Electric Vehicles May Be Worth Another Look

The electric vehicle, or EV, boom some had hoped for obviously didn't take place in 2011. The Nissan Leaf and General Motors (NYSE: GM  ) Chevy Volt barely counted sales into the thousands each month, and a high-profile launch from Fisker has been disappointing to say the least. But there may be some room for optimism in the EV market.

As fellow Fool Alex Planes pointed out last week, EVs are actually on a faster adoption curve than hybrid vehicles were more than a decade ago. And companies may finally be releasing products that fill the needs of consumers. That doesn't mean there haven't been growing pains in the process, but EVs may be leaving their pimply, teenage years and entering a more mature stage of development.

Learning from uninspired, mass-market flops
For some reason, auto manufacturers insist on making first-generation vehicles look like something a disappointed teenager gets for his 16th birthday. The first generation Toyota (NYSE: TM  ) Prius was a sad looking car, the Nissan Leaf looks more like an alien station wagon than a revolutionary vehicle.

These vehicles were so uninspired that only diehard early adopters have considered buying them. The Toyota Prius didn't see sales take off until it came out with its second-generation vehicle and now you can hardly tell a hybrid from a standard vehicle.

Some manufacturers are figuring out that EVs shouldn't look like something undesirable, and maybe the opposite should be the reason people are attracted to EVs. Ford's (NYSE: F  ) 2012 Focus Electric at least has thoughts of being a hip-looking vehicle. And Chevy's Volt would look fine in any driveway. It's an age-old adage but it's true today for EVs: sex sells.

Tesla Motors (Nasdaq: TSLA  ) has been extremely successful in selling purely electric vehicles because it knew that performance and looks were most important. The company set out to build a performance machine and put it in a body that would catch the eye of any car lover. The Model S, a sedan that will be released later this year, builds on that high-class style. It is more comparable to a BMW 5-series than a Toyota Camry in styling.

Last week, Tesla unveiled the Model X, a crossover that could have a 300-mile range. By 2014, when the vehicle hits showroom floors, Tesla could be leading the EV charge in sports cars, sedans, and even utility vehicles.

Range anxiety easing
The biggest reason to take another look at EVs is their improving range. When first introduced, a 50-mile range was about as far as you could go. Even newer vehicles have trouble breaking that barrier. The 2012 Focus Electric will only go 100 miles and new VIA Motors vehicles, powered by A123 Systems (Nasdaq: AONE  ) batteries, only project a range of up to 40 miles.

Some vehicles had a hybrid system that allowed gas to be used for farther trips. The Volt can go 35 miles on electricity, and the Fisker Karma can go 32 miles powered by A123 Systems batteries, but gas engines extend that range further.

Tesla has increased range to up to 300 miles, and IBM has its sights set on building a 500-mile range battery. If a 300-plus mile range becomes more commonplace, then I think you'll see EVs sales grow much more rapidly.

Charging while you wait
For now, charging an electric vehicle might as well be measured in days. Four hours to charge the 100-mile range Focus Electric isn't getting many people past their daily commute, much less a trip out of town.

That's changing as well, and with an increased charging infrastructure having an EV as your only vehicle won't be such a stretch. Tesla says the new Model S can be charged in an hour with fast charging stations being built around the country. Maybe a stop for dinner and a charge won't be so bad after all.

Who to keep an eye on
Electric vehicles really need three things to become a major force in the auto industry: increased range, fast charging, and a larger charging infrastructure. Tesla has shown that all three can be improved, and it may just be making EVs a viable part of our automotive future.

At the very least, improving technology and better design makes EVs worth another look for investors. Tesla, in particular, may be driving us into the future of the auto industry.

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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. Motley Fool newsletter services have recommended buying shares of Ford Motor, Tesla Motors, and General Motors. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. 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 (6) | Recommend This Article (6)

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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 February 13, 2012, at 4:03 PM, RobertBoston wrote:

    An important point for TSLA: it's the only pure-play EV company out there. If you have an investing POV that EVs will gain a lot of market share because of rising gas prices, only TSLA is poised, among the traded car manufacturers, to benefit from that market swing. (Of course, were gas to fall to $2/gal, TSLA might not do so well.)

