Shorting ICE

[theschnell]

So I was a huge Toyota fan until Tesla came on to the scene, so there may be some bias but here's the reason I don't think its necessarily time to go after Toyota yet. At this point, Toyota (with a possible exception of their trucks) is primarily purchased by very price conscious, middle to late adopters. In my opinion, that genre is not quite ready to make the switch to Tesla. They can still buy a brand new, very reliable Toyota sedan for less than $25k, and a crossover for less than $30k. Yes cost of ownership and all that, but they are just not going to to pay that significant of an additional premium to new company this early in the game.

Over the long term, I think Toyota is screwed if they don't change their strategy very soon, but I just think they still have some more time. Two things are required to get Toyota loyalists to convert en masse.

1) Up front cost parity or very close.
2) Gas prices nationwide above $3 or maybe it would need to be $3.50 per gallon.

Number one is not that far out, so Toyota's days are numbered.

 

[Oil4AsphaultOnly]

I too have been looking at buying TM puts.

Their revenue has been declining every quarter since Dec '18. But the puts (for ADR shares only) are only for 6-months out.

So they might have the most room to fall, but their buyers are slow to change and unless you outright short the stock (and have to bear both the borrowing costs and dividend payments), it doesn't seem to be a profitable trade.

I've taken a token put position in the off-chance that TM suddenly changes with their Dec'19 earnings report.

 

[theschnell]

So I was a huge Toyota fan until Tesla came on to the scene, so there may be some bias but here's the reason I don't think its necessarily time to go after Toyota yet. At this point, Toyota (with a possible exception of their trucks) is primarily purchased by very price conscious, middle to late adopters. In my opinion, that genre is not quite ready to make the switch to Tesla. They can still buy a brand new, very reliable Toyota sedan for less than $25k, and a crossover for less than $30k. Yes cost of ownership and all that, but they are just not going to to pay that significant of an additional premium to new company this early in the game.

Over the long term, I think Toyota is screwed if they don't change their strategy very soon, but I just think they still have some more time. Two things are required to get Toyota loyalists to convert en masse.

1) Up front cost parity or very close.
2) Gas prices nationwide above $3 or maybe it would need to be $3.50 per gallon.

Number one is not that far out, so Toyota's days are numbered.

So I can't edit this post now, but one point bothers me that I did not say correctly. Of those two requirements for Toyota buyers to switch, I don't believe they both need to happen. Just one or the other.

 

[ammulder]

If we're going to be bullish on Tesla and bearish on ICE, then presumably we believe oil usage is going to go down rather than up. We can argue over whether we're "at peak oil" or "near peak oil" or "there will exist a peak oil", but overall, don't we have to take the position that oil demand is not going to go up much? And OPEC has not done a good job of controlling supply lately.

Bottom line, a sustained rise in gas prices seems a bit unlikely, unless a meaningful carbon tax is put in place. But that also seems unlikely.

So I think it's going to have to be cost parity.

 

[theschnell]

This video is extremely relevant to this discussion. This is why BMW is very high on my list. If only I some insight into what the Chinese reaction will be over the short term. But I may just have to go for it regardless. I'll think on it for another couple of weeks / months.

 

[Zero CO2]

So I was a huge Toyota fan until Tesla came on to the scene, so there may be some bias but here's the reason I don't think its necessarily time to go after Toyota yet. At this point, Toyota (with a possible exception of their trucks) is primarily purchased by very price conscious, middle to late adopters. In my opinion, that genre is not quite ready to make the switch to Tesla. They can still buy a brand new, very reliable Toyota sedan for less than $25k, and a crossover for less than $30k. Yes cost of ownership and all that, but they are just not going to to pay that significant of an additional premium to new company this early in the game.

Over the long term, I think Toyota is screwed if they don't change their strategy very soon, but I just think they still have some more time. Two things are required to get Toyota loyalists to convert en masse.

1) Up front cost parity or very close.
2) Gas prices nationwide above $3 or maybe it would need to be $3.50 per gallon.

Number one is not that far out, so Toyota's days are numbered.

Long time Toyota owner here... multiple Camrys and (3) 4Runners over last 25 years... once i understood EV and Tesla is was no-brainer for me... I spent more on my MS than i would have ever thought to spend on a vehicle in terms of first cost ... there is a 0% chance of me going back to Toyota ... pretty sure Tesla has me locked in already

Model 3 is already there for item #1 above im my estimation in terms of TCO

 

[theschnell]

Long time Toyota owner here... multiple Camrys and (3) 4Runners over last 25 years... once i understood EV and Tesla is was no-brainer for me... I spent more on my MS than i would have ever thought to spend on a vehicle in terms of first cost ... there is a 0% chance of me going back to Toyota ... pretty sure Tesla has me locked in already

Model 3 is already there for item #1 above im my estimation in terms of TCO

Are you seeing a trend of former Toyota owners around you, other than Prius owners, making the leap?

I’ve seen a few around here but it’s certainly the exception rather then the rule.

