A simple analysis of this wheel-building movement from an economic point of view.
Editor’s note: This article is from the micro-channel public number “Chi Society” (ID: zhibenshe0-1), Author: SD president.
In this monetary feast, a new round of carmaking has swept across.
Bitcoin has opened the magic box of digital currency, and Tesla is setting off a new round of car building competition. Apple, Evergrande, Baidu, Geely, BYD, Huawei, Xiaomi and others have entered the game. Global capital is focusing on new forces in car building, which is dazzling. The most surprising thing is that the market value of Evergrande Motors, which “everything is ready and only owes cars”, has overwhelmed many traditional automakers and far surpassed its parent company Evergrande Group.
Is this a capital carnival, or is it a car revolution that is breaking out?
This article briefly analyzes this wheel-building movement from an economic perspective.
The logic of this article
First, energy and efficiency
Second, technology and capital
Three, giants and revolutions
01Energy and efficiency
Energy has no distinction between old and new, only efficiency.
A hundred years ago, there were four types of cars running on European city roads. They were horse-drawn carriages, steam locomotives, electric cars, and gas locomotives. From the perspective of market share, the four are evenly matched. Who wins in the end?
As far as cars are concerned, in the next 100 years, it can be said that the world of gasoline cars-the first round of car building. why? These four vehicles represent different energy power: natural animal power, steam power, electric power and oil and gas power. The former two are eliminated because of their low efficiency, while the latter two compete with each other in different fields.
In the factory, the efficiency advantage of electricity is quite obvious; in the aerospace and military fields, oil and gas are still reliable power for aircraft, rockets, and ships; in the field of rail cars, electricity is basically used; in the field of automobiles, electric vehicles are now trying to Challenge the status of diesel locomotives.
In the past, gas turbines won because they used new energy sources, but because oil and gas energy was more efficient. The key is that Daimler, Diesel, Wankel and other engineers continuously improve the internal combustion engine and continuously improve the efficiency of energy conversion.
Economics does not support the argument of new energy or old energy. In this round of car building feast, we should focus on energy efficiency. In addition to power, safety, stability, energy saving and resource availability are all part of energy efficiency.
Solar energy is considered to be a new energy source, but it is the oldest natural energy source, far earlier than mankind. but,The efficiency of human use of solar energy has been low. Today, we again mention solar energy because of the advancement of photovoltaic technology. Photovoltaics improves the efficiency of converting solar energy into electricity.
Coal was first discovered more than 2000 years ago, but its value was not developed until the appearance of steam locomotives. Nuclear energy is now a high-efficiency energy source, but safety has not been resolved, and it is limited to power generation and aircraft carrier power. After the Fukushima nuclear accident, Japan strategically abandoned nuclear and switched to hydrogen fuel. Hydrogen fuel is a kind of clean energy, but the current cost of hydrogen cars is not low.
Therefore, there are many energy sources in front of mankind, such as wind energy, solar energy, animal power, petroleum, coal, natural gas, electric power, hydrogen energy, ethanol, methanol and so on.
Low carbon should not be the only consideration. The only consideration should be efficiency. It is not appropriate to use industrial policies to bet on which energy technology. Even in the battery field, there are lithium batteries, manganese-zinc batteries, lead-acid batteries, and nickel-hydrogen batteries. There are huge differences in density, safety and manufacturing costs between them. The best way is for companies to compete in their respective markets, using dreams as horses, profit as their sense of smell, technology as their strength, and running out of different tracks and advantages.
At present, there is a saying in the market that China’s development of new energy vehicles is a curve overtaking. Which turn? The engine is precisely an internal combustion engine. Now that the internal combustion engine technology is mastered by Japan, the United States and other countries, can China make a detour with electricity?
In fact, the internal combustion engine is a power technology that cannot be bypassed in the short term. We mentioned above that there are many kinds of energy, each of which has different efficiency and advantages, and is used in different fields. Even if electric vehicles solve the problems of battery life, safety and cleanliness, electricity cannot dominate the world. The core power of airplanes in aviation, rockets in aerospace, and ships in oceans still comes from internal combustion engines. Even if the internal combustion engine is so powerful, it cannot be compared with the nuclear power in an aircraft carrier. Even in the post-industrial era, internal combustion engine technology still needs to work hard to break through. The internal combustion engine, especially the aerospace internal combustion engine, is the “crown” in the industrial field. It is the industry’s top technology package, including supercharging, control and various material technologies. At that time, Japan won a breakthrough in the field of automobile engines, and then jumped to the field of aero engines.
