Car companies are becoming mobility businesses as cutting edge vehicles shift from internal combustion engines to electrification. It’s a huge opportunity for investors.
Kia Motors revealed the EV6 last week to gasps from the automotive world. The sleek SUV generates 557 horsepower and blows the doors off gas-powered Lamborghinis, Mercedes, Porches and Ferraris.
The message is clear. Electric vehicles are the new smartphones and it is only a matter of time before everyone wants one.
That is still not a popular opinion. Many investors still believe widespread adoption of EVs is a decade away. The perception is while the vehicles are cool and futuristic, they are not practical for most drivers who worry about driving range or the cost of ownership.
It’s a theory. Unfortunately it is not borne out with facts.
Kia managers claim the EV6 will get 316 miles on a full charge. The SUV can travel 62 miles after only a 5 minute top-up. And because the vehicle is based on a skateboard design with electric motor regenerative charging, there are many fewer moving parts and no need for regular brake replacement. The platform consists of a chassis, batteries, electric motors, inverters and integrated circuitry for HVAC and infotainment. This should mean much less maintenance.
Traditional vehicle owners should be so lucky. It is amazing how often a simple oil service morphs into a $600 repair for worn out brakes.
Saving money on repairs is a powerful incentive for consumers to make the switch to EVs. However the single biggest motivator is likely to be simple word of mouth. EV buyers are getting all of the coolest advances in automotive technology first.
There is a good reason for this: Digital transformation.
Electrification is a brand new architecture unsullied by legacy sub platforms. Powering up digital innovations like actual onboard computers for advanced assisted driving, more functional camera systems, and always-on connectivity is much easier when the entire substrate of the vehicle is a battery, and traditional copper wires have been replaced with fiber optics.
The development of EV platforms is eerily similar to smartphones. In the same way touchscreen interfaces changed the face of mobile communications, the digital architecture of EVs is pushing forward futuristic new features for the auto industry.
It is not a coincidence that industry executives are referring to their comanies as mobility brands.
Kia is playing to this notion full throttle. EV mobility means the best performance, the safest passenger cabin and the most advanced feature set in its fleet.
The EV6 with the GT performance package has a 0-60 mph time of only 3.5 seconds; towing capacity is 3,500 pounds; augmented reality turn-by-turn navigation; a pair of immersive 12 inch curved flat panel displays for instrumentation; and software and sensors for level 2 self-driving. And in a pinch the EV6 is an emergency power source for your home. It’s a killer combination of features that is becoming the norm for EVs.
Globally the category represented only 1% of all vehicles sold in 2018, according the latest study from the International Energy Agency. A year later 2.7% of all cars and trucks manufactured used batteries in some capacity. The IEA foresees this number rising nearly 20-fold by 2030.
A stealth way to play this incredible growth is Monolithic Power Systems (MPWR). The Kirkland, Wash.-based company designs the integrated circuits to make the power systems more efficient. This might seem quaint, yet as cars and trucks transition to electric propulsion every efficiency is magnified.
The company is currently working with every major auto parts supplier in the world. Through Delphi, Bosch, Panasonic Automotive, Magna and Mitsubishi Electric, Monolithic ICs reache end customers such as Ford (F), Nissan, BMW, Mercedes, General Motors (GM), Volvo, Toyota (TM), Volkswagen (VWAGY) and Kia.
The EV6 may turn heads by zooming past high priced Mercedes and Lamborghinis yet the real story is EVs are going mainstream. They offer the best performance, greatest safety and biggest bang for a driver’s buck. Car companies got there by building new digital platforms dependent on semiconductors.
Investors should buy Monolithic shares into weakness. The biggest part of the growth cycle is forthcoming.