Motley Fool Money
Car Sales Are Soaring
Thu Jul 06 2023Description
The episode covers the latest trends in the car sales industry, focusing on the rise of new car sales and Tesla's performance. It also discusses the challenges faced by GM in competing with Tesla in the EV market. Additionally, the episode explores the potential of VTOLs in the transportation industry and provides insights into real estate investing strategies in the current market.
Insights
Car sales are experiencing a significant increase
Car sales have risen by 13% in the first half of the year, driven by pent-up demand, easing supply chain restrictions, and consumer preference for new vehicles. The shift towards new cars over used cars is notable.
Tesla's inventory and gross profit per vehicle pose concerns
Tesla delivered a large number of vehicles in Q2 but produced more than it delivered, leading to a rise in inventory. This could result in inventory write-downs and deep discounting. Additionally, Tesla's gross profit per vehicle has been decreasing recently.
GM faces challenges in the EV market
While GM has seen significant sales gains, its EV sales remain relatively low compared to overall sales. The company plans to roll out EVs on its Altium platform, starting with the Silverado. However, GM needs to overcome Tesla's strong brand advantage in the EV market and focus on building a strong brand image for its EVs.
VTOLs show promise in transportation
While flying cars are not expected to arrive soon, VTOLs (vertical takeoff and landing vehicles) offer a more promising alternative. Public companies like Vertical Aerospace and Archer Aviation are active in the VTOL market. Partnerships with established companies such as Toyota and United indicate positive signs for VTOL manufacturers.
Real estate investing strategies adapt to market conditions
Real estate investing tactics vary based on market conditions. The popular buy, rehab, rent, refinance, repeat (BRR) strategy is currently less attractive. However, flipping houses can still be lucrative despite correcting home prices. Cash flow and value ads are prioritized by real estate investors over appreciation.
Institutional investors adjust their approach in the real estate market
Institutional investors like iBuyers have temporarily left the market due to operational complexities and supply chain issues during COVID. The instant offer model may still have potential but requires refinement. Institutional players are scaling back their purchases of single-family rentals in certain cities. Small entrepreneurs own the majority of rental properties nationally, while institutional investors have more control over regional markets. Institutional investors are expected to re-enter the market when prices hit bottom.
Chapters
Car Sales and Tesla
00:05 - 15:19
- Car sales are up 13% in the first half of the year, with average prices rising to $3,000. The increase in sales is driven by a combination of pent-up demand, easing supply chain restrictions, and consumers' desire for new vehicles. There is no incentive for dealers to lower prices, making it a challenging time for buyers looking for deals. The cycle between new and used cars continues to shift, with new cars currently being more popular.
- Tesla delivered over 46,000 vehicles in Q2 but produced more than it delivered by about 13,000. Tesla's inventory has been rising faster than overall sales, which could lead to inventory write-downs and deep discounting. Gross profit per vehicle at Tesla has been decreasing recently.
- Incentives in China may be limited for Tesla, as other car companies have agreed to stabilize prices and avoid abnormal pricing. China is an important market for Tesla, with revenue almost tripling from 2020 to 2022. Tesla still has influence in China but may not be able to eliminate local Chinese competitors like Nio through price incentives. The Chinese government wants Tesla to succeed in China and will support them despite the ongoing US-China conflict. Elon Musk has created a cooperative relationship with the Chinese government to protect Tesla's business interests in China.
- GM had significant sales gains but only a small percentage of those were EVs. GM plans to roll out EVs on its Altium platform, starting with the Silverado. GM faces challenges in competing with Tesla due to the latter's strong brand advantage in the EV market. GM needs to focus on building a strong brand image for its EVs alongside improving production capabilities.
EV Market and Real Estate Investing
07:23 - 29:28
- Tesla has a significant brand advantage in the EV market. GM needs to focus on creating real desire for their brand. GM should aim to have a Corvette moment with a great EV sports car.
- Flying cars are not arriving soon, but VTOLs (vertical takeoff and landing vehicles) are more promising. Public companies in the VTOL market include Vertical Aerospace (EVTL) and Archer Aviation (ACHR). Partnerships with established companies like Toyota and United can be positive signs for VTOL manufacturers. Partnerships do not guarantee commercial approval or success.
- Real estate investing tactics shift depending on market conditions. Buy, rehab, rent, refinance, repeat (BRR) strategy is less attractive now. Flipping houses can still be lucrative despite correcting home prices.
- Flipping is still lucrative despite home price corrections. Stabilized assets are increasing in value, while properties needing renovations are experiencing a deeper correction. Cash flow and value ads are more important to real estate investors than appreciation. Amortization or loan pay down can also generate yield in correcting markets. Experienced investors are buying more now than before.
- Institutional investors like iBuyers have left the market due to operational complexities and supply chain issues during COVID. The instant offer model may still have potential but needs refinement. Institutional players are scaling back their purchases of single-family rentals in certain cities. Small entrepreneurs own the majority of rental properties nationally, but institutional investors can control regional markets. Institutional investors will likely re-enter the market when prices hit bottom.