Some Electric Vehicles Are Already Dead in the Water

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The electric vehicle revolution is supposed to be taking place in front of our eyes. Ford (NYSE: F  ) , General Motors (NYSE: GM  ) , and Nissan are just a few of the companies that either have launched electric cars or are planning to soon. But the EV industry is still miniscule and not all carmakers are having success selling the few vehicles they do make.

The Chevy Volt in particular has struggled recently. The car's ability to use electricity for short trips and gas for long ones was supposed to give the car more mass-market appeal. But after 302 Volts sold in August, versus 1,362 of the all-electric Nissan Leaf, the car is already in trouble.

It may be a vote of no confidence in Chevy or it could be part of a larger picture that buyers just aren't ready for an "every man" electric vehicle.

Sell to those with the money to buy
One of the issues is that buying an electric vehicle isn't like buying a regular car. Unless you want to count your charge time in days, you'll need to have a high-voltage car charger installed at home. Unless you buy a plug-in hybrid, you're also going to need another vehicle for longer trips, and these vehicles still aren't comparable price-wise with a traditional car.

So in this tough economic environment, how can Chevy possibly expect to sell a significant number of vehicles to the typical Chevy buyer? They just don't have the money.

The people who do have money to have an extra vehicle are those spending $50,000 plus on a car, and they want something different. What the cutting-edge EV buyers want is sex appeal in their tree-hugging vehicle.

At the high end of the EV market, Tesla Motors (Nasdaq: TSLA  ) has already accumulated more than 5,300 reservations for its Model S sedan that's nearly a year away from delivery. Fisker Automotive, a maker of high-end plug-in hybrid cars, reportedly has about 3,000 Karmas on backlog. When you compare this with the paltry numbers for Chevy and Nissan, which should have wider appeal, you can see that the high end is where EVs belong right now.

How not to invest in EVs
With the high end of the EV market looking strong and the low end looking extremely weak, how should investors be investing right now?

I would avoid companies that cater to buyers that aren't at the top end of the passenger-vehicle market. I expect Chevy, Nissan, Ford, and any of the other mass-market auto manufacturers to post disappointing sales of EVs for now. The average buyer just doesn't have the money to make the investment necessary. And the buyers that do have the money aren't looking for an EV with a blue oval or a Chevy symbol on it.

Of course, these companies are much larger than their electric vehicles, but this should at least factor into the equation.

Investing in EVs
I still argue that the best way to invest in EVs right now is by buying companies that build the infrastructure. AeroVironment (Nasdaq: AVAV  ) and General Electric (NYSE: GE  ) are making chargers that can not only go in your home, but will be fueling EV stations on the road as well. As this infrastructure is built out, we may start to see EVs become an economically viable purchase for more drivers, but we're still far from that right now.

Battery makers can also offer exposure to commercial electric vehicles, a market that's growing as companies like United Parcel Service (NYSE: UPS  ) and PepsiCo buy electric delivery trucks. A123 Systems (Nasdaq: AONE  ) is still a very risky stock, but the company has built a large list of clients in passenger vehicles, commercial vehicles, and grid storage solutions. The company currently has too much capacity and is reporting large losses, but fortunes could turn quickly as its end markets ramp up demand.

But the best pure play may be Tesla. The company makes cars that have experienced strong demand and is becoming a supplier to manufacturers like Toyota. Profit is still a long ways off, so the company's operations require a bit of a leap of faith.

Foolish bottom line
Being on the cutting edge of EVs manufacturing may seem like a nice idea for GM, Ford, and Nissan but evidence shows that the mass-market just isn't ready for prime time. High-end buyers will lead the EV charge until costs come down and a national charging infrastructure is built. I would like to say that I see more hope for EVs than just a small market, but that's what the evidence shows.

Interested in reading more about EVs? Add your favorite EV stock to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Ford Motor and United Parcel Service. Motley Fool newsletter services have recommended buying shares of General Motors, Ford Motor, and AeroVironment. 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 (10) | Recommend This Article (5)

Comments from our Foolish Readers

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 September 15, 2011, at 4:28 PM, cmbourne wrote:

    You say the " typical chevy buyer" can't afford an EV. True. nevertheless, he is paying for one! Everytime a rich liberal yuppee buys a toy that you describe as "sex appeal in their tree-hugging vehicle" , he gets a $7500 rebate. The $7500 is extracted from the pay of working people who can't afford a new car.

