Why Ford’s New Electric Mustang is Great for Chip-makers

Elon Musk must be grinning from ear to ear. The world’s largest automakers are finally turning their fleets electric. Competition is coming.

Ford (F) unveiled the Mustang Mach-E Sunday, its first mass market, first plug-in electric vehicle. Inspired by Mustang, the Mach E is an indication the company is going all in on electrification.

This is just the tip of the iceberg, though. The bigger story is the expansion of the category.

Musk, Tesla (TSLA)’s charismatic chief executive, alienated others in the industry when he first revealed his seemingly crazy idea: Electric cars could be comparable in luxury to traditional vehicles.

He didn’t help himself by exaggerating production goals and timelines. He was needlessly provocative about the future of autonomous vehicles. Regulatory hurdles be damned. Musk even recently claimed autonomous Tesla robotaxi fleets will arrive in 2020.

Related post: Real Autonomous Cars Hit the Road in Arizona

And while he often underestimates the complexities of EV production, he has been fully plugged into the changes happening within the auto industry.

As Tesla pumped out its Roadster in 2008 and its Model S in 2010, it began attracting serious attention. Soon, it became a lightning rod for investors and gearheads alike.

The Palo Alto firm traded like a high-flying technology company, and its vehicles looked the part. Interiors were spartan, with the exception of electronic gizmos. Drivetrains lacked moving parts like transmissions. And its wild valuation was a honeypot to the bearish hordes.

The success of Tesla changed everything. Car companies from BMW, Mercedes and Jaguar, to Volkswagen and Ford have been scrambling to catch up ever since.

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Mach-E is Ford finally getting it right. What makes Teslas so beloved by buyers is not their green roots; it’s the lack of compromises. Owners get to be environmentally friendly while marshaling a vehicle that is fast, cutting-edge and fun to drive.

The Mustang design language says a lot. The fabled pony car sparked a generation of hot-rodders who were down with Steppenwolf long before “Born to Be Wild” was an advertising jingle.

The standard Mach-E gets an SUV fastback shell and 0-60 mph acceleration in a heart-pumping 5 seconds. A performance edition slashes that time to an ultraquick 3.5 seconds.

For good measure, all the classic EV goodies new buyers have come to expect are included. There is a next-generation infotainment system, complete with a 15.5-inch center mounted flat screen, vegan interior and the standard electronic door handles.

Mach-E joins a bunch of new performance-oriented EVs from Audi, Jaguar, BMW and even Ferrari (RACE).

None of these vehicles are likely to cannibalize the current EV marketplace. To the contrary, greater variety should boost EV penetration into the larger market.

Ford announced last year it would offer two years of access to a 12,000-unit charging network. As the EV infrastructure expands, internal combustion engine vehicles are the likely loser.

That’s probably why Elon Musk offered congratulations to Ford managers Monday. Competition is making the size of the potential EV market larger. That could be a positive development for automakers.

Reuters reported Nov. 4 that the next-generation Volkswagen ID.3, an all-electric hatchback, is 40% cheaper to build than its ICE predecessor.

The best play for investors, though, is not car companies. It’s the businesses that make electric motors and the semiconductors required to get all the instructions right. New drivetrains will mean new processes, silicon and software.

Applied Materials (AMAT) is a maker of the equipment that semiconductor firms use to retool.

Shares have performed very well, rising 90% in 2019. This indirect play on vehicle electrification should continue to trade higher.

Investors should keep this in mind and view any weakness as a buying opportunity.

In fact, my Tech Trend Trader subscribers already own Applied Materials. We’re sitting on open gains of about 40% on this position. And we have other positions that clock in gains of up to 161%. My Disrupt system is hard at work finding the best tech investments out there. Click here to learn more about it.

Best wishes,

Jon D. Markman