Electric Vehicle Dynamics: Tesla’s Rise, Toyota’s Stance, and What Investors Need to Know
Tesla sold 1.8 million full EVs in 2023, a 31% increase over 2022. During an event in 2020, Elon Musk stated that Tesla would develop the production capacity to eventually produce 20 million EVs each year before 2030. To put that level of production into perspective, the entire global auto sector currently produces 70-80 million vehicles per year. Musk’s 20 million vehicle prediction by 2030 would represent twice the production volume of Toyota, which produces 10 million cars today.
Tesla is not the only automaker with massive EV growth. Chinese auto company BYD sold more than 3 million EVs in 2023. The automaker sold 1.6 million full EVs during the year, which is less than Tesla’s full EV total. However, BYD managed to increase its full EV sales by an impressive 72% in 2023 compared to Tesla’s 31% sales growth over the same period.
Market research firm Rho Motion reported that 13.6 million EVs were sold globally in 2023, with 9.5 million sold being full battery electric vehicles. Rho Motion is forecasting a 25% to 30% increase in EV sales for 2024.
Forgotten in the global automotive EV discussion, however, is Toyota. While selling fewer than 100,000 full EVs in 2023, the company managed to sell 3.1 million hybrid electric models last year. While Musk believes full EVs are the future of the automotive industry, the Toyota chairman Akio Toyoda recently predicted that full EVs will reach at most 30% of the market. Toyoda believes hybrid cars, hydrogen fuel cell vehicles, and internal combustion engine vehicles (ICE) all will play important roles in the future global automotive industry.
It is easy to dismiss Toyoda given the volume of news and social media engagement emphasizing the importance and credibility of EV-makers like Tesla and BYD. However, investors and those whose job depends on understanding the future direction of the automotive category cannot afford to ignore the chairman of the largest car company in the world, which is also the automaker often considered to be the best car company in the world until Tesla became a household name.
For those disagreeing with Toyoda, one must question their reasoning for believing that he might be wrong? According to Automotive News, Toyoda has stated that “there are a billion people in the world living without electricity.” How will these people afford and utilize expensive electric vehicles? Do the Toyoda doubters disregard the reality of these one-billion people?
Being totally sure on issues with a strong ideology, turns you into a lousy thinker. - Charlie Munger
Yet, Toyota also seems committed to being in the race to supply full EVs for the potential 30% of the automotive market the company’s chairman believes might exist in the future. Toyota actually has strategic plans to sell 1.5 million full EVs by 2026, and 3.5 million by 2030.
How should investors think?
To determine the auto company future winners in a rapidly evolving automotive landscape, investors need to answer three fundamental questions.
“Do I believe Elon Musk about the future of the automotive sector?”
“Do I believe Akio Toyoda?”
“Is there another credible auto industry future view that I have not considered?”
What is most important for investors to avoid, is what Charlie Munger described as being “passionately ideological.” Investors must recognize that Elon Musk is passionately ideological regarding the auto sector’s full EV transition. However, Akio Toyoda believes there still is market uncertainty. Thus, Toyota is allocating capital toward multiple propulsion technologies in case the market does not fully transition to EVs, or if the transition takes longer than the ideologues imagine.
As described in the book about Munger, Poor Charlie’s Almanack, “being totally sure on issues with a strong ideology, turns you into a lousy thinker.” And lousy thinkers often make lousy investors. Munger acknowledged that sometime ideologues like Musk turn out to be correct. Just make sure you don’t become be a lousy investor because you’re an ideologue only.
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Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.