They are down because of COVID and related shutdowns.
They are not collapsing at the rate of 80-90% by 2025 pre covid.
Robotaxis aren't collapsing ICEv sales 80-90% by 2025.
There are limits to how many ICEv can be made. It is mining and chemical processing. Not reluctant dealers and slow moving legacy automakers.
We don't know how strong the recovery post-covid could be. Many businesses are discovering that they do not need as much office space as they did prior to covid because the trend to work from home has be accelerated. For an extreme example BP will be permanently closing 50% of its office space. This was part of laying off 10% of workers. So for BP the office closure is a recognition that a substantial port of office space can be avoided by work from home technologies and that demand for oil has taken a permanent hit.
So what would it mean to the auto industry if 10% of office workers now working from home never return to office space? Most private passenger vehicle are purchased to enable a daily work commute. Additionally the trend to online purchase with home delivery has been accelerated. So the need for a private vehicle for shopping has also be eroded. Many families are discovering that they need one less car. The consequence here is that the total fleet of existing vehicles presently over supplies the need for private vehicle and this excess can take years to work off. When the supply of used vehicles is more than adequate for mobility needs, new sales will be depressed.
So I would argue that long term trends eroding private vehicle ownership have been accelerated by the covid crisis. Thus, some amount of this shock will persist permanently. For example, oil demand was about 100 million barrels per day (mb/d) before covid. It fell substantially, but has now recovered to about 88 mb/d. Oil analyst now believe that it can continue to recover to 92 to 96 mb/d in the the next few years, but will plateau in that range. Thus, the industry is considering that 4% to 8% loss of demand (relative to pre-covid forecasts) could be permanently locked in. The loss of demand specifically for motor fuels also points to an oversized motor vehicle fleet relative to demand for motor vehicle miles. That is, the total number of registered vehicles may also need to shrink by 4% to 8% too. This creates huge headwinds that can depress new vehicles sales for the better part of the decade.
The counterpoint here is that that investors are coming to realize that EVs are the future. Investors are now hungry to find investment vehicles to play on the EV trend. Tesla is a major beneficiary of this. Other EV stocks are cashing in. Auto part makers will also lure investors by their expansion into the EV supply chain. Battery makers and their mineral suppliers will also cash in and scale up. So in spite of depressed new auto market, the big money will flow into the EV supply chain. The covid crisis has helped the investment communities to recognize that ICE investments are a wasteland. So as the money shifts to EVs, we could see the EV supply chain grow at an unprecedented clip, much faster than pre-covid.
So your basic suggestion here is that things cannot change as quickly as Seba's scenario. You might be correct in pressing the most extreme numerical target. However, things can change much faster than most of us expect. Covid is transformative event. Pre-covid BAU no longer applies. Covid has exposed the fault lines in ICE and oil demand. Reallocation of capital can happen just as quickly as Tesla rose from a $300 stock to $2200. The reallocation of capital changes the trajectory going forward. This is at the core of Seba's analysis of disruption. He looks for places where a 10X cost reduction is possible. This becomes disruptive once investors recognize the potential and reallocate capital to the new technology. Capital stuck in the old tech will be destroyed. So once investor start heading to the new tech there is a stampede to exit the old tech. The shift in capital reorients the market much faster than most market participants could have ever imagined. So what I am arguing here is not that Seba is numerically correct in his forecasts, but that he is qualitatively correct in suggesting that disruptive tech transforms the markets much quicker than most participants can imagine. This is why his projections seem so fanciful. They are fanciful because we struggle to imaging how it could all come together so abruptly. But my take on Seba is that we should follow the money. Capital is deployed where investors think it will generate the best returns, but once disruptive tech threatens returns on investment dependent on incumbent tech, capital can take flight abruptly. Ask yourself if it is possible for a legacy automaker to lose 95% of its market cap by 2025. We are a little more comfortable with the idea that capital can lose value rapidly than that production and consumption can shift just as quickly. Yes, the linkages are not 1 to 1, but Seba is really trying to wake us up to how abrupt change can be when capital is in an all out race to enter a new disruptive tech and to flee the legacy tech.