  • Report this Comment On September 15, 2011, at 4:30 PM, Nhern wrote:

    It would be nice if you could include some addition FACTS in your story. Like:

    How many total Nissan EV's have been sold in the US to date?

    How many total GM Volts have been sold in the US to date?

    How many Nissan EV's are currently on order in the US?

    How many GM Volts are currently on order in the US?

    Put up, or shut up.

  • Report this Comment On September 15, 2011, at 4:33 PM, Runasays wrote:

    The answer to the Auto Industry in not Electric Cars

    but the Cars running on is abundant in USA.

    I was in India and was amaze to see Cars, Trucks, Public Buses, Auto Rickshaws, Motorcycles and many more transportation Vehicle running on LPN.

    We will not only bring the Oil and Gas price down below $1 but also smell clean air. Vehicle run on LPN is noiseless and no smoke from the exhaust.

    China is the another country that uses LPN for transportation vehicles.

  • Report this Comment On September 15, 2011, at 5:02 PM, spectechinvest wrote:

    I agree that this article should include the numbers on actual Leafs, Volts, Roadsters, act sold to date. That would help compare. The actual premise of his argument makes sense to me.

    This is new technology and many early adopters are educated and have money to spend so releasing premium vehicles first makes good sense. Tesla has the lead on this for sure. Once you see the new model S for all the upper middle class yuppies that sits 7 people you may be convinced as well.

    If you want to see a BMW Z4 trying to keep up with the model S I have embedded footage here:

  • Report this Comment On September 15, 2011, at 5:04 PM, spectechinvest wrote:

    This Saturday the model S will be on display in Palo Alto and Im making a trip up there to see it in person and will take pictures and post them on my EV blog. follow it if you want to keep up dated. I live 3 miles from the Tesla Fremont Factory.

  • Report this Comment On September 15, 2011, at 5:41 PM, EVdriver101 wrote:

    Travis -- you should take a look at what ECOtality (ECTY) is doing.

    I believe they are undergoing the largest EV infrastructure deployment in history, through the EV Project, which the DOE has backed with $115M.

  • Report this Comment On September 15, 2011, at 5:42 PM, bloatyspizzahog wrote:

    the standard business model always requires early adopters to fork over big $$. As the business matures costs come down, options increase and customer base increases. It's not really news to say few are buying EVs at this stage. It's expected. As long as companies like Ford and Nissan stay in the game, willing to ride out the losses the first few years, they'll produce the more reasonably priced EV car(s) that have more aesthetic appeal. Tesla cars are appealing now because of their styling. I'm sure Ford would be selling at better numbers if their EV looked more liked the mustang and less like grandma's sunday school special. Tesla started this process much earlier and it shows. The other end of the equation that's obliquely addressed in this article is the infrastructure necessary to accommodate EVs, like ubiquitous public charging stations. Range would be meaningless if I know i can drive from Boston to LA and have quick charge stations available the entire route (just like gas stations for my gas powered car). But if your only option for a charge in a 50 mile radius is your garage, the customer base will always be dinky.

  • Report this Comment On September 16, 2011, at 1:11 AM, maryfriend wrote:

    Christ, this is about the most irresponsible investor advice I've read in six months, possibly longer. Nissan and Volt supply is constrained by production ramp up, not demand. More important, batteries remain expensive so the only way to make EVs profitably is to do so in mass-market, mainstream cars that have enormous economies of scale, the OPPOSITE of what Tesla and Fisker are doing. All the advice in this article is based on lunacy: Check out CREDIBLE article by Fortune:

    For those who have asked about numbers: Nissan has already sold more than 14,000 LEAFs worldwide, including nearly 7,000 in the USA since December, and still is working through a big backlog. Volt has sold about half that, but still impressive given added complexity and cost of a hybrid powertrain (which combines the cost of a battery with the weight and complexity and service schedule of an ICE). By contrast, Tesla has sold 1,600 EVs in the past three years. Fisker has given one car to Leo DiCaprio but refuses to divulge total numbers because they are possibly in the single digits.

  • Report this Comment On September 20, 2011, at 1:55 AM, CokeBear wrote:

    Another re-hash from the anti-electric oil funded boo-hoos. electric was here and quished. Watch Death of the Electric Car; Revenge of the electric car the stocks are the Apple and microsoft of the 2020s don't miss your chance 8years goes by quickly...

  • Report this Comment On September 23, 2011, at 5:16 PM, baldheadeddork wrote:

    @maryfriend - Good points. The author also failed to point out that so far the Volt has only been sold in seven or eight states. It won't be available nationwide until the end of this year.

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