We're Focusing on the Wrong Electric-Vehicle Market

As General Electric (NYSE: GE  ) and NRG Energy are grabbing headlines for buying electric cars and building electric-vehicle infrastructure, respectively, I can't help thinking we're focusing on the wrong type of electric vehicles in the media. We hear about General Motors' (NYSE: GM  ) Chevy Volt, Nissan's Leaf, and, of course, the Tesla Motors (Nasdaq: TSLA  ) Roadster, but we get no news on the practical applications that are driving the few profitable (or nearly profitable) companies in the industry.

Headlines are nice, but as an investor, I'm more concerned about where I may be able to profit from this trend. GM and Nissan both expect to sell their electrics at a loss (at first), and Tesla is burning money trying to get the Model S launched -- so where is the profit going to come from?

Think small
Advanced Battery Technology
(Nasdaq: ABAT  ) has had success building its battery technology into scooters that are selling like hotcakes. Scooters make almost too much sense as an electric vehicle. They're small and lightweight and never travel long distances -- at least I wouldn't drive one very far. We aren't talking about a huge market, but it makes more sense in a lot of ways than having an electric family sedan.

The challenge would be the U.S. market, which has never had great tolerance for tiny vehicles such as scooters. But I think a cool electric motorcycle would sell in reasonable volumes if a little design work went into them. Can we get Tesla on this, please?

I’m not expecting Harley-Davidson owners to run out and buy an electric motorcycle, but as a sport-bike guy, I could handle doing away with its annoying zing for the silent ride of an electric. Zero Motorcycles is the closest thing we have right now to a stylish electric bike, but the smaller electric vehicles could use a little more love from both the industry and the media.

Think big
Going small has made some progress, but going bigger is gaining momentum in the U.S., and investors are starting to see progress. We've seen Valance Technology (Nasdaq: VLNC  ) make inroads in the commercial market recently with customer Smith Electric. Frito-Lay and Staples are purchasing a combined 217 vehicles for local distribution, and the government is considering Smith for a 100-vehicle fleet as well.

Commercial electric vehicles make more business sense than passenger electric vehicles do, because defined routes and schedules allow for charging time. Commercial drivers also don't take vehicles on the occasional cross-country road trip, a major deterrent for electric vehicles right now.

And how long will it be until FedEx or UPS (NYSE: UPS  ) makes a big move into electric vehicles? They both have the infrastructure and delivery schedule to make it work, maybe better than anyone else. Both are testing electric vehicles, but we've seen no huge orders such as what we've seen from GE.

If we take this a step further, I don't see why semi-trucks can't be at least partially battery-powered as well. A123 Systems (Nasdaq: AONE  ) and Ener1 are building grid-scale battery systems, so scale doesn't seem to be an issue. The size and weight of the pack in the truck would be an issue, but the concept semis I've seen would make more business sense than most of the concept electric cars.

Plus, building the infrastructure wouldn't be nearly as difficult as it will be for passenger cars. Build charging stations on major highways every 100 miles, and when drivers are sleeping, they can get a full charge for the road. That may be a little bit of wishful thinking, but the payback for a truck driving tens of thousands of miles a year has to be faster than for a city commuter.

The bottom line
Whether you're looking big or small, the electric-vehicle market has more going on beyond just the cars getting all the headlines. Commercial trucks and scooters may not be as exciting, but they're driving Advanced Battery Technologies profit and pushing Valence closer to profitability than any of its U.S. battery rivals. That's something to consider when you're looking at investing in the electric-vehicle revolution.

Interested in reading more about the electric-vehicle revolution? Add one of these companies to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

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Fool contributor Travis Hoium has no 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.

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Read/Post Comments (11) | Recommend This Article (15)

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 November 24, 2010, at 5:30 PM, bellbell63 wrote:

    Ideal for electric vehicles is US Post Office. My local branch has about 75 vehicles that have short well defined routes with constant start/stops. All come back to the "barn" every night. Could make a charging station that could serve 10 vehicles ( 5 parked either side) to keep cost down.

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  • Report this Comment On November 24, 2010, at 7:22 PM, TMFFlushDraw wrote:

    Absolutely. I thought about mentioning them as well. There are so many good fits in the commercial space.

    Travis Hoium (TMFFlushDraw)

  • Report this Comment On November 24, 2010, at 11:32 PM, Maksani wrote:

    Where did my comment go???

  • Report this Comment On November 25, 2010, at 12:44 AM, Brammofan wrote:

    You said, "Zero Motorcycles is the closest thing we have right now to a stylish electric bike, but the smaller electric vehicles could use a little more love from both the industry and the media." Have you heard of the Brammo Enertia and it's bigger brother, the Empulse? Plenty of style in these vehicles and they're built from the ground up with premium parts like Brembo brakes and Marzocchi forks. Plus, much of the bike is built with recycled materials -- this is carbon sequestration that looks good, goes fast and make sense for the commuter and the sport rider. Based in Ashland, Oregon and building bikes that already have a significant following with owners forums, regional riders groups, these bikes are built by people who believe in the the mission of "saving the world, two wheels at a time." Check them out at Brammo.com and realize that this little southern Oregon company is already in Europe, Asia and making their way across the U.S.

    Brammo.com I ride one and love it.

  • Report this Comment On November 26, 2010, at 10:34 PM, SavantFool wrote:

    Tesla has done a lot of work developing battery packs and intends to sell battery packs in addition to cars. It has selected Panasonic (PC) to supply the batteries. See http://ir.teslamotors.com/releasedetail.cfm?ReleaseID=526928

  • Report this Comment On November 29, 2010, at 3:24 PM, ikkyu2 wrote:

    What about medical scooters (motorized wheelchairs) and golf carts?

  • Report this Comment On November 29, 2010, at 11:38 PM, JPDemers wrote:

    Re scooters, "We aren't talking about a huge market." Umm .. can you spell "China"? You know, the country where ABAT happens to build its products?

  • Report this Comment On November 30, 2010, at 12:05 AM, JPDemers wrote:

    Oh, and the Harley-Davidson types might want to Google "KillaCycle"

  • Report this Comment On November 30, 2010, at 8:01 AM, dendreon wrote:

    It already exists in Canda. Check out this website where they feature electric motorcycles, scooters, bikes, and even skateboards. Fuel is more expensive in Canada and they are usually ahead of us on such ideas. I was in the shop and they have stylish and fun to operate scooters. It saves money, is cleaner and uses less fossil fuel overall.

  • Report this Comment On November 30, 2010, at 8:01 AM, dendreon wrote:

    http://www.e-ride.ca/

    here's the site

  • Report this Comment On December 29, 2010, at 1:19 PM, WiseChoice4u2 wrote:

    Our market in the USA is not the primary market anymore. Developing countries are buying