An upper middle age lady in my church just bought a Prius because she “wanted to go electric”. Model 3 was just out of her price range (Prius was a bit of a stretch). She’s obviously a very late adopter but that’s kind of my point.

 

[defc0n]

I have pondered a lot recently whether it’d be easier to make money off of the demise of ICE compared to making money on TSLA now in the near to medium term future.

 

[Sherlo]

Are you seeing a trend of former Toyota owners around you, other than Prius owners, making the leap?

I’ve seen a few around here but it’s certainly the exception rather then the rule.

An upper middle age lady in my church just bought a Prius because she “wanted to go electric”. Model 3 was just out of her price range (Prius was a bit of a stretch). She’s obviously a very late adopter but that’s kind of my point.

We are firmly in that group. 30 years of Toyota (and Lexus). Pretty sure we have purchased our last Toyota.

 

[generalenthu]

I believe the fall in GM & F will be quite swift, once the cybertruck and the Y come out. I have started writing at the money calls for these and will continue to roll them. When the fall accelerates, that's time to outright short or buy puts.

 

[generalenthu]

This video is extremely relevant to this discussion. This is why BMW is very high on my list. If only I some insight into what the Chinese reaction will be over the short term. But I may just have to go for it regardless. I'll think on it for another couple of weeks / months.

It's already trading at distressed levels, sporting a 5% dividend yield and a 6 PE ratio per Yahoo. Need to look more closely.

 

[theschnell]

It's already trading at distressed levels, sporting a 5% dividend yield and a 6 PE ratio per Yahoo. Need to look more closely.

This despite record sales overall in 2019...

 

[Doggydogworld]

Autonomy is the real threat to legacy carmakers, not EVs.

 

[Oil4AsphaultOnly]

Autonomy is the real threat to legacy carmakers, not EVs.

They go hand-in-hand. You can't really have autonomous combustion vehicles, because people will be up in arms about the pollution they cause while waiting for a fare. And rural/suburban areas will never have enough AV coverage to make financial sense.

EV's make autonomous vehicles cost-effective, and this reduces the need for everyone to have one in an urban environment.

 

[Doggydogworld]

EV's make autonomous vehicles cost-effective,...

Certainly not. Removing the driver saves a buck a mile, EV vs. hybrid saves a few cents. Robotaxis would happen whether we had EV technology or not.

If the Robotaxi model is anywhere near as successful as Tony Seba says then most legacy carmakers will perish. Even Tesla is threatened, though not as severely.

 

[Oil4AsphaultOnly]

Certainly not. Removing the driver saves a buck a mile, EV vs. hybrid saves a few cents. Robotaxis would happen whether we had EV technology or not.

If the Robotaxi model is anywhere near as successful as Tony Seba says then most legacy carmakers will perish. Even Tesla is threatened, though not as severely.

Not quite. That's too simplistic of a calculation.

If you could build an autonomous vehicle, why would you add complexity (hybrid/PHEV) to its powertrain rather than just calculate BEV versus ICE? Especially since hybrids incur the same maintenance costs as ICE anyway. The pennies saved from reduced fuel consumption might not pencil out over the capital costs of the additional powertrain components.

So the difference is actually in the tens of cents per mile. Over 100k miles, that ends up being some serious change that matters when running a robotaxis. So I repeat my point, autonomous vehicles go hand-in-hand with being electric.

 

[Doggydogworld]

If you could build an autonomous vehicle, why would you add complexity (hybrid/PHEV) to its powertrain rather than just calculate BEV versus ICE?

Let me be very clear - all Robotaxis that deploy at scale will be BEV. Because once you remove the huge driver cost it makes sense to chase those pennies.

That said, I used hybrids because that's what fleet operators would choose if BEV technology wasn't available. Hybrids are less complex than ICE. You replace the most complex part of an ICE drivetrain, the automatic transmission, with a simple planetary gearset. The ICE itself is also simpler since it is designed for a much more limited set of operating parameters.

Especially since hybrids incur the same maintenance costs as ICE anyway.

Not over long time periods, due to the simpler mechanical section. The electrical portion should be extremely low maintenance.

So the difference is actually in the tens of cents per mile. Over 100k miles, that ends up being some serious change

No, it doesn't. Even consumer ICE maintenance is down in the penny per mile range (excluding tire cost, which is higher with BEV). My Toyota minivan had well under $1000 of maintenance and repair (again ex-tires) the first 100k miles. And that's at dealer retail prices, fleets pay less.

Gas is sub $2 near me now. That's 4 cents/mile for 50 mpg Camry Hybrid. Electricity is also cheap here, about 10 cents/kWh. That's about 2.5 cents/mile for a Model 3. "Tens of cents per mile" EV savings simply don't exist for fleet operators.

 

[Oil4AsphaultOnly]

Let me be very clear - all Robotaxis that deploy at scale will be BEV. Because once you remove the huge driver cost it makes sense to chase those pennies.

