This is a watershed moment for electric vehicles.
Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker will make sense of the most important developments in business and why they matter.
We know you’re busy, so think of our Buy/Sell/Hold labels as shorthand metaphor: a Buy if we view it as a positive trend or clever move; a Sell if it’s a disastrous mistake or a missed opportunity; or a Hold if it’s noteworthy but too early to call.
The Buy/Sell/Hold Analysis
After a new bull run, Tesla’s market cap has now raced past Toyota, the biggest seller of cars on the planet, and ExxonMobil, the symbol of the Oil Age. Skeptics will say Wall Street is not the real economy, especially with a conviction stock like Tesla. That’s true; the stock market has been even more than usual stuck in its own universe, detached from economic reality. (For proof, look no further than the recent success of Nikola, a Tesla copycat dubiously claiming to be on the verge of producing electric trucks, now worth $23 billion after an IPO last month.) But there is also rock-hard substance to the argument that the electric age is here. Over the next decade, many, many people you know are likely to buy an electric SUV, pickup truck, or sedan.
This inflection point has little to do with environmentalism and everything to do with quotidian economics: The cost of electrics is quickly reaching parity with conventional vehicles. When the cost point crosses over — in the next five years, according to renewable energy research group BloombergNEF — motorists will find electric and combustion vehicles to be price competitive. At that point, auto consumers will choose between the two based on factors like style, convenience, and power instead of carbon footprints, status, and sheer novelty.
The primary reason for the plunge in electric vehicle cost is a decade-long revolution in the lithium-ion battery: Without making an actual electrochemical breakthrough, engineers year by year have lowered the cost of producing these batteries until the current versions became one-tenth the price they were in 2010. But the key bottleneck to escape velocity for electric cars is the build-out of fast-charging infrastructure — vehicle buyers will by and large refuse to purchase an electric if it is a pain to find a charging point and if they cannot charge up in a half-hour or less.
According to BNEF, the world will need around 290 million charging points by 2040 at a cost of about $500 billion. In a small but positive development this week, McDonald’s said it will install fast-charging at all new restaurants it builds in the U.K. — that’s on top of 55 charging stations already installed at its Swedish restaurants as of last year, 168 in the Netherlands, and stations in San Francisco and North Carolina. In other words, the archetypal, globe-spanning fast-food behemoth is folding electric mobility into its infrastructure.
Skeptics are starting to adjust to the signs of the inflection point from niche to middle-market. Barclays’ Brian Johnson, one of the most vocal Tesla bears, forecast in a note to clients this week that the company would easily beat consensus for second-quarter production and deliver 91,000 vehicles. Though he still thinks the share price is too high, he said, “We urge our bearish friends … to return to the shelter of their caves.” In other words, don’t bet against the company right now.
— Steve LeVine
The estimated amount the U.S. economy could save from a widespread adoption of masks
Goldman Sachs has waded into the absurdly politicized debate over whether we should all be wearing face masks in public — of course we should — with a new tactic: a dollars-and-cents argument. According to an analysis by the investment bank, a federal mandate would increase mask-wearing by 15%, which would cut the daily coronavirus growth rate from 1% to 0.6%. That outcome would “potentially put an end to lockdowns that would otherwise knock 5% from GDP” — an estimated $1 trillion hit. Right now, the mask debate is being worked out in the marketplace, left to retail chains, restaurants — and, evidently, Etsy. The platform recently reported that its crafters sold 12 million masks in April alone to the tune of $133 million, making it one of the site’s biggest categories. A national mask mandate would be even better for Etsy’s sellers — and, more to the point, for all of us.
— Rob Walker
- Mirror Sells Itself to Lululemon. In its first-ever acquisition, athleisure retailer Lululemon is buying four-year-old fitness tech startup Mirror in a $500 million all-cash sale. The deal is undoubtedly a coup for Mirror’s founder Brynn Putnam and her investors; for Lululemon, it’s a way to own the entire customer experience, the data, and earn new cachet as a tech company. The only thing that may get lost? Putnam’s loftier vision to transform her $1,495 interactive full-length mirror into “the next iPhone.” Hold.
- Microsoft Closes Its Retail Stores. Given that Satya Nadella was swift to nix most of Microsoft’s bad ideas from the Steve Ballmer era, we’re surprised that it took until 2020 for Microsoft to announce it would be “taking a new approach to retail” by shutting down nearly all 83 locations of its Microsoft Store. Microsoft says it was already planning to close these stores in 2021 when the pandemic accelerated its decision. In 2012, Ballmer told a skeptical shareholder that the Microsoft Store existed to “Sell! Sell! Sell!” After more than a decade stuck beneath the Apple Store’s shadow, all we can say about closing up shop is Buy, Buy, Buy.
- Netflix Pledges $100 Million to Boost Lenders Serving Black Americans. About 2% of Netflix’s cash holdings will be moved into financial institutions and funds that predominantly support Black communities, including the Black-owned Hope Credit Union based in Mississippi. The investment marks a refreshing alternative to the vague statements of Black Lives Matter solidarity pouring out of companies this past month. But to make any meaningful dent on a system where Black-owned banks owned only 0.03% of total assets at the end of 2019, a redistribution of corporate holdings has to occur regularly over the course of many years with far larger sums of money. Buy.
- Uber Bids to Buy Postmates. After a failed attempt to merge with food delivery service Grubhub in June, Uber has reportedly turned to the next in line — food delivery competitor Postmates, last valued at $2.4 billion. Uber lost $4.1 billion, $3 billion, and $8.6 billion in 2017, 2018, and 2019, respectively, and was forced to cut 3,000 jobs in May. Uber Eats — the company’s delivery service — and Postmates both remain unprofitable despite spiking demand for delivery. Nothing Uber does now, including a reckless acquisition bid that has made it look desperate, will justify its pre-IPO $68 billion valuation. Sell.
- WeWork’s Shuttered Private School May Live Again. WeWork co-founder Rebekah Neumann reportedly acquired the rights to part of the curriculum for WeGrow, the private Montessori-style New York City school she launched for The We Company in 2017. WeGrow folded in 2019 amid the fallout from WeWork’s disastrous attempt at an IPO, but according to Forbes, Neumann plans to rename the school “Students of Life for Life” (or SOLFL, pronounced “soulful”) and relaunch a pilot program this fall. Between a pandemic and her husband’s lingering SoftBank lawsuit, parents are unlikely to jump at enrollment even with the fresh rebrand. Sell.
Design geeks are always lamenting that the world doesn’t pay enough attention to typefaces. Goldman Sachs — the same one advocating sensible pandemic policies in The Big Number above — managed to get lots of people interested in a font two weeks ago, when the firm released “Goldman Sans,” billed as “a clean modern typeface designed for dense data rich environments.” Personally, I found the curvy sans serif trendy to the point of ephemerality, a bad look for an institution that presumably seeks to project gravitas. But then came the twist: While Goldman released the font for anyone, it was swiftly discovered it has a restriction from using it to “disparage Goldman Sachs.” That, of course, is what brought the typeface plenty of attention. “You can’t make this shit up,” commented Design Observer, helpfully reminding readers that Goldman is the firm once described by Rolling Stone as “a great vampire squid wrapped around the face of humanity.” Presumably not the brand boost the company was seeking.
— Rob Walker
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