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Are electric vehicle investors delusional? That’s what Research Affiliates chairman Rob Arnott thinks. Justina Lee reports at Bloomberg:
The electric-vehicle craze is a classic sign of a “big market delusion” that has entrapped investors throughout history, according to quant pioneer Rob Arnott.
The 600% rally in a year that sent the combined value of eight manufacturers to $1 trillion is pricing every firm as a major winner in the clean-energy boom.
Yet just as the once-highly valued PalmPilot lost in the smartphone revolution, not all of them will succeed in the EV age, the Research Affiliates chairman co-wrote in a new paper.
“All of these companies are priced as if they are going to be huge winners, but they are competitors!” Arnott said alongside Lillian Wu, a researcher at RA, and Bradford Cornell, a finance professor at the University of California, Los Angeles. “They cannot all assume dominant market share in the years ahead!”
While these stocks are much more highly valued than traditional carmakers, their total sales average about 2% of the latter’s over the last three years.
Nonetheless, EVs have been a lucrative wager beloved by retail traders and tech evangelists such as Cathie Wood on the conviction that the fight against climate change will make such cars the go-to choice of the future. Led by Tesla Inc., the stock mania intensified in 2020 as the election of U.S. President Joe Biden boosted confidence the switch to clean energy will accelerate.
That rally has recently taken a breather, after rising rates caused investors to rethink the priciest parts of the stock market.
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