That said, I used hybrids because that's what fleet operators would choose if BEV technology wasn't available. Hybrids are less complex than ICE. You replace the most complex part of an ICE drivetrain, the automatic transmission, with a simple planetary gearset. The ICE itself is also simpler since it is designed for a much more limited set of operating parameters.

Not over long time periods, due to the simpler mechanical section. The electrical portion should be extremely low maintenance.

No, it doesn't. Even consumer ICE maintenance is down in the penny per mile range (excluding tire cost, which is higher with BEV). My Toyota minivan had well under $1000 of maintenance and repair (again ex-tires) the first 100k miles. And that's at dealer retail prices, fleets pay less.

Gas is sub $2 near me now. That's 4 cents/mile for 50 mpg Camry Hybrid. Electricity is also cheap here, about 10 cents/kWh. That's about 2.5 cents/mile for a Model 3. "Tens of cents per mile" EV savings simply don't exist for fleet operators.

That right there tells me that you don't know what you're talking about.

Planetary gearsets are part of the transmission. It's what makes changing gears possible. If you didn't need to do so (like with an EV), you'd simply have a reduction gear. A BMW i3 Rex, which as a true series-hybrid, could be said to be simpler, but that's the exception, not the rule. Any hybrid that has the gas engine driving the wheels, has a complicated transmission, which is pretty much all of them. The engine in an i3 Rex only acts as a generator, which is why it has trouble going up hills when the battery charge is low).

As a fleet operator your maintenance cost needs to include the staffing and facilities to refuel (they can't plug it in and walk away), change the oil, check the transmission fluid (because AV's can't deal with a failing transmission), radiator fluid, fuel pumps, etc. All these items, when they fail are merely an annoyance to an owner, but puts the cars out of service if it's an AV. The maintenance has to be done preventively, if rider/customer satisfaction matters. Or at least can be addressed quickly - AV pulls over because of leaking radiator, so another AV needs to be available and in the area to make sure the customer reaches their destination in a timely manner.

Besides, AV's are more likely to be deployed in urban areas where gas prices are nowhere near $2/gal, so still tens of cents difference per mile (when you include maintenance costs).

 

[Doggydogworld]

That right there tells me that you don't know what you're talking about.

Planetary gearsets are part of the transmission. It's what makes changing gears possible. If you didn't need to do so (like with an EV), you'd simply have a reduction gear. A BMW i3 Rex, which as a true series-hybrid, could be said to be simpler, but that's the exception, not the rule. Any hybrid that has the gas engine driving the wheels, has a complicated transmission, which is pretty much all of them. The engine in an i3 Rex only acts as a generator, which is why it has trouble going up hills when the battery charge is low).

As a fleet operator your maintenance cost needs to include the staffing and facilities to refuel (they can't plug it in and walk away), change the oil, check the transmission fluid (because AV's can't deal with a failing transmission), radiator fluid, fuel pumps, etc. All these items, when they fail are merely an annoyance to an owner, but puts the cars out of service if it's an AV. The maintenance has to be done preventively, if rider/customer satisfaction matters. Or at least can be addressed quickly - AV pulls over because of leaking radiator, so another AV needs to be available and in the area to make sure the customer reaches their destination in a timely manner.

Besides, AV's are more likely to be deployed in urban areas where gas prices are nowhere near $2/gal, so still tens of cents difference per mile (when you include maintenance costs).

Good grief. Here's a random exploded diagram of a GM 4L60E, a very rudimentary 4 speed auto tranny that dates back to the '80s. Yes, there are planetaries. But there are also a bunch of clutches, bearings, pumps and intricate pathways for the hydraulic transmission fluid that makes it all work.

The Prius HSD "transmission" is a single planetary gearset with two electric motors. No clutches. No torque converter. No special reverse gear. No hydraulic fluid flowing through intricate pathways to actuate various shifting mechanisms. It's mechanically simpler than the differential in a Tesla. The control software is a little tricky, but s/w isn't a wear item.

 

[Oil4AsphaultOnly]

Good grief. Here's a random exploded diagram of a GM 4L60E, a very rudimentary 4 speed auto tranny that dates back to the '80s. Yes, there are planetaries. But there are also a bunch of clutches, bearings, pumps and intricate pathways for the hydraulic transmission fluid that makes it all work.

The Prius HSD "transmission" is a single planetary gearset with two electric motors. No clutches. No torque converter. No special reverse gear. No hydraulic fluid flowing through intricate pathways to actuate various shifting mechanisms. It's mechanically simpler than the differential in a Tesla. The control software is a little tricky, but s/w isn't a wear item.

I was going to comment about how you were comparing apples and oranges between a parts diagram versus a design drawing. But in looking for a blowout of the prius' tranny, I learned that they use a CVT (or at least a modified version). Unlike Ford's hybrid, which mate their regular transmission with an electric motor. My bad for not noticing the details.

So comparing the Toyota hybrids with their non-CVT cars, then you're right about the transmission being simpler.