California Gas Prices Surge, Ross Gerber Says It's 'Time To Buy an EV'

Ross Gerber warned that California's rising gas prices make EV ownership more attractive and recommended Rivian and Kia as alternatives to Tesla. He highlighted a Tesla FSD limitation in direct sunlight and predicted a potential 50% plunge in Tesla's stock this year, citing waning popularity and reporting an offload of roughly $60 million in Tesla shares.

Analysis

Higher regional fuel costs function like a targeted subsidy for EV ownership: a $1/gal increase raises annual fuel savings versus a 25-mpg ICE driver by roughly $480 (12k miles/yr), materially shortening payback on a $7k–$12k EV premium by ~6–18 months depending on assumptions. That math flips purchase elasticity in near-term markets where consumers face concentrated pump pain; expectation: orderbooks and dealer trade-in flows will tilt toward lower-priced EVs and brands with large dealer footprints before margin-accretive premium EVs can scale production.

Software reliability and perceived safety are a second-order tax on EV economics. Persistent driver-assist edge cases (glare, edge-case sensing) inflate insurance and perceived residual-value risk; a 100–300bps uptick in implied insurance/financing costs erodes the fuel-driven payback advantage and compresses EVs’ total-cost-of-ownership edge unless OEMs or insurers reduce premiums. That creates a bifurcation: vertically integrated players that can control HW+SW (and quickly remediate edge failures) preserve residuals; volume OEMs with broad dealer channels can capture near-term share but face margin/recall risk.

Market mechanics: headline-driven retail flows and high-profile insider exits compress sentiment and elevate IV in the short run (days–weeks), creating fertile ground for option strategies. Over 3–12 months expect differentiated winners: high-distribution, low-price EVs and charging infra; over 2–5 years the winners will be those solving software reliability and residual-value — watch order cadence, lease-inventory, insurance rates, and warranty reserve revisions as early indicators that consumer TCO assumptions are shifting back or widening further in favor of EVs.

Key Decisions for Investors

• Pair trade (6–12 months): Long RIVN equity (or a 9–12 month call spread to limit capital) vs short TSLA via a 6–9 month put spread. Size so max loss = 1–2% portfolio; target asymmetric payoff where a 20–40% relative move in RIVN/TSLA delivers 3–5x return. Rationale: capture share rotation toward non-Tesla, dealer-distributed EVs while hedging market volatility.
• Direct bear hedge on TSLA (3–6 months): Buy a TSLA 6-month put spread (buy nearer-ATM put, sell farther OTM) risking defined premium ~0.5–1% portfolio for potential 4–8x payoff if sentiment/earnings disappoint or regulatory headlines on FSD re-accelerate. Trim if IV collapses or FSD remediation announcements materially reduce uncertainty.
• Charging & services play (12–24 months): Buy CHPT or EVGO sized to 1–2% portfolio with 12-month horizon. Catalyst set: regional EV registration growth, utility rate approvals, and fleet electrification announcements. Exit or rebalance if charging utilization growth < 15% YoY or capex guidance delayed.
• Battery cycle/recycling exposure (12–36 months): Initiate a small long in a recycler/secondary-supplier (e.g., LICY) to capture rising material recovery economics as incremental EV conversions lift feedstock value; target 2–3x upside over 18–36 months if lithium/Co/NMC supply tightness persists, cut if new mine/supply announcements reduce spreads.