ITEK ETF: While Tesla will likely never match the mass volumes of these carmakers – Anthony Ginsberg sees Tesla supplying its technology on the IP (licensing/royalties) side to other car makers and benefiting from the explosion of electric vehicle models amongst other car makers …
Anthony Ginsberg, Co-creator of the HAN-GINs Tech Megatrend Equal Weight UCITS ETF (ITEK)
Anthony Ginsberg, Co-creator of the HAN-GINs Tech Megatrend Equal Weight UCITS ETF (ITEK), believes Tesla is increasingly being valued as a technology company, and a growing slice of its earnings will be generated via its intellectual property (IP) in areas of battery technology and autonomous driving.
He says these IP advantages and its battery capacity due to operating the world’s largest battery factory, means Tesla is likely to become the primary seller of such technology to other car manufacturers.
Anthony Ginsberg said: “Earlier this month, Tesla became the world’s most valuable car company surpassing Toyota. With a market cap of $224bn, Tesla is now larger than General Motors, Honda, Ford, Daimler and Harley Davidson combined, and we see its profit margins increasing over the next few years.
“The company is benefiting hugely from developments in battery technology and the direction of government environmental and urban planning policies. In particular, the reduced and falling battery costs, which will drive higher profit margins at Tesla.
“Increased government regulations against pollution creating vehicles and a focus on clean energy is also driving up demand for electric vehicles. Governments are imposing increasingly stringent environmental guidelines for vehicle manufacturers in a bid to combat emissions and meet CO2 targets and reduce congestion, further spurring the development and adoption of a wider range of electric and autonomous vehicles.
“We believe the intellectual property (IP) Tesla has in areas of battery technology and autonomous driving will take a bigger slice of its overall profits. Other car manufacturers will increasingly look to Tesla to help with the development of their EV models. While Tesla will likely never match the mass volumes of these carmakers – we see it supplying its technology on the IP (licensing/royalties) side to other car makers.
“Cheaper and better-quality batteries mean auto companies are using them more, and the cost to the end consumer is falling. The cost of Lithium batteries used in electric vehicles fell 87% from 2010 to 2019 and new combinations of chemistry, design and technology mean the next generation of batteries will offer longer ranges, fewer and faster recharges, wireless recharging and increased output.
“In our view, lower cost batteries mean more car and truck manufacturers are creating electric and hybrid models – an estimated 500 different electric vehicle models will be on the market by 2022, meaning more competition, lower prices, and broadened appeal across different consumer segments.”