RE:RE:RE:Been watching this onehawk35 wrote: Hi Divies. EV is actually a concern now for DIV. The market is weighing heavy on DIV with so much riding on one company. And that one company is facing unanswered questions. The market doesn't like unanswered questions.
The dividend is safe for a few years but I don't see much share price appreciation due to this overhanging issue. I'm holding back from investing here because I like good dividends and good share price appreciation. I don't see both happening unless DIV diversifies into other areas.
It will take a while for EVs to take over for multiple reasons.
The first reason is the manufacturing capacities. It takes around three years to convert a plant to EV production. To back that production, you need battery manufacturing facilities as well. While many plants are being converted, the production in 2025 will still be limited for new vehicles.
The second reason is the metals mining capacity. There isn't enough lithium being extracted today to even supply all the projected EV vehicles being designed right now. This is why Tesla is actually thinking about buying lithium mines. Cobalt is also a problem. Developping new mines takes a long time since they all have their own environmental challenges. This will soon become the bottleneck in producing new EVs.
The third reason is the supply of older vehicles. With EV batteries having 6-10 years of life regardless of mileage, and with the cost of a battery replacement being around $20k (we'll get to the cost/technology issues next), the EVs don't make good "older" vehicles. This needs work and development to take over gas vehicles.
The fourth reason is the cost of EVs. While it was predicted that the cost of EVs would go down, they haven't really. That's because demand is too high, so while there are efficiency gains, the losses in further capital expenses required and higher material costs have stopped battery prices from coming down. Which means EVs right now mostly target the richer markets. The cost/usage of EVs need to go down significantly for market wide adoption (and the cost of batteries for cars that last longer than 6-10 years). It could be argued that gas engine cars prices are also going up, but the result of that has been higher used car prices because the new cars cost too much for a large segment of the population.
The last reason is the technology. It needs evolution in the sense that in order not to run out of metals to build batteries, we will need technology that gets more out of smaller batteries. They're working on it, but commercial use for the new technologies likely wont come before 10-12 years, and in the meantime if demand is there the bottleneck will be lithium and cobalt production.
So, for all those reasons, if you look at it rationnally, gas engine cars still have a good number of years ahead. Mr Lube's probably have another 5 years of expansion before them at the moment. After that, they probably will have to look at new offerings.