A Huge, Profitable Trend to Play in Electric Vehicles

I talked in an earlier article about how the electric vehicle (EV) is the transportation of the future. I believe long-term investors are in for a gold rush as the race for EVs heats up. But Foolish investors shouldn't be targeting only the carmakers.

There are other stocks available which might not look good now, but definitely will take off as the EVs start to roll. Here is how you can gain more by starting small in the electric vehicle market.

The story so far
You already know how costly the gas for your car is getting. With the turmoil in the Middle East and the economy going through rough waters, it will definitely not be a pretty picture for car owners across the world. Amid all this chaos and bottlenecks, the electric car starts its journey.

The EV comes with the advantage of being a sweetheart to the environment and also to technology buffs like myself, for whom the main attractions are under the hood and within the dashboard. That there are several EVs scheduled to be launched in the next couple of years reflects the long-term optimism of these carmakers. For an example, just look at Toyota (NYSE: TM  ) and Tesla (Nasdaq: TSLA  ) coming together to roll out the RAV4 in 2012. This is no longer a dream concept vehicle.

Great expectations
The demand for electric vehicles is expected to grow at a rapid pace, supported by the public's growing concern regarding greenhouse emissions from gas-powered vehicles and the effects these emissions have on climate change. So it is no surprise that the Department of Energy recently announced $5 million funding for development of electric vehicle infrastructure that will be necessary to support the growth of the EV. That $5 million is a pittance of what will be required to truly and realistically roll out this vehicle on a broad scale. But it's a start.

Where is the money then?
If the EV is to see the light of the mass market, infrastructure for these vehicles will take prime importance. In my opinion, this is precisely where you will find a really big investment opportunity.

San Francisco-based Ecotality (Nasdaq: ECTY  ) builds infrastructure for electric vehicles in the U.S. and China. Riding high on a $114.8 million recovery act grant from the Department of Energy, Ecotality plans to set up 15,000 commercial charging stations.

AeroVironment (Nasdaq: AVAV  ) has its own EV charger technology solutions for home and commercial usage. AeroVironment joined hands with NRG Energy (NYSE: NRG  ) early this month to expand the "eVgo" electric vehicle charging ecosystem. By the end of 2012, they plan to install 70 charging stations across the Dallas-Fort Worth area.

Charging stations need to be easily accessible to EV drivers. Perhaps the best method is to use popular devices like smartphones and the Internet to be seen. This idea is definitely in Ecotality's perspective, having recently launched its own mobile app, named Blink Network, that helps people locate charging stations. This app will run on Apple's iOS and Google Android-enabled devices.

Front-runners in this industry are going to make some cash. But, the long-term spoils are going to be showered upon the one or two companies whose standards and products get adopted on a national and perhaps international scale. This is true of all new mass technologies -- there is a lot of disruption and consolidation at the beginning. Then winners begin to emerge. What we're looking at today are those early players. The long-term winners are probably a few years off, but we might just be staring at one of them right now.

Foolish take
The road for investors is mapped out. As electric vehicles kick into hyper drive, infrastructure facilities will have to be pushed up several notches. Companies like Ecotality and AeroVironment are sure to push up revenues while riding on the electric storm in the short term. If things go the way I think they will, this grouping of stocks is going to look delectable as larger business picks up. Investing in them now could mean a very good opportunity of reaping substantial profits in the long run, but be careful. To the winner and the winner alone go the spoils.

Arunava De does not own shares of the companies mentioned in this article.

AeroVironment is a Motley Fool Rule Breakers selection. Google is a Motley Fool Inside Value recommendation and a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor choice. Motley Fool Options has recommended a bull call spread position on Apple. The Fool owns shares of Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (9) | Recommend This Article (55)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 29, 2011, at 2:42 PM, markz13 wrote:

    I own a Leaf and it is charged by a Blink ..They both work great...

    Im normally not a long term investor in any stock but I think I may hold on to my shares of ECTY for a while..

    After they installed my garage charger I got to thinking that most garages may get these put into their homes eventually and ECTY could be a great long term investment..

  • Report this Comment On April 29, 2011, at 4:16 PM, jimmy4040 wrote:

    "As electric vehicles kick into hyper drive, infrastructure facilities will have to be pushed up several notches"

    Hybrids are great, but if you're talking about plug-ins there are no more than 2500 in the US today. That's versus 240 million passenger cars alone. EV's are fine as niche products but there's no mass market for them until at least 10 years out.

