Attack of the Vacuum Cleaners

Theme Attention

Author: Daniel Seiler

Date: April 5, 2024

For my floor cleaning, Xiaomi is indispensable. My fleet of Xiaomi robot vacuums departs punctually for their rounds at 2 pm every Tuesday and Thursday, exemplifying their precision and reliability. Occasionally, I watch them via the app, admiring how they map the apartment and adhere to the invisible borders I've established. It's fascinating.

Yet, what's truly astonishing is Xiaomi's expansion from the living room to the streets—a territory seldom explored by vacuums. The company has launched the SU7 in December 2023, an electric vehicle with a price tag below $30,000. The SU7 is remarkably fast, rivaling the speed of the most esteemed models from Zuffenhausen and could easily be mistaken for one at a quick glance (a topic that surely deserves its own blog post—take a look for yourself). While it shares the visual elegance of the high-end Taycan, which is priced well over $100,000, the affordability of the SU7 stands out remarkably, even to a Porsche enthusiast.

But you might wonder, what does this have to do with theme investing?

The electric vehicle (EV) theme has been a buzzworthy topic in recent years, primarily propelled by Tesla and the charismatic leadership of Elon Musk. This attention also led to various investment themes within the broader concept of future mobility, including developments in electric vehicles, green cars, hybrid technology, and smart mobility solutions, batteries, etc.

The SU7's aggressive pricing reflects a trend often associated with established rather than growing markets, which could suggest that the EV market is transitioning toward maturity. However, it's too soon to label the EV sector as mature, especially with traditional vehicles still dominating the market.

Nevertheless, the theme is deemed to be waning, as indicated by our attention score. In February, a dip in our attention score suggested that interest in EVs might be diminishing, evidenced by only half of the news coverage being positive. This trend was later corroborated by lower-than-expected delivery numbers from Tesla and BYD in the first quarter, signaling a cooling demand for EVs. Further complicating the situation is China's sluggish economy and the potential implications of a Trump presidency, which could hinder the progress of EV adoption in the U.S.–funny enough, a situation Tesla might find favorable given the stiff competition from China.

In summary, it might be the moment to reconsider an exclusive focus on electric vehicles. Investment funds with a sole focus on future mobility might find the landscape increasingly challenging without the capacity to adapt their strategies. The arrival of a vacuum cleaner in the shape of an affordable car underscores this shift. This kind of innovation, offered at a fraction of the price of high-end models, suggests that profit margins in the EV industry could be subject to compression. Given these signals, it may indeed be time to 'hoover on' and explore fresh avenues.