The electric vehicle market has been a bright spot, with companies pumping billions of dollars into the sector to benefit from the transition from gasoline cars. While Tesla appears to be a market leader with billions of dollars’ worth of EVs already sold, Warren Buffett believes no single company will ever own the sector.
Electric Vehicle Rush
Tesla has enjoyed a monopoly thanks to being the first automaker in the industry. However, with the likes of General Motors and Toyota Volkswagen, among others, investing billions of dollars in securing supply chains for electric batteries, its competitive edge should come under pressure. Buffett has been quick to remind investors that Ford did dominate the car market at one point but ended up losing its edge with the entry of more players.
The push to develop EVs has seen companies burn billions of dollars as they try to integrate new advanced features that will appeal to the masses. General Motors is one of the companies burning cash as it tries to catch up with Tesla. Ford is also fresh from reporting a $722 million loss for its EV division, affirming how the EV sector is capital-intensive.
Low Mortgage Rate Impact
Meanwhile, the real estate sector is feeling the pressure amid deteriorating economic conditions. Homeowners are no longer listing their houses for sale after being put off by the low mortgage rates. The 30-year mortgage rate declining to its lowest level on record of 2.96% has left many homeowners with no option but to stay put.
Consequently, inventory for home listing has declined significantly. The low supply amid high demand has also seen prices increase significantly, much to the disadvantage of new homebuyers or people looking to upgrade houses. In April, the total number of houses listed fell to 392,016 homes from 497,844 listed the same month last year.
Stock Markets
Meanwhile, the US stock market remains muted as investors continue to digest corporate earnings and key economic data. The much-awaited inflation report is expected to trigger some volatility as it is expected to influence FED policy going forward. Additionally, investors are also paying close watch to much-awaited talks between President Joe Biden and House Speaker Kevin McCarthy over the debt ceiling.
In contrast, stocks in Asia and currencies lost some ground as investors reacted to slowing imports in China, which hints at a slowing economic recovery. Imports in April fell by 7.9%, raising serious questions about future demand. In contrast, exports beat estimates by increasing by 8.5%.
