Disruption: Auto Ancilliary

Dhwanil while the tyre industry will maintain their status quo in the period of electric vehicle disruption, a much better way to gain from such events is to perhaps find industries that will gain business enormously from it. This one particular event will be like an antifragile moment for such industries which will make them more valuable in the EV value chain. Two examples of such industries should be copper and lithium production chains. For copper the simple thesis is that an EV uses three times as much copper as an ICEV. A direct way to invest in copper is purchasing long dated future contracts and indirectly one can invest in miners of copper ore. Similarly for lithium we can follow the production value chain and find investable opportunities. Investing in lithium gets a bit complicated because it is not traded on any commodity exchange currently and the biggest lithium miners have lithium as a very small part of their mining portfolio. So an investor has to take undue risk in other commodities mining as well. One can follow the production chain and look for companies that refine lithium from its ore. Chile has one of the biggest lithium deposits as of now. And Tesla’s current lithium suppliers are either uninvestable or already in a crowded trade. To conclude there will be many more opportunities to find if one follows the EV production process closely but in my view we should be looking for industries that will strengthen from disruptions rather than those that maintain their staus quo.
Will wait for your thougts on this.

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Graphite is one element one can use to take advantage of Tesla related disruption. HEG is one listed in the space, but not much options in the indian market

I going by this thesis if copper demand goes up exponentially, and if prices also follows trend due to demand, what happens to companies with copper as inputs? Just a thought…companies like V-guard etc. may see margin compression and decrease in demand.

I’m not sure how soon the electric car will catch on here. Probably CNG will be more widespread than electric in the near term as an alternative fuel option.

As an aside, saw a couple of headlines this week mentioning well known investors getting into auto components -


Vivek exponentially is a term that should be used very carefully. Even if all the ICEV are converted to EV in an year that would be a 3x jump in demand which is in no way exponential. And ICEV will be replaced in a more linear fashion over a timeframe of decades.

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Did CNG use ever happen in foreign countries on a scale as in India? Dont forget India also skipped the telephone line boom directly to mobile communication.

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Good point Ghanisht but it may not be true for every technology. India skipped landlines because wireless was cheaper than laying wires for wide penetration. But you would not see the same adoption of technoloy in fiber as it is expensive. I mean nationwide adoption not adoption in metros. India has always opted for cheaper options in technology and while it would be really nice to see the advent of EVs in India it just might be a bit farther away than we think. The cost curve for EVs will need perhaps another decade to develop for a market like India.

Exactly what I pointed out, India has wholly adopted CNG which will take time to phase out and create an obstacle for EV entry into India. Also noting lack of infrastructure and indigenous tech to support it on a large scale. CNG kits cheaper and CNG filling more convenient. Whereas we have a perfect infrastructure for CNG distribution. My nana owns two petrol pumps which I help manage I have first hand information about this.

Ya, CNG is not going anywhere soon. And as more and more petrol pump guys start adding CNG stations, the network effect comes into play. As long as mass market size EV cars don’t reach mass market price points, they will remain a niche segment.

But, what about electric 2 wheelers? Its more likely that EV adoption will be faster in 2 wheelers than cars. I visited China for the first time recently and was amazed to see that almost all the scooters were electric.

At present India is a Power deficienct country. And for a power deficienct country like us I think use of electric vehicles at mass level is still far from reality.
There is no doubt that the volume of such vehicles will increase but it might not cause a disruption in auto industry.
My views are purely based on the current power generation capacity of the nation. If Any disruption changes the power generation capacity drastically, then I might be wrong.

I think the EV disruption will lead to a crash in oil prices. This should help a lot of industries like paints, chemicals and plastics which use crude derivatives as input.

One thing to consider is that electricity is generated using traditional fuels - coal, fossil fuels etc. The share of renewables in electricity generation is minuscule. So, with EVs what is really happening is taking the fossil fuel use up the value chain -from using in a car to using in a power plant.

Also, my opinion is in future the stress is going to be more of public transport rather than private transport, specially in emerging countries. with negative interest rates and money available cheap, a lot of metro rails are getting funded and more more focus on bus and rail is more than likely.

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Yes your true about power deficiency… But with nuclear power plant, solar subsidiaries, wind energy, the government can bring the power generation up. Coal is the cheapest power generation method, but has huge negative externalities… To move forward in the world economic and political power, government will market green energy and EV subsidiaries, Being one of the biggest importer of fossil fuel, governmnt will try to promote EV, to reduce the budget deficit…

In India, I think government hat too many positives to promote and market EV vehicles than western world. Soon you will see more EV vehicles on road… Not to forget Mahindra has now a good hold of technology and partners… They will lobby to make it main stream. Since other Indian players have no or very less know how on his topic… In my opinion, Nissan, tesla, GM have a good know how… Hyundai is trying big just now…

Suppose if I buy an electric vehicle, I won’t face any problem for charging it at home. When I use EV for say 100kms I may be consuming 4units of energy but I could save 2 liters of petrol for the country. The country can invest this money for generation of solar energy which is getting cheaper day by day. So obviously EVs will benefit countries like India and Power deficit is not at all a problem as cost benefits of using EVs can be used for power generation
Efficiency of ICEV is 18%
Efficiency of EV is >85%
Even if we produce electricity from fossil fuels plants whose efficiency is >50%, resultant efficiency of EVs is 42.5% which is very high than ICEV (18%)

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I am also optimal about nuclear, solar and wind power. But the question is, when we will achieve the capacity required.
And solar is still a costly affair, you can’t rely on subsidy forever. To bring down the cost we need to ride on technical innovation not on subsidy.
Market for EV will definitely going to improve. But the share wouldn’t be much that it will impact auto ancillary companies in near future. Instead of indentifying the companies whose business would take a hit from this change, I would say we should identify such companies which are going to get benefits from EV segment.

I already see a LOT of electric two wheelers in my city. Because Class 11 & Class 12 students (aged 16,17) can’t get a driving license till they turn 18, a lot of them end up buying the electric two wheelers, which doesn’t require a driving license & If I’m not wrong, one doesn’t need to wear a helmet also.

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But that’s just govt. regulation effect brother.
What do you think would happen to the licensing rules should the electric scooter become too, um, mainstream and resulting accidents (due to underage use) spike up? I fear that electric scooters would also come under license rules.
Govt. regulations would have little or no effect on the disruption effects discussed above in the long run IMHO.

Earlier when I was 16-17, one could get a learner’s license at 16 & buy a low power gearless moped (like a TVS XL) to go to college. Now, one needs to turn 18 to even get a learner’s license, but are allowed to drive electric vehicles (The CMVR (central motor vehicles rules) exempts electric vehicles upto 250 W from licensing requirement.). I don’t see any Govt regulation stopping teenagers from wanting to have a vehicle to go to college. The Govt might just stipulate wearing helmets for electric two wheelers also.

Whether the adoption of electric two wheelers will reach a critical mass or not is another question altogether.

I read an article on the future disruption of automobiles and related jobs

If we expand the horizon beyond merely materials, we notice that taxi services, insurance, justice, toll bridges, farm sector would also change. So we should consider these impacts as well

The best way to keep a track of this coming change in human transportation industry is to first divide its impact into developed economies and emerging economies. We can all agree that changes will first touch the DMs much more than EMs. Further, this being a multi decade change one should build a matrix of time scales divided into 5 years periods for perhaps 3 decades and go about forecasting their expectations of the speed of this change and its impact at various time points.

We can all agree that a big change is coming but guessing what will be impacted when is the crucial component we need to focus on.

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