Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Where are the Opportunities for Investors with Electric Powered Cars?

Companies / Renewable Energy Aug 20, 2009 - 03:47 PM GMT

By: Hans_Wagner

Companies

Best Financial Markets Analysis ArticleSpeculation on the prospects for electric cars and their impact on the world’s economies make for interesting chatter. As China, the U.S. and European governments step up their stimulus programs to encourage electrification of vehicles, investors are starting to take notice. The question is which industries offer the best investing opportunity.


The Tesla Motors Roadster is expected to deliver 200 to 240 miles per charge, depending on driving conditions and usage. According to General Motors, the Chevrolet Volt, when it finally hits the showrooms, will get 40 miles between charges. The difference is due to the size of the batteries used to power the car. In the Tesla’s case there are more batteries installed on the car, as it depends only on battery power. The Volt will have a small gasoline engine to help recharge the batteries beyond the 40-mile limit. Other hybrid-eclectic vehicles such as the Toyota Prius also use a small gasoline engines to help charge the battery and in some cases add power to the wheels when necessary. The electric cars can be recharged by plugging the car into the power grid using a special adaptor, though some can be charged through the standard household electric outlet.

China has set a goal of producing half-a-million electric cars annually by 2011. To help stimulate this goal they have announced they are investing $1.4 billion in R&D. The United States has committed $2 billion in stimulus spending to help design and manufacture better batteries. Vehicle manufacturers are receiving help to the tune of $25 billion form the U.S. government to retool their production lines so they can produce larger number of fuel-efficient vehicles, including electric ones.

As more electrified cars and trucks move to the mainstream, they will require some significant changes in several industries if they are to be commercially successful. While some people may believe the move to electric cars is a long way off, the current drive by several major governments should not be ignored. The power trains, battery, and materials industries will each see investing opportunities.

Electric Power Trains

As shown by the success of the Tesla, start-up manufacturers are already making small inroads into the electric car industry. Faced with large legacy engineering and manufacturing processes, the incumbent auto and truck manufacturers must deal with the challenge of operating their existing vehicles while they introduce new vehicles including electric ones. Most of the vehicle manufacturers have outsourced all vehicle components other than engines and drive trains. Electric and hybrid-electric vehicles use significantly different engines and drive trains than your traditional gasoline or diesel powered cars and trucks. As a result, many of these companies must completely redesign their current engineering and manufacturing processes to adapt to the new electric power trains.

Controlling battery design and production will be a core skill that will help to differentiate a car or truck. If your car or truck can go 25% farther on the same charge, you will have a significant competitive advantage. In addition, the technology to manage power will require investment in electronics and software that is foreign to the auto manufacturers.

These new power trains open the door to innovations and start-up firms to capture a significant share of the market, as the traditional vehicle manufacturers wrestle with their transition from their current emphasis to new hybrids and all eclectic drive trains. As a result, many traditional vehicle manufactures will collaborate with or acquire these new firms. For example, Daimler A.G. has acquired nearly a 10 percent stake in Tesla Motors, which remains privately held.

Companies such as BorgWarner Inc., who produces the single-speed gearbox for the Tesla Roadster, will have to adjust their design, engineering, and production approach to meet the challenges of electric vehicles.

Battery Industries

The potential to displace oil as the power source for millions of vehicles is an interesting opportunity. Governments in China, the European Union, and the United States are trying to encourage industries to develop world-class battery technology, so they can become the world leader. Like many industries, the value of the product will shift from the basic components to total systems. Today, batteries are comprised of cells whose chemistry generates electricity. While important, cell chemistry is likely to become a commodity with little to differentiate it from others. For example, battery manufacturers have accomplished the transition from lead battery technology to lithium-based chemistry.

The most successful battery manufacturers will be the ones who move to system level capabilities designed to support specific vehicles. These systems will use electronics and software to offer power and thermal management capabilities that optimize the battery’s performance for a specific vehicle. This will require a more complex engineering and production capability. It will also require the battery manufacturers to work closely with the tier one drive train manufacturers and the auto manufacturers themselves. To succeed the battery manufacturers will have to develop significant new skills and capabilities so they can meet the needs of each vehicle. This will require substantial financial strength as well.

Engineers estimate that the cost of a battery for a plug-in electric car that gets 40 miles before it needs recharging is $11,800. This cost increases to $24,000 for a car that gets 100 miles per charge. The cost of a battery for a common laptop runs $50 to $100. This gives you an idea of the opportunity for battery manufacturers. If the world were to see 6 million electrified vehicles sold per year, the market could be greater than $70 billion. The cost of a battery will decline as volumes rise and economies of scale are achieved. Some analysts estimate we should expect a six to ten percent drop in the price of an equivalent battery over the next ten years. To achieve this, battery manufacturers will have to invest substantial sums in engineering and manufacturing.

Another challenge the battery manufacturers face will be how they deal with warranty issues. Today, these manufacturers have a relatively small exposure to warranty problems. Probably the largest has been problems associated with several laptop computers that have high failure rates or in some cases caused a fire. While serious, these batteries have a relatively low cost compared to the cost of an electric car’s battery. Replacing an entire battery system and possibly the vehicle will require new approaches as well as very strong balance sheets.
As each of us has witnessed, batteries have a useful life that grows shorter with use. Eventually batteries must be replaced. This creates a new aftermarket opportunity that has not existed. It also creates a disposal problem. Recycling cell phone and laptop batteries is one thing. Putting in place the process to recycle lithium car batteries is quite another. So far, there seems to be very little study on this problem, though it looms quite large as areas of the world move to electric cars. Where there is a problem, there is an opportunity.

Materials Sector

Electrified vehicles will use more of several important minerals and metals. Current batteries are using lithium with several different metals as the cathode material including cobalt, manganese and phosphate. Scientists and engineers are spending time and money to develop the best alternative for a vehicle battery. Like many design problems there are tradeoffs.

The table below is from Isidor Buchmann, President of Cadex Electronics, Inc. It presents some of the trade-offs in battery technology. The ideal battery would have high energy density (Cobalt), high charge rate (Phosphate) and a high Charge V Limit (Manganese). It also would be safe to use. For example, the cobalt Lithium-ion battery is subject to fires if it is charged at too high of a rate.

The phosphate based battery is thought to be the one being used by the Chevrolet Volt. Its weakness is the short cycle life of a charge, meaning the battery discharges faster than other chemistries. When coupled with a small conventional fuel engine to recharge the battery it might be a good choice.

Cobalt is normally a by product from mining other metals such as copper. However the largest sources of cobalt are in the Congo, Tibet and Siberia. This increases the country risk associated with the metal should any of the  governments decide to restrict export of cobalt.

Manganese is a widely mined mineral and is used to enhance iron to create such products as stainless steel. As a result it is more readily available for batteries. Phosphate is a widely used mineral for fertilizer, which makes the mineral readily available.

An average car use 45 to 90 pounds of copper. An electric car uses twice as much copper as a gasoline power vehicles. As electric vehicles become more prevalent, they will increase the demand for copper.

According to the US Geological Survey, Bolivia's Uyuni Desert has 5.4 million tons of lithium, which can be used to make batteries for hybrid and electric vehicles. This is the largest amount of lithium in any country, compared to Chile's 3 million tons and the United States' 760,000 tons. China and Russia have large deposits of Lithium.

The move to electrifying cars and trucks will require more minerals and metals. However, at this point the demand will be manageable and not likely to cause shortages in any one element.

Electric Utilities

Electric vehicles offer new opportunities for the electric utility industry. Most people assume that the plug-in vehicles would be recharged at night. If true, the electric utilities would not have to invest in new infrastructure, as this is an off-peak demand period. However, if drivers of electric vehicles found it necessary to plug their cars in during the day, a peak period use, they could force the utilities to invest in additional infrastructure to meet the higher demand. Companies might want to encourage their employees to drive electric cars by providing plug-in centers at their parking facilities, so drivers could recharge their cars during the day. I could even see some companies claiming this as a company benefit, using the service as a way to help offset their carbon producing facilities elsewhere.

Electric utilities are aware they must invest to create new smart grid capabilities that will help to manage usage of electricity. Electric cars will add to the demand for this new infrastructure. Utility company engineers see this as just another demand placed on the electric grid. However, we might see entrepreneurs employing renewable energy methods to take advantage of these opportunities. Maybe a windmill and or solar panels hooked up to a recharging unit in the parking lot will offer a way for cars to recharge without using the local electric utility.

The Bottom Line

Any time there is a fundamental change in the way an industry operates, new investing opportunities develop. Investors who understand these opportunities can reap the rewards. They also must manage the risks, as they can be large. These opportunities will come from several industries, but especially the drive train and the battery companies. To a lesser extent the electric utilities may also benefit, though not to the same extent, and possibly not at all.

As governments stimulate the move to use of electricity to replace oil, investors should be prepared to find opportunities to benefit. These opportunities will grow with time and the time is now to start your research.

By Hans Wagner
tradingonlinemarkets.com

My Name is Hans Wagner and as a long time investor, I was fortunate to retire at 55. I believe you can employ simple investment principles to find and evaluate companies before committing one's hard earned money. Recently, after my children and their friends graduated from college, I found my self helping them to learn about the stock market and investing in stocks. As a result I created a website that provides a growing set of information on many investing topics along with sample portfolios that consistently beat the market at http://www.tradingonlinemarkets.com/

Copyright © 2009 Hans Wagner

Hans Wagner Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules