Honda Motor

📢 𝐉𝐔𝐒𝐓 𝐈𝐍: $QuantumScape(QS.US) QuantumScape and Honda Sign Solid-State Battery Research Agreement

👉 𝐊𝐞𝐲 𝐇𝐢𝐠𝐡𝐥𝐢𝐠𝐡𝐭𝐬:

➤ 𝐐𝐮𝐚𝐧𝐭𝐮𝐦𝐒𝐜𝐚𝐩𝐞 and 𝐇𝐨𝐧𝐝𝐚 𝐑&𝐃 signed a joint research agreement.

➤ Partnership includes a 𝐦𝐮𝐥𝐭𝐢-𝐲𝐞𝐚𝐫 program focused on solid-state battery development.

➤ Research will target both 𝐛𝐚𝐭𝐭𝐞𝐫𝐲 𝐭𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲 and manufacturing process improvements.

➤ Agreement follows Honda's successful completion of a 𝐭𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲 𝐞𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 of QS batteries.

➤ Honda conducted an in-depth technical study and 𝐜𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐛𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤𝐢𝐧𝐠 of QS technology.

➤ Honda said QS technology demonstrated 𝐜𝐨𝐦𝐩𝐞𝐥𝐥𝐢𝐧𝐠 and unique advantages during testing.

➤ QuantumScape develops 𝐬𝐨𝐥𝐢𝐝-𝐬𝐭𝐚𝐭𝐞 𝐥𝐢𝐭𝐡𝐢𝐮𝐦-𝐦𝐞𝐭𝐚𝐥 battery technology.

➤ QS believes its batteries can enable 𝐬𝐚𝐟𝐞𝐫 and higher-density energy storage.

👉 𝐖𝐡𝐲 𝐈𝐭 𝐌𝐚𝐭𝐭𝐞𝐫𝐬:

➤ Honda's endorsement adds credibility to QuantumScape's 𝐬𝐨𝐥𝐢𝐝-𝐬𝐭𝐚𝐭𝐞 battery platform.

➤ Partnership could accelerate commercialization of 𝐧𝐞𝐱𝐭-𝐠𝐞𝐧 EV battery technology.

➤ Successful development may improve 𝐄𝐕 𝐫𝐚𝐧𝐠𝐞, safety, and charging performance.

👉 𝐄𝐱𝐩𝐞𝐫𝐭 𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭:

➤ "QS technology demonstrated compelling and unique advantages during our evaluation. We see potential for QS technology to add value across a range of applications, including automotive, and we are excited to move forward into the next phase of our partnership." — 𝐀𝐭𝐬𝐮𝐬𝐡𝐢 𝐎𝐠𝐚𝐰𝐚, Chief Operating Officer, Research Center of Excellence, Honda R&D Co., Ltd.

➤ "Honda is a leading global automaker renowned for its engineering excellence and product quality across automotive and other applications worldwide, and its evaluation represents one of the most rigorous assessments of our technology to date. This agreement reflects the growing confidence in QS solid-state lithium-metal batteries to enable safer, higher-density energy storage." — 𝐃𝐫. 𝐒𝐢𝐯𝐚 𝐒𝐢𝐯𝐚𝐫𝐚𝐦, CEO and President of QuantumScape.

Toyota & Honda jumped 13%, GM & Stellantis up double digits. Auto ripple effect.

Tariff drama turns into Dow fireworks.

$Toyota Motor(TM.US) $Honda Motor(HMC.US) $General Motors(GM.US) $Stellantis NV(STLA.US)

The biggest mistake $Tesla(TSLA.US) bears make is slapping an auto industry P/E on TSLA’s EV business. From long-term $Tesla(TSLA.US) bear Drew Dickson’s latest report: “We can make a simple determination of what the automobile business is worth. And, by implication, the balance must be these other "Musk Options." In auto-land, the average P/E for Ford, BMW (XE:BMW), Mercedes (XE:MBG), GM (GM), Renault (FR:RNO), Stellantis (STLA) and Volkswagen (XE:VOW) is 6.5x. Include Honda (JP:7267), Toyota (JP:7203) and SAIC (CN:600104), it is 7.7x.”

“If we assume the Tesla automotive business - despite all its deteriorating metrics - is a better business and deserving of a higher multiple than each of them, perhaps we can say it should be worth a P/E of 10x. Maybe we could even say 15x. At a 2025 P/E of 15x, Tesla's auto business would have market cap of $100 billion. That is still a heck of a lot, more than any other automaker except Toyota (which generates 5x more sales and Ebitda). And if we assume we are close, that means that the market already values Tesla's FSD, robotaxis, Optimus and the energy business at roughly $1 trillion. And for the Tesla fans laughing at our valuation of the automotive business, even if Tesla's automotive business were worth twice that amount (a P/E of 30x), the "Musk option" would be valued at $900 billion. In other words, Tesla's share price already assumes - and prices in - a tremendous amount of success for Tesla's non-automotive manufacturing businesses.”

While we have high respect for Drew as a reasonable bear, we believe his approach is flawed because P/Es are based on forward revenue and earnings growth rates of businesses, and not the industry in which they compete. Does $Cava(CAVA.US) trade at the same P/E as $McDonald's(MCD.US)? Does $On Holding AG(ONON.US) trade at the same P/E as $Nike(NKE.US)? Does $Costco Wholesale(COST.US) trade at the same P/E as $Target(TGT.US)? The answer to all of these is of course not.

To say that $Tesla(TSLA.US) should trade at no more than a 15x P/E just because GM, F, STLA, VW, and TM trade at 7-8x EPS ignores the fact that TSLA is 100% EVs which are growing at 25-30% per year while ICE vehicles are in a state of permanent decline. Of course there should be a huge difference in P/Es between EV manufacturers and ICE manufacturers given stark differences in growth prospects.

We continue to like $Tesla(TSLA.US) longer-term but remain concerned about the near-term asymmetrical risk/reward associated with the Austin robotaxi test that begins 6/22. We also worry that the more affordable vehicles targeted for 3Q will be lower cost, lower priced M-3 and M-Y that are not new form factors and do not increase TSLA TAM but instead cannibalize the more expensive M-3 and M-Y trims. Finally, we believe TSLA 2Q volumes are likely to again disappoint (~380K -14% YoY vs Street consensus of 394K -11% YoY) as the China EV price war led by $BOYD Gaming(BYD.US) and the U.S./European brand taints take their tolls on 2Q deliveries to be announced 7/2.