7 Dying Industries (only one survives)

Introduction

It’s quite the fool’s errand to try to pick exact dates, but I think the deaths of most of these industries are going to happen much more rapidly than people think. There are actually more than seven, but I’ve grouped several of them to shorten the list and make for briefer writing. These industries are severely threatened by one new industry, and more specifically, one new company. Tesla is known for their revolutionary electric car, but it is not primarily a car company. Tesla is an energy company. Though solar is a small part of their business today, it ultimately may become the most significant part of their business model. Regardless, the very presents of electric transportation changes everything in the economy. I’ve put the following in what I see to be a likely chronological order of decline (with some overlap of course).

Republicans have positioned themselves as the “Oracles” of Oil to politically oppose the Democrat’s big government push for green energy. The reality today is that this transition to electrification has nothing to do with politics or global climate change. The reality is that this change is inevitable because of the science of economics. Whether they know it or not yet, consumers prefer electric over gas for everything. The manufacturing simplicity of electrification makes it more cost effective to make over the complicated mechanisms of gas. Technology and economies of scale are making the battery costs plummet. These inevitable economic forces are all pointing in one direction; a total transformation to electric transportation. If you are aware of this reality, you will benefit from positioning your labor and capital accordingly. The following is a detailed look at what to avoid like the corona virus.

Oil production

The oil industry is already in collapse. I feel like I’m way late in writing this as I’ve known this all to well for a while. The first and obvious hints of an over supplied and under demanded global market were exemplified in the Syrian bombing (2019) and the Iran conflict (Jan 2020). Historically these kinds of events would send oil prices to the moon. Instead, oil prices have steadily declined into the $45 range (as of March 2020). Jim Crammer came out for Tesla after resisting it for years, then shortly thereafter, recommended against any oil stocks. I’m surprised it took him so long. (Update) As I’m posting this oil has fallen to $31.

Oil, of course, is not going to completely disappear because, unless we find an alternative to plastic and other petroleum products, we’ll still need its production for those purposes. Yet since fossil fuel is a significant portion of oil consumption (nearly half) It will be the first in the news to take a noticeable hit from the advent of mobile electrification. It won’t take much in terms of percentage for this entire precarious industry to see its core product plummet in price and the industrie’s companies’ stocks collapse.

Until October 2019, I worked smack dab in the middle of the industry. I knew I was in a dying industry but hoped I could figure something out before the collapse effected me. I was wrong. Despite moving to Texas; a state that has beat all 49 others for the most business friendly environment for the last 30 years straight, the company I worked for went out of business. Trust me, this is only the beginning. Adjust your labor and capital accordingly.

New ICE Vehicle Sales

People that get new vehicles have the most options. Certainly, this isn’t a completely homogenous group, yet these new car buyers will have first choice in picking electric over gas. Not all kinds of vehicles have been supplied with alternatives yet, but the Tesla Model 3 has proven to be the most successful car not just compared with other electric vehicles (EV’s), but also with all cars on the market in 2019. Unlike all of the current car companies, Tesla has devoted nearly all of its resources on specializing in the electric car production. As they enter each vehicle type, they will siphon a significant portion of business away from the other car companies. They may have a small capacity compared to the major ICE vehicle production companies, but they are growing exponentially and can borrow as much money as they need.

The fundamentals of manufacturing alone point to the electric car as the preferred winner. Internal Combustion Engine (ICE) cars have some 3,000 moving parts to design, assemble, and maintain. Electric cars have about 50. This order of complexity is expensive for ICE manufacturers to be competitive. Battery production is the main thing that has held back the pricing of EV’s so far. The production of batteries is on the exponential rise and the price is in free fall. Furthermore, Tesla is becoming the foremost monopoly in supply and technical advancement of these batteries so vital to the industry which means that they are leaving the entire world behind. Established Motor companies won’t be able to buy enough batteries from anyone else because no one is producing enough. New car buyers will buy EV’s for the performance, convenience (never needing to go to a gas station again), the durability, and ultimately the price. The switch in buying trends will be dramatic and devastating to ICE makers. Adjust your labor and capital accordingly.

Small Motors New, Used, and Maintenance

Manufacturers of lawn equipment and other small motor tools should be transitioning fairly soon as these should be much easier to convert to electric than vehicles. I bought an electric weed eater (see my video) a few years ago and am elated not to have to mix gas with oil and pull start that thing. I can use it on my yard for weeks without charging it. I will buy an electric lawnmower for the same reasons. In doing so, I’ll also know that it will last a long time. This is just normal with electric. Once the commercial grade versions are developed, that will be game over for gas power. Small motor used sales and repair shops will follow in the painful and inevitable decline. Adjust your labor and capital accordingly.

Used ICE Vehicle Sales

The used car market will begin populating with used electric vehicles. Unlike ICE vehicles, (at least Tesla’s mass market model) they hold their value. According to Carfax.com the average car loses 20% of its value in the first year. According to the latest study by iseecars.com, the Tesla Model 3 not only beat all others, but out performed value retention double that of 2nd place.

This could be a temporary supply and demand effect that is mitigated in the future by increased capacity. I wouldn’t rule that out. However, I think this is closer to what will be normal and ultimately fatal for the entire industry. It’s true that used car dealerships could simply switch to the increasing electric vehicle supply and potential continue business as usual. Yet, the “hot potato” effect of old unwanted ICE cars is going to evaporate capital value of the holders of those vehicles. They won’t be able to get them off the books fast enough. Furthermore, the increased use of peer to peer direct sales on mobile apps may also contribute to the decline of traditional pre-owned vehicle sales outlets. The bankrupting effects of this and the reduced overall market size will make the used car industry a hazard to be in. Adjust your labor and capital accordingly.

Fuel and Oil Change Stations

Another great feature of owning an electric vehicle is never needing an oil change. I recently put high milage synthetic oil in mine from home. I won’t have to replace the oil for a year. This can’t be good for the oil changing service sector as it stands today. Add this infrequency “electrification” and you have an industry I wouldn’t want any part of.

The mass closing of fuel stations should make front pages. This very competitive industry is already a war stricken market. Traffic will decline year after year as each new electric vehicle never makes even one visit for gasoline or diesel. You might think that these gas stations could just add electric charging stations. Some already have. In highway traffic situations, this is a plausible business model. Yet local neighborhood gas stations would be ill advised to do so as the homes all around it will be easily adapted to charge their own vehicles. Can some survive by reverting into a 7-eleven type convenience store? Perhaps. For all others, adjust your labor and capital accordingly.

Mechanical Repair Parts and Services

I’m not sure how large this segment is compared with some of the others, but I think it contends for the top half of the list. Beside your local mechanic, national companies like auto zone will be taking a hit from this declining pool of entities propping of this 3000 parts per vehicle conglomerate. Electric vehicles simply don’t need the high degree of maintenance that ICE vehicles do. The repair and parts services may be on the later end of this fateful conveyer belt of death but they are just as hazardous. Adjust your labor and capital accordingly.

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