A little background first. I waste time online (wow, hoocoodanode?). One of the many, many, many ways I waste time online is reading Business Insider (because Blodget! Not really. That's sort of a joke that isn't funny to anyone but possibly me). Their house style is terrible, both in the headlines (n things that you need to know about x or you will be shocked by z or wtf. Usually with pictures of Elon Musk or Richard Branson. It's like some sort of celebrity fan site, where the celebrities are really rich CEOs. Anyway. They have been covering, in a sort of, hey, this guy is ZANY! way Adam Jonas over at Morgan Stanley. Here are some articles:
"mobility" will replace "autos"
I, personally, want to know why the focus is so relentlessly on Jonas. Did Ravi Shanker pay Business Insider to leave his name out of this coverage? Or does Jonas have a buddy that is getting BI to cover him preferentially because he's hoping to plug a book in the next year or so? Someone maybe thinking about a career as a Futurist, perhaps?
Tesla may someday build a pickup truck.
See headline. Rationale is that Ford already warned on macro issues and, further, GM is behind the curve on spending money and engineering resources on modularization and lightweighting.
Used car prices may start to descend as people can afford to buy new cars. There are some flaws in this theory, but if true, it would be a good thing. Used car loans are averaging over 5 years now, which suggests people are finding them super unaffordable. I suspect that the real problem is that used cars _used_ to stay in the region where they were sold new (a car originally sold in Seattle might make it down to Portland, OR or vice versa, but you wouldn't be finding it in New Orleans unless its owner moved there and drove it) and they don't anymore. The used car market is very liquid and very national, so lower income regions may still have cheaper housing -- but they no longer enjoy cheaper used cars. But that's just my theory.
After unsuccessfully attempting to find this report ("Death of an Auto Analyst") online, I called someone and found out how to search for it on the MS site (you have to have an account -- it's under research and NO you cannot search by analyst name, at least not if you want to find it. And if you are searching for the car rental report, don't use rent a car or "rent-a-car" in the headline search because the engine will strip out stuff and then not find it. Honestly, whatever you think about MS being slugs as houses go, their online services will only support that theory.) so I could read it myself. BI is actually not taking this stuff out of context. Jonas and his co-authors are making extreme statements without qualifiers.
The biggest issue with the transition they are predicting is actually present in the BI summary:
"Jonas doesn't say exactly when he expects steering wheels to be a thing of the past, but he compares the coming change to the switch from horse-drawn carriages to automobiles."
The statement is even more extreme in the original.
"Fully autonomous (100% autonomous - as in NO STEERING WHEEL) will be here far sooner than the market thinks. A cursory read of the news clippings at the dawn of the 'horseless carriage' more than 110 years ago can help open the mind."
The transition from horses to cars was _insanely_ slow and it didn't go in a straight line, either. In rural areas in the depression, it was not that uncommon for people who had once owned a car to leave it parked and use horses and wagons instead, because food for the horses had become cheaper than fuel for the car (so I'm not talking about Amish and others who converted late for religious or cultural reasons -- I'm talking about people who switched and briefly switched back).
Here's the one that really made me think Jonas was nuts:
The argument is that gas is cheap and not likely to go up and stay up any time soon, so Ford perhaps erred in lightweighting the F-150. Jonas _himself_ recognizes that while customer concerns about running costs was a factor in switching to aluminum,
"Sure, Ford needs to achieve higher overall MPG targets to meet looking EPA regulations."
(The quote is of BI summarizing the MS analyst group that includes Jonas.)
None of it makes sense anyway; for most of the country, gas may be cheaper but it isn't exactly cheap and F-150s tend to guzzle it, especially when towing. And it's not like they lightweighted it that far anyway; the lightest version of the F-150 still has a curb weight over 4K pounds.
There are more. The primary author of Jonas pieces at BI seems to be Matthew Debord (at least currently), but virtually everyone who writes for BI seems to produce a piece on Jonas sooner or later, often as part of the Musk/Tesla cult coverage.
I spent a bunch of time trying to understand the report (not on BI) about car rental and was not tremendously successful. I may write something about that later, but analyst coverage suffers from some predictable problems and this stuff has those predictable problems in job lots. _Good_ coverage (where the writer follows a stock or sector over many quarters, has established contacts in the industry and a good feel for macro issues and how they interacts with the business cycle as experienced by that particular industry) is inherently fairly boring. "Unemployment continues to drop and sales in this sector are increasing in tandem" type of thing. Or, "a major fire in a crucial plant continues to limit availability of parts for product y, limiting sales growth". Quite frequently, "Unexpectedly high or low or both amounts of precipitation during a particular season impacted planting, harvesting or anywhere in between of agricultural commodity n, resulting in a historically high or low price). And for a variety of reasons, most of the people who really need to know this stuff already know it by the time the research report comes out -- I'm not sure who the research is aimed at, altho I sort of suspect it is for people doing portfolio type investing and you need to avoid totally screwing up and you never do a deep dive into any one industry never mind one particular stock.
When analysts make predictions, their audience is wildly uninterested in anything that extends more than 2 years into the future. Other than a buy-and-hold long strategy, there is no way (and no I really don't want to hear about LEAPs seriously, you think I don't know?) to use that kind of information. Even knowing ahead of time what was about to happen to Kodak, for example, didn't necessarily help because Kodak's biggest earning years happened so late in the overall game. What is going on in these auto analyst reports is someone doing some decent bread-and-butter stuff (Hmmm. People who drive pickups tend to be conservative -- the kinda guys who want Steel not Aluminum, and who are going to be suspicious of anything they can't bash the dents out of themselves. What are they going to think about Ford's decision to lightweight the F-150? You can't focus on the need to do it for regulatory purposes driven by global warming -- that is not going to sell that F-150 to a red blooded American in the Midwest. Is this going to hurt Ford? And then basically present that thesis in a way that a coastal, finance industry reader can relate to. Oooh, Ford got a little too far ahead of themselves! Danger!), some cult stuff (boy, they love Tesla), and some long-term trend stuff. Somewhere along the way, they are getting a ton of pushback on the long-term trend stuff, and they are doubling down (you can really see this in some of the language, even in the quotes making it through to BI. "We really believe", the destination is "crystal clear").
I wish the long term trend analysis they are producing was actually good. But I'm not convinced it is. Their history isn't good enough for me to believe their "history rhymes" approach. And they keep asserting weird stuff like, traditional car rental isn't going to co-exist with Uber type stuff. Not to mention overselling the reduction in private ownership. They have this complicated underutilized asset argument that appears to completely ignore the difficulty of sharing vehicles that are needed across a suburban landscape for a few minutes here and then a few minutes there and then a few minutes somewhere else, meanwhile juggling kids' car seats and boosters and so forth. Never mind self-driving. We need car safety equipment that doesn't require aftermarket seating apparatus.
I could go on, but I already have so I'll stop at least for now.