Car companies are becoming mobility businesses as cutting-edge vehicles shift from internal combustion engines to electrification. It’s a huge opportunity for investors.
Kia Motors Corp. (OTCPK: KIMTF) revealed the EV6 last week to gasps from the automotive world. The sleek SUV generates 557 horsepower and blows the doors off gas-powered Lamborghinis, Mercedes, Porsches and Ferraris.
The message is clear: Electric vehicles (EVs) are the new smartphones, and it is only a matter of time before everyone wants one.
That is still not a popular opinion. Many investors still believe widespread adoption of EVs is a decade away. The perception is while the vehicles are cool and futuristic, they are not practical for most drivers who worry about driving range or the cost of ownership.
It’s a theory … but unfortunately, it’s not borne out with facts.
Kia managers claim the EV6 will get 316 miles on a full charge. The SUV can travel 62 miles after only a five-minute top-up. And because the vehicle is based on a skateboard design with electric motor regenerative charging, there are fewer moving parts and no need for regular brake replacement. The platform consists of a chassis, batteries, electric motors, inverters and integrated circuitry for heating, ventilation and air conditioning (HVAC) and infotainment. This should mean much less maintenance.
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Traditional vehicle owners should be so lucky. It is amazing how often a simple oil service morphs into a $600 repair for worn-out brakes.
Saving money on repairs is a powerful incentive for consumers to make the switch to EVs. However, the single biggest motivator is likely to be simple word of mouth. EV buyers are getting all of the coolest advances in automotive technology first.
There is a good reason for this: digital transformation.
Electrification is a brand-new architecture unsullied by legacy sub-platforms. Powering up digital innovations like actual onboard computers for advanced assisted driving, more functional camera systems and always-on connectivity is much easier when the entire substrate of the vehicle is a battery, and traditional copper wires have been replaced with fiber optics.
The development of EV platforms is eerily similar to smartphones. In the same way touchscreen interfaces changed the face of mobile communications, the digital architecture of EVs is pushing forward futuristic new features for the auto industry.
It is not a coincidence that industry executives are referring to their companies as mobility brands.
Kia is playing to this notion full throttle. EV mobility means the best performance, the safest passenger cabin and the most advanced feature set in its fleet.
The EV6 with the GT performance package has a 0 to 60 mph time of only 3.5 seconds; towing capacity of 3,500 pounds; augmented reality turn-by-turn navigation; a pair of immersive 12-inch curved flat panel displays for instrumentation and software and sensors for level 2 self-driving. And, in a pinch, the EV6 is an emergency power source for your home. It’s a killer combination of features that is becoming the norm for EVs.
Globally, the category represented only 1% of all vehicles sold in 2018, according to the latest study from the International Energy Agency (IEA). A year later, 2.7% of all cars and trucks manufactured used batteries in some capacity. The IEA foresees this number rising nearly twentyfold by 2030.
Related Post: BMW Lays Plans to Electrify Your Commute
One possible stealth way to play this incredible growth is with Monolithic Power Systems, Inc. (Nasdaq: MPWR). The Kirkland, Washington-based company designs integrated circuits to make the power systems more efficient. This might seem quaint, as cars and trucks transition to electric propulsion, every efficiency is magnified.
The company is currently working with every major auto parts supplier in the world. Through Delphi, Bosch, Panasonic Automotive, Magna International Inc. (NYSE: MGA) and Mitsubishi Electric, Monolithic ICs reach end customers such as Ford Motor Company (NYSE: F), Nissan Motor Co. Ltd. (OTCPK: NSANY), BMW, Mercedes, General Motors Co. (NYSE: GM), Volvo, Toyota Motor Corp. (NYSE: TM), Volkswagen AG (OTCPK: VWAGY) and Kia.
The EV6 may turn heads by zooming past high-priced Mercedes and Lamborghinis, but the far more important part of its release is that it proves EVs are going mainstream. They offer the best performance, greatest safety and biggest bang for a driver’s buck. Car companies got there by building new digital platforms dependent on semiconductors.
From an investment standpoint, savvy investors should consider buying Monolithic shares into weakness. The biggest part of the growth cycle is forthcoming.
Best wishes,
Jon D. Markman
