Global Automotive Stocks/EV Focus/Event Driven, SC Capital

SC Capital

SC Capital has over 20 years' experience covering the global automotive industry both on the Sell Side (UBS & Morgan Stanley) and Buy Side (Och-Ziff), along with a wealth of industry contacts. 

Current focus is on electric vehicle stocks & their supply chains. Aim is to identify the winners and losers from a long/short perspective. This includes close coverage of legacy automakers as well.  

From time to time. we cover opportunistic events with stocks in the manufacturing sector, food & beverage, healthcare and tech, where we also have coverage experience.

Global Automotive Stocks/EV Focus/Event Driven

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Over 22 years covering Japanese equities on both the sell side and the buy side. 

Bottom-up Japan Equities Research

Equity Bottom-Up

<ul><li>Jaguar just priced its new I-Pace all-electric SUV at an aggressive $69,500 in the US, where if you include environmental tax credits, can bring the price down by as much as $10,000 to around $59,500.</li><li>This is a whopping 25% ($20,000) discount to the lowest-priced Tesla Model X <em>and</em> gets you longer driving range, plus quicker acceleration (see details below). And because it's a Jaguar, the I-Pace surely has a proper luxury feel to its interior, unlike Tesla vehicles, which tend to have cheap build quality relative to the price.</li><li>This could be bad news for Tesla, as they never had any competition up to now, but still lost money and amassed heaps of debt. Moreover, it casts a doubt over Tesla's goal of selling 100K units (flat with 2017 levels) of the Model X and Model S (luxury sedan) combined in 2018.</li><li>The Models S &amp; X generate over 100% of Tesla's gross profits, as the new Model 3 "affordable" EV is undergoing mass-production problems and generates gross losses per unit.</li><li>The risk Tesla faces is either Model 3 mass-production takes off and generates profits, or Model X volumes fall due to stiff competition from Jaguar's I-Pace, which leads to mounting losses at Tesla. By year-end, Audi will also have a new electric SUV, as will Daimler Benz shortly thereafter.</li><li>While everyone saw this coming as far back as July 2017 (see <a href="https://www.smartkarma.com/insights/tesla-and-its-coming-struggle-to-survive" target="_blank" data-smartkarma-citation="insights:11755">Tesla and Its Coming Struggle to Survive</a> ), the only surprise to us now is how cheap the I-Pace is priced relative to Tesla's Model X. Even to wealthier fans of Tesla, a $20,000 price difference for a better-performing <em>Jaguar</em> should give pause for thought.</li><li>Tesla continues to trade at "tulip mania" valuations: the PBR is 12x versus 1x at luxury rivals like Daimler and BMW. Its EV/sales ratio is 3.4x revenues while Daimler and BMW both trade on a 0.3x multiple. We envision financial strains at Tesla mounting by year-end, which should cause this premium valuation to shrink.</li><li>Jaguar's I-Pace goes on sales in the US this summer but will be launched next quarter in Europe, which accounts for 10% of Tesla's revenues. Given Jaguar's aggressive pricing, we expect the growing media buzz about the I-Pace and eventual market share decline at Tesla to raise concerns among its shareholders.</li><li>We will publish a preview of Tesla's upcoming Q1 2018 results shortly. Currently, we see evidence that Tesla's Q1 could be even worse than its record high losses in Q4 of 2017. Model S and X sales for January and February were weak globally and production problems with the new Model 3 continue. </li></ul>

Jaguar just priced its new I-Pace all-electric SUV at an aggressive $69,500 in the US, where if you include environmental tax credits, can bring the price down by as much as $10,000 to around $59,500.This is a whopping 25% ($20,000) discount to the lowest-priced Tesla Model X and gets you longer driving range, plus quicker acceleration (see details below). And because it's a Jaguar, the I-Pace surely has a proper luxury feel to its interior, unlike Tesla vehicles, which tend to have cheap build quality relative to the price.This could be bad news for Tesla, as they never had any competition up to now, but still lost money and amassed heaps of debt. Moreover, it casts a doubt over Tesla's goal of selling 100K units (flat with 2017 levels) of the Model X and Model S (luxury sedan) combined in 2018.The Models S &amp; X generate over 100% of Tesla's gross profits, as the new Model 3 "affordable" EV is undergoing mass-production problems and generates gross losses per unit.The risk Tesla faces is either Model 3 mass-production takes off and generates profits, or Model X volumes fall due to stiff competition from Jaguar's I-Pace, which leads to mounting losses at Tesla. By year-end, Audi will also have a new electric SUV, as will Daimler Benz shortly thereafter.While everyone saw this coming as far back as July 2017 (see Tesla and Its Coming Struggle to Survive ), the only surprise to us now is how cheap the I-Pace is priced relative to Tesla's Model X. Even to wealthier fans of Tesla, a $20,000 price difference for a better-performing Jaguar should give pause for thought.Tesla continues to trade at "tulip mania" valuations: the PBR is 12x versus 1x at luxury rivals like Daimler and BMW. Its EV/sales ratio is 3.4x revenues while Daimler and BMW both trade on a 0.3x multiple. We envision financial strains at Tesla mounting by year-end, which should cause this premium valuation to shrink.Jaguar's I-Pace goes on sales in the US this summer but will be launched next quarter in Europe, which accounts for 10% of Tesla's revenues. Given Jaguar's aggressive pricing, we expect the growing media buzz about the I-Pace and eventual market share decline at Tesla to raise concerns among its shareholders.We will publish a preview of Tesla's upcoming Q1 2018 results shortly. Currently, we see evidence that Tesla's Q1 could be even worse than its record high losses in Q4 of 2017. Model S and X sales for January and February were weak globally and production problems with the new Model 3 continue. 

Tesla to Face Stiff Competition From Jaguar's New EV