In the automotive field, let capital explore freely, looking for electric motors, internal combustion engines, electric energy conversion technology, and shale gas technology. The question is whether oil and gas resources have peaked, and whether internal combustion engine technology has peaked?
The technical history of internal combustion engines and generators is similar, and both are very mature. The track of technology has limits, but technological progress has no limits. For example, the chips are getting smaller and smaller. Currently, 7-nanometer chips can be developed, but there is always a limit. When the chip’s limit comes, other materials may be used, or methods such as improving thermal management and energy density may be used to enhance technical performance.
In economics, resources are assumed to be limited. Maximize the allocation of limited resources, rely on the free marketField and technological progress. It is the technological advancement of exploration and exploitation that oil and gas resources can support the world’s huge industrial system. After entering the 21st century, anxiety about the shortage of crude oil continues to rise, and oil prices continue to rise. In July 2008, the international oil price reached its peak, rising from US$19 per barrel in 2002 to US$145. China’s new energy strategy is also proposed in this context.
However, oil prices fell after the financial crisis. By February 2016, international oil prices fell to a historical low of 27 US dollars a barrel. An important reason for the decline in oil prices is that the shale gas revolution broke out in the United States, and the United States has achieved oil self-sufficiency and transformed from an original importer to an exporter.
Is shale gas technology important? At present, the total amount of proven shale gas resources in the world is equivalent to the sum of coalbed methane and tight sandstone gas resources, and equivalent to conventional natural gas reserves. China is also rich in shale gas. In other words, as long as shale gas technology advances, the adequacy rate of oil and gas resources remains high.
At present, the price of shale gas in the United States is higher than that of Saudi Arabia and Russia, but it has become a sword that lies above global oil and gas prices. As soon as international oil prices touch the profitability of U.S. shale gas prices, they fall. The international oil price crash in 2020 was also caused by the “Three Kingdoms Kill” staged by Russia, Saudi Arabia and the United States. Russia hopes to maintain production capacity and oil prices at the median, that is, below the profitability of US shale gas, above the profitability of its own oil companies. Saudi Arabia hopes to substantially reduce production and raise prices to maximize profits. The United States hopes to raise prices above the profit line of shale gas. As a result, the three failed to reach a consensus.
Constrained by the anti-monopoly law, American oil companies dare not openly collude with Saudi Arabia and Russia and can only rely on technology to suppress them. This is the pressure of market and technology colluding with international oil power.
Petroleum resources are limited and not clean; power resources are also limited and not clean. Generally speaking, if half of the world’s cars are replaced by electric vehicles, the demand for electricity will increase exponentially, the consumption of coal and oil will also increase significantly, and nuclear power plants will also expand significantly. To be smaller, the cobalt used in lithium batteries is also limited. The domestic Tesla battery is a lithium iron phosphate battery, which is characterized by good safety, low cost, but low density and insufficient battery life. The ternary lithium battery has a higher density and a stronger endurance, but its output is limited by the core material cobalt.
Cobalt is a rare metal. The current global proven cobalt ore resources are 25 million tons, the reserves are 6.88 million tons, and the annual mining volume is less than 150,000 tons. New energy vehicles have pushed the price of cobalt more than ten times in a few years. Why can’t the amount of cobalt mined keep up? The main reason is that the global distribution of cobalt resources is not market-oriented. More than half of the world’s cobalt resources are distributed in Congo (DRC), and most of the cobalt in the international market is exported from this country. However, the continuous war in the Democratic Republic of the Congo and the unstable political situation cannot guarantee a stable market supply, let alone technological progress. In addition, Russia, Canada and Australia, which are relatively rich in cobalt ore, restrict cobalt exports.
This is the bottleneck of lithium batteries. In recent years, in order to break through the bottleneck, Terras has gradually jumped to the nickel technical track. In the ternary lithium battery, the proportion of cobalt is continuously reduced while the content of nickel is increased.
The petroleum used in internal combustion engines and the nickel, cobalt, and manganese in the ternary lithium battery are all limited resources. All need to improve the allocation efficiency through free market and technological progress, such as shale gas technology and cobalt-free high-nickel technology routes. Perhaps technological breakthroughs in batteries are more imaginative than petroleum.
In short, we need to focus not on the old and new energy, but on the technological innovation in the free market-energy efficiency.
02 Technology and capital
The real opportunity for this wheel-building movement is in fact driverless.
Even if the effective battery life is increased to 1,000 kilometers, there is nothing amazing about electric vehicles compared to cars. Of course, this does not deny the value of electric vehicles. If the battery’s effective battery life is increased to this level, and can solve the safety and pollution problems, this is a remarkable technological advancement. Traditional automakers have to face new challenges head-on.