    Most modeling fails to take real world business and financial matters into consideration. If gas went up to say $5-6 a gallon it would result in more EV sales, but only marginally so because the price would crash the economy, OR it would make investments like tar sands oil economical, bringing a whole new supply on to the market and driving price back down. That's the way it is with commodities.

    I don't know about any of these companies as an individual investment, but the idea of plug-ins as just around the corner is not viable.

  • Report this Comment On April 29, 2011, at 4:39 PM, reggidmalc wrote:

    Oops, forgot to mention that GE is the 800# monkey in the EV charger room? Don't want to be the betamax charger when this takes off. Are there any standards for interoperability? Better do some more DD on this one.

    I like AVAV for their UAV's with the Leaf charger as a kicker, so to speak.

  • Report this Comment On April 30, 2011, at 11:35 PM, neamakri wrote:

    By the way, Toyota already made electric Rav4's years ago. Sometimes they show up on eBay. They do not need Tesla; just restart their old assembly line.

    Also, in the 1970's an engineer made a hybrid electric that got 75MPG. Search for: david arthurs electric car. He used parts from junkyards! The article is in Mother Earth News.

  • Report this Comment On May 01, 2011, at 1:58 PM, corstrat wrote:

    Since you did mention China in ECTY comment, let me remind that Kandi Technologies (NASDAQ-KNDI) is in a very envious position in that they not only manufacture EV's for sale on three continents already, but also are a 30% equity holder in a Joint Venture developing Quick Battery Exchange stations in China with PRC owned State Grid. SG is China's largest electric utility covering 91% of the country. As can be seen from this translated link off the SG website, KNDI was invited in the JV due to their owning 10 patents for the QBE.

    http://translate.google.com/translate?hl=en&sl=zh-CN&amp...

    Lets face it, if EV's are going to make a significant dent anywhere in the automotive market world wide this decade, it will have to be in China and KNDI is the only Company that most US investors can play to participate in China as a relatively pure play. And with all of the Chinaphobia re. the market, it appears KNDI will remain the only significant play for some time to come.

  • Report this Comment On May 01, 2011, at 5:19 PM, jimmy4040 wrote:

    corstat:

    China is not making EV's and chargers for their own market but for everyone else's.

  • Report this Comment On May 02, 2011, at 8:57 AM, corstrat wrote:

    jimmy-Don't tell that to the 50% of Chinese surveyed by Deloitte two weeks ago who consider themselves "First Movers" into EV's, as compared to 12% of Americans. Also, you apparently didn't read the link I provided above.

    Deloitte survey: Chinese consumer market strong for electric vehicles

    Fifty percent of Chinese consumers surveyed identify themselves as “potential first movers” in purchasing or leasing an electric

    Publish date: 18 April 2011

    A new survey released today by Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group shows that 93 percent of Chinese consumers are interested in buying or leasing an electric vehicle (EV). The survey coincides with the 14th Shanghai International Automobile Industry Exhibition (Auto Shanghai 2011) this week, where low-carbon, green economy, and sustainable development will be key themes.

    "As China is the largest automotive market in the world, this is great news for players in the EV market," says Mr. Craig Giffi, DTTL Global Automotive Sector Leader, who is presenting at the Shanghai Automotive Summit today. "Of the world’s four dominant automotive markets - China, United States, Europe, and Japan – Chinese consumers stand out as potential first movers in the adoption of EVs. Fifty percent of Chinese consumers surveyed identify themselves as potential first movers in purchasing or leasing an electric vehicle compared with 12 percent in the United States, 16 percent in Europe, and 4 percent in Japan."...

    http://www.deloitte.com/view/en_CN/cn/Pressroom/pr/5b69306ba...

  • Report this Comment On May 02, 2011, at 10:03 PM, jimmy4040 wrote:

    Businesses don't run on surveys. The whole country only has 170 million vehciles total for 1.3 billion people. They only have about half the highway miles that we do, though they are trying to catch up. Just like the solar panel market where they are the world's leader in manfacturing but an also ran in using them.

    Believe if you want to. It's your money.

  • Report this Comment On May 03, 2011, at 7:13 AM, corstrat wrote:

    jimmy-You are 100% correct and this is exactly why if EV's are going to work anywhere in this decade, it will be China

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