Electric Cars Signal How Auto Companies Can Make a Profitable Transition to a New Economy


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…