However, if that’s all, this wheel-building movement is not revolutionary, users just have one more choice. This is difficult to arouse the interest of users and capital. This round of car building movement should be an electric car dance sword, intended for driverless.
The imagination of car-making feast will be unmanned in the future. However, unmanned driving is the cutting edge of artificial intelligence. Currently, no company, including Tesla, Google, Apple, and traditional car manufacturers, has mature and reliable technology. Some electric car manufacturers, which have nothing to do with driverless driving, also wear this hat to sway in the capital market.
This round of car-making feast is basically a capital feast, and to be precise a monetary feast.
In history, the eve of every technological revolution attracted a large amount of capital, and capital promoted technological innovation. A typical example is the railway revolution in the second half of the 19th century. At that time, the US stock market was mostly railway stocks. Many financial crises were triggered by the collapse of the railway investment bubble.
This time, perhaps more exaggerated than any time in history. Since the 2008 financial crisis, global currency has been severely over-issued, and a large amount of capital has been circulating in the financial market. Especially in 2020, large-scale capital will gather in the real estate market in big cities, Moutai, Bitcoin and global technology leading stocks, and the capital market will be highly polarized.
In January 2021, Evergrande Automobile received 26 billion Hong Kong dollars in financing, the stock skyrocketed, and the total market value exceeded 600 billion. Evergrande Motor has not yet landed, and its market value is close to three times that of the parent company Evergrande Group. At the same time, Tesla’s market value far surpasses Toyota, BYD surpasses Volkswagen, and NIO surpasses Daimler. But the former’s car sales and profits are far inferior to the latter.
WhyWhat about capital getting together to build new forces?
In the year of the pandemic, currency oversupply, asset prices and commodity prices rose, currency depreciation, and risk aversion in global capital markets rose sharply. Where does capital go to hedge? For example, houses in core areas of big cities, leading global technology stocks, and leading consumer stocks. This is like the large-scale melting of Arctic glaciers and rising sea levels, and people are going to the highest places to avoid danger. Even if the end of the world comes, the person at the highest point can survive to the end. As long as the world is still there, they are still the strongest. If you can still bet on the future technical direction, it will undoubtedly win in chaos.
Investing in new powers to build cars can eat the currency dividend of new energy in the short term, and the technology dividend of driverless in the long term.
The main purpose of the new forces to manufacture electric vehicles instead of fuel vehicles is to reduce the difficulty of building vehicles, bypass the threshold of engine, and reduce the difficulty of supply management for vehicle manufacturing. Industrial policies also have this tendency to a large extent, providing a large amount of financial subsidies and credit support for electric vehicles. Beijing, Shanghai, Guangzhou and Shenzhen relax new energy licenses and encourage users to purchase new energy vehicles. The Biden administration of the United States launched a trillion-dollar Green New Deal, which also heavily subsidized new energy. Stimulated by subsidies, short-term efficiency gains have driven stock prices to surge.
Bao Tuan often collapses due to liquidity shrinkage. If the Fed ends its easing cycle in the second half of 2021 and shifts to mild tightening, the polarization of the capital market will be eased, and more funds will return from new energy auto stocks to short-term valuable investment targets.
Supporting the stock price of new automakers is the expectation of future driverless driving. This complex technology is composed of a combination of chips, operating systems, sensors, big data, and artificial intelligence. Tesla’s unmanned driving is mainly assisted driving. It is still unknown how far away the real unmanned driving is from us. This is the risk of investing in new powers to build cars.
Through the capital feast, what we need to pay attention to is the growth of automakers in driverless driving. The core technology of traditional automobile manufacturers is vehicle manufacturing, engine and gearbox, while electric vehicles are vehicle manufacturing and battery technology. The core technology of driverless cars also needs to add chips, operating systems, artificial intelligence and big data processing. The electronic control unit will be greatly increased, and the number of lines of code of the whole vehicle will reach hundreds of millions.
The difficulty of unmanned driving is the accumulation and intelligent processing of large amounts of driving data. In this regard, Google is ahead. Google’s driverless cars have accumulated a lot of driving data and have caused 11 minor accidents in the past six years. This result is still satisfactory. Apple put 62 driverless test vehicles on California public roads in 2018.
Tesla’s advantage is that it has large-scale cars and users accumulating relevant data in real time. Although only assisted driving can be activated at present, although “people” are sometimes identified in the cemetery, it helps to improve its technology. Tesla’s autopilot system uses machine vision technology to collect vehicle cycles through cameras, millimeter wave radar and other components.