev stocks and my energy stocks

which a lot of solar companies rely

heavily on battery technology so we've

got a whole host of issues related to

battery issues

or a whole host of consequences related

to battery issues

and this is something that i very much

want to pay attention to

and it's very likely going to mean that

when i rotate out of my options i

probably need to

start diversifying more into companies

that are not

solely exposed to battery supply chain

issues

and right now being heavy on evs and

being heavy on energies

uh like end phase that heavily rely on

battery and

and chip supply is is probably not the

best

portfolio balance to have especially if

i'm heavy on calls

again i expect we are going to have a

large ev and tech recovery over the next

six months

as that recovery comes i am going to

rotate my portfolio to shares

but potentially also other companies

outside completely

the battery reliant uh sector so maybe

that means

i start looking at companies that are

discounted sas companies compared to

prior evaluations

who knows but these are things that i'm

going to be evaluating over the next

few weeks to few months so make sure to

subscribe to the channel if you want

more of my thoughts on how i'm going to

evolve my investing strategy

but this is a big concern of mine it's

something i'm paying attention to and i

think it's something you should pay

attention to as well

i look forward to your comments link

down below or in the comment section

down below

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and folks we'll see you in the next

video thanks bye

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