In his podcast addressing the markets today, Louis Navellier offered the following commentary.
EV Irony
Tesla Inc (NASDAQ:TSLA)’s planned 8-day shutdown of its Shanghai plant is being extended due to rising Covid cases in China. The company now has sufficient inventory of its electric vehicles (EVs) and continues to offer discounts to try to sell its EVs amidst increasing competition in China.
Furthermore, the U.S. tax incentives to buy an EV have expired for Tesla in 2022, so in the U.S., Tesla is offering $7,500 discounts on Model 3 and Y EVs, plus 10,000 miles of free charging during December.
Q3 2022 hedge fund letters, conferences and more
The EV revolution may pick up as the inventory of EVs builds, since there is now a growing inventory of EVs, so discounts as well as new 2023 tax incentives should help sell more EVs. I should add that Tesla had a 163,000 order backlog as of December 8, down from 476,000 in late July.
High electricity prices in Europe have caused EV sales to “gone off track” according to Thomas Schmall, the CEO of VW’s components division. Schmall also said that the North American market is “speeding a little bit faster than we expected in the last months.”
The bottom line is, in countries where electricity is expensive, EV sales have slowed. The ultimate irony is that in countries with cheap electricity, from coal or hydroelectric, EV sales remain healthy. On the other hand, countries with expensive electricity due to expensive green energy sources, like wind, are suddenly hitting EV resistance as their electricity costs rise.
EV sales accounted for 6.8% of VW Group’s global sales in the third quarter and are expected to steadily rise due to new models like the VW ID Buzz.
Higher Gas And Oil Prices
Due to the “Siberian Bomb Cyclone” that disrupted air travel heading into the weekend, most of the continental U.S. has been enveloped by cooler-than-normal temperatures as well as record snow in upstate New York.
Despite forecasts for warming weather around New Year’s weekend, the price of natural gas is expected to remain very firm due to strong seasonal demand in both Europe and the U.S. Russian Deputy Prime Minister Alexander Novak told the state news agency TASS that natural gas production would decline 12% and export would decline about 25%.
Prime Minister Novak earlier said that G7 price caps would cause Russia to reduce its crude oil production by 5% to 7%, which works out to 500,000 barrels to 700,000 barrels per day. As a result, I expect that both natural gas and crude oil prices will meander steadily higher in the New Year due to tight supplies.
The other thing to watch in the New Year is the analyst community. Often when the analyst community gets back from skiing and their Christmas vacations, they tend to update their fourth-quarter earnings announcements.
I for one will be curious if the analyst community will be revising their earnings estimates higher or lower in the first half of January before the fourth quarter announcements commence. Outside of the energy sector, expectations for earnings remain very low due to difficult year-over-year comparisons as well as a strong U.S. dollar impeding multi-international companies.
Semiconductor Chip Glut
The Wall Street Journal had a great article discussing that the world is suddenly awash in semiconductor chips. The semiconductor chip glut is largely due to the fact that consumers are buying fewer electronic items like personal computers and cell phones.
Interestingly, despite a near-term glut, semiconductor manufacturers are still expecting semiconductor chip sales to double by 2030 as the “internet of things” required chips to be installed in more consumer devices. As a result, the guidance from semiconductor chip manufacturers in the upcoming months, especially after their fourth-quarter earnings announcements will be critically important.