    Tesla is also the only company with a successful track record in delivering pure EVs. This gives Tesla enormous advantages in experience, proprietary technology, and historical operations data. Small wonder that Daimler and Toyota are partnering with Tesla, rather than attempting to reinvent this expertise themselves.

    Disclosure: I have a small long position in TSLA.

  • Report this Comment On February 13, 2012, at 5:09 PM, brunsmrk wrote:

    Look at the RECENT insider selling in $TSLA in the last two months ... the company is evidently richly enough valued that insiders like the Chief Financial Officer AND Chief Technical Officer are taking money off the table.

    I am not exactly advocating shorting the company -- $TSLA is still a highly speculative development company that is still losing money.

    It's one thing to be optimistic about what the company, but it's another thing to get out "over your skis" and far ahead of the stock. If you want to know what the real potential value is -- pay attention to what the insiders are doing -- the upside potential is incredible, but this company is not about to start putting money in the bank any time soon.

  • Report this Comment On February 13, 2012, at 5:17 PM, brunsmrk wrote:

    Don't be deceived about the news of companies like Daimler and Toyota partnering with Tesla ... these companies are partnering with Tesla just to see what the new kid is up to.

    Do not kid yourself ... ALL of the major automotive companies have EV expertise ON THE SHELF; they developed EVs prototypes in the 90s and 2000s -- a lot of us have worked on those prototypes, so we understand the issues pretty well.

    The decision for those companies not to go forward with their launches was strictly a matter of financial prudence and marketing research -- they could see exactly the same thing you see in the $TSLA financials, nothing but losses as far as the eye can see.

    Please do not be an idiot about $TSLA ... it's a company with exciting prospects working on exciting technology ... but do not be stupid enough to imagine that the automotive industry has not been looking really hard at EVs for at least 20 years.

  • Report this Comment On February 13, 2012, at 6:10 PM, brunsmrk wrote:

    Automotive launches tend to be highly dependent on a few personnel ... not necessarily one or two people ... but there are teams where key players have a an absolutely pivotal role. It is important to remember that ventures like $TSLA are not just about grand visions and prototypes that seem to work well -- they are about old-school blocking and tackling, i.e. vehicles are not a simple little software project -- they involve a variety of complicated, safety-critical networked systems that are orders of magnitude more complex than iPhone or iPad. What this means is that it is extremely important to have very deep engineering bench. Hopefully, we can hear a good story during the conference call about retention of key personnel. Last month, $TSLA CEO Elon Musk insisted that the departure of two top execs, chief engineer Peter Rawlinson and Nick Sampson, who supervised vehicle and chassis engineering, would not really effect launch plans. Plans for managing human capital will be an important thing to listen for on the upcoming earnings conference call.

  • Report this Comment On February 14, 2012, at 12:08 PM, TMFMarlowe wrote:

    @RobertBoston: Your case for Tesla makes a *huge*, and to my mind not yet warranted leap: Just because auto buyers might decide to consider an EV does *not* mean they'll consider buying one from a startup (versus a familiar name like Ford or Toyota).

    It takes a big leap of faith to drop five figures on a car from a company that might not be around in five years. Tesla hasn't established itself in the mass market yet -- and there's a good chance it won't. Expanding EV sales (another thing I'm skeptical of, but that's a whole 'nother argument) don't necessarily ensure success for Tesla.

    John Rosevear

  • Report this Comment On February 18, 2012, at 9:57 AM, JGDTexas wrote:

    The viability of EVs revolves around battery technology. Issues with batteries in cold weather significantly affects battery output; batteries degrade over time as they approach their useful life in maximum charge/discharge cycles; and someone alreadymentioned the time to fully charge. There is also a longer term issue with cost when the battery has to be replaced. I haven't seen much in the way of total cost of ownership. The use of E-onlyVs is also limited not only by range but infrastructure to plug in. This limits the market for EVs along with the initial price. The concept is great but the market is limited greatly now by the technology itself. Then there is the esoteric issue of pollution caused by electric power generation to charge them versus nat gas pollution, for the enviro group. No free lunch yet by any stretch.

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