Electric Cars Signal How Auto Companies Can Make a Profitable Transition to a New Economy
by Jeff Siegel, Green Chip Stocks 
on 07.17.08
Last week, Mitsubishi Motors Corp. announced that it will begin selling its electric car, the i-MiEV, to individual customers starting in 2009. When this news came out, the Company’s stock picked up just over 2 percent in early trading—while pretty much all of the other major auto-manufacturers saw their shares decline.
Did this little piece of news add value to the stock?
Of course not. An announcement that the Company’s rolling out with 2,000 units in the first of year launch does not add value to the stock. However, this announcement shouldn’t be brushed aside. In fact, it’s one more reason investors should be paying close attention to this early transition of personal transportation.
Moving out of the dark ages
Five years ago, it would’ve been unheard of for any major automaker to introduce an electric car, much less roll out 2,000 of them a year from now. But as we’ve recently seen with GM and its Chevy Volt, some of the major automakers are finally attempting to begin the long process of moving out of the dark ages of the internal combustion engine, and onto the future with electric vehicles and plug-in hybrid electric vehicles (PHEVs).
Of course, if gas prices weren’t certain to increase from here on out, they’d be pumping out Hummers and Silverados like nobody’s business. But as we all know, the days of cheap gas are over. And the future of electrification is underway.
As consumers, this is certainly exciting. Between shunning the pump and reducing carbon footprints, it really doesn’t get much better for the future of personal transportation. And for investors, this is definitely an opportunity to not only make a profit – but also make a difference.
Playing the PHEV market
Over the past couple of years, I’ve received a lot of e-mails about where the best investment opportunities are in the PHEV market. Some have even asked about picking up shares of General Motors Corporation (NYSE:GM), since the company’s putting so much time, effort and money into the Volt. But the fact is, if you’re looking for a way to play the PHEV market, you’ll be better off focusing less on the automakers, and more on the high performance battery manufacturers that are supplying the juice for our next generation of PHEVs.
Some of the high-performance battery companies that are getting the lion’s share of investor attention these days include: Ener1 (AMEX:HEV), Altair Nanotechnologies (NASDAQ:ALTI), and Electrovaya (TSX:EFL). While these stocks are extremely speculative right now, it’s not going to take much more than one major deal to push shares of these things north. And over the long-term, we believe that the companies perfecting high-performance battery technology today--specifically when it comes to lithium-ion technology--will be the dominant, publicly-traded PHEV players tomorrow. Assuming they don’t just get acquired by larger manufacturers altogether.
That being said, there are also a number of private companies operating in this sector as well. Most notably, A123 Systems. This is the company that’s co-developing the lithium-ion battery cell for the Volt. The Company has also signed a production contract for Think Electric Vehicles. A123 Systems, incidentally, is expected to have an IPO this year. So certainly, we’re paying very close attention to this one.
Bottom line: The PHEV is a major game changer that’s going to completely change the way we power our vehicles in the future. And the high-performance batteries that will be needed to enable this transition are going to be in extremely high demand. So certainly, following this sector closely now could very well pay off over the next few years.
To a new way of life, and a new generation of wealth…
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I love this post. A burst of good news, good perspective, and good predictions.
I'll be the first to admit that I don't know too much about the way stocks are priced, but isn't it conceivable that the announcement affected the stock price by demonstrating to potential investors that Mitsubishi has a forward-thinking and innovative attitude?
Perhaps the idea that the market could reward that type of behavior is wishful thinking on my part. But here's to hoping...
How is having to plug-in a vehicle a new way of life?
Having to pay thousands more up front for these vehicles in a time of rising food and energy prices is not going to make the average person financially better off. A few speculators will get wealth in the electric vehicle bubble.
Hybrids will still be plagued by congestion on crumbling roads and highways. People will still be overweight from driving instead of walking or cycling. Over 40,000 people in the US will still be killed per year. Farmland and greenspace will still be lost to sprawling development. Wilderness will still be torn up to find the resources needed to build them.
Using such large vehicles for personal transportation is an environmental and social disaster regardless of whether they are powered by gas or electricity. Time to move to rail and cycling.
What does this post have to do with "How Auto Companies Can Make a Profitable Transition to a New Economy"?
I expected some kind of insight into how auto companies were going to overcome the issue of the cost of batteries, but all I found was some stock tips on battery makers.
As for Mitsubishi's stock rise, a small increase after any sort of positive press release isn't uncommon, but without an increase in operating profit the price usually settles back down soon thereafter. Since that uptick in its value, Mitsu's stock has dropped about 5%.
Richard -
You are right we do need to switch to public transit. But that isn't an argument against electric cars in the near term. Public transit provides transportation for the bottom of the financial curve. I know this is not 100% in large cities, but by in large public transit benefits the poor first and as it matures is adopted by the middle class. Plug in Hybrids and pure electric vehicles do the opposite, they start from the top and work their way down. I'm sure we can both agree that nobody is trading in their bus pas for a $24,000 Prius. So, in the meantime let's replace gasoline cars with cleaner cars and let city planning and public transit come in to replace them. Remember in order for people to dump their cars and ride a train it has to be a better option. Electric cars as they are priced today and in the foreseeable future aren't going to change the economics of that anytime soon.
I love how no one can pass up an opportunity to take a cheap shot at the US auto-makers....
"Of course, if gas prices weren’t certain to increase from here on out, they’d be pumping out Hummers and Silverados like nobody’s business."
Let's remember that this is the same company which is pushing forward with the PHEV 'Volt'. This is the same company that is partnering to install solar photovoltaic arrays on the rooftops of it's factories. This is the same company that's investing in next-generation cellulosic ethanol technology. Give them a break, already. Don't forget that everybody's favorite 'green' auto-maker also sells the 'Toyota Highlander' and the 'Toyota Tundra'.
Auto-makers produce large SUV's and trucks because consumers ask for them. It's unfair to fault them for being slow to transition to the electric vehicle arena. The fact is, they haven't moved in that direction because we as consumers have not demanded it until now.