Listen closely. It's the sounds you don't hear that count. The electric car revolution is happening.
Balding and mustachioed, Dieter Zetsche does not look the part of a futurist. Still, the Mercedes-Benz chief is pushing the 92-year old automaker headlong into the future. It's electric.
The internal combustion engine is on its way out, and it's a big opportunity for investors.
Electric propulsion has been softly creeping up on us for years. Prior to the new millennia, Toyota's (TM) - Get Report Prius was a hit with the Sierra Club set. Tesla (TSLA) - Get Report pushed the market beyond green patrons with a fleet of no compromise electric vehicles. A Tesla SUV recently crushed a $530,000 gas swilling Lamborghini. I commute on an electric performance motorcycle made in Santa Cruz, Calif., called the Zero S. Electric has also piqued the interest of luxury car markers
In addition to the 2019 Mercedes EQC, all electric SUV, Porsche is bringing Taycan to market. The head turning, swooped, stretched Targa sports car looks more concept than reality. And the Audi e-tron and the Jaguar I-Pace are muscular EV crossovers that look fast even when they are parked.
These vehicles are not supposed to be for soccer moms. They are designed for eye-stabbing flashes of neon light. They beg for drivers with a heavy foot.
They are being called Tesla killers, but this characterization misses the point.
The Silicon Valley carmaker is an easy target. It has been plagued with production woes since inception. It can't keep top brass, and Elon Musk, its brilliant chief executive, is an emotional mess eager to please. Too often, the result is over-promise.
The Germans are promise keepers. They know how to make cars. But they are not going to kill Tesla, at least not intentionally. In a way, they are surrendering to Musk's vision of the future of cars. They are migrating production to electric propulsion.
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Zetsche says the EQC is the first vehicle of the next generation of Mercedes. He says the company has no choice but to go all-in on electric propulsion because they are cheaper for operate, more efficient and fun to drive.
Mercedes is investing $12 billion on the conversion. It will begin building EVs in six plants, on three continents. By 2022, the company will have 10 EV models, touching every part of its product line, from tiny subcompacts to large SUVs.
In March, Automotive Newsreported Volkswagen, the world's largest carmaker by volume, will begin making EVs in 16 factories. By 2025, there will be 80 new EV people movers.
Chief executives at automakers across the globe are talking without speaking. Large investments in electrification indicate the future of motor vehicles will be electric. Investors will be wise to look past zero-sum game theories. The market for EVs is set to grow exponentially. An entire new ecosystem is evolving.
Monolithic Power Systems (MPWR) - Get Report designs the integrated circuits to make the power systems more efficient. While this seems like a like a small thing, as cars and trucks move to electric propulsion, every efficiency becomes magnified.
Today, cars have an average of $350 worth of semiconductor content. Consumers take for granted their vehicles with have modern infotainment systems, safe lighting, advanced driver assistance systems and smart electronic devices. However, USB charging, electric mirrors, seats HVAC systems and LED light all use sophisticated integrated circuits. And the cameras, light based radar and ultrasonic sensors necessary for the next generation of self-driving cars will only increase IC use.
All of these will benefit from reduced power consumption.
Monolithic is currently working with every major auto parts supplier in the world. Through Delphi, Bosch, Panasonic Automotive, Magna and Mitsubishi Electric, the company reaches end customers such as Ford, Nissan, BMW, Mercedes, GM (GM) - Get Report , Volvo, Toyota, and Volkswagen (VLKAY) .
The company reported revenues of $139.8 million, for the second quarter ended June 30, a gain of 24.6% over a year ago, with gross margins of 55.4%. In 2017, sales surged 21.7% to $471 million, year-over-year.
Monolithic is a quiet company. Don't be fooled. As cars go electric, its shares appear set to scream higher.
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I have a position in Monolithic Power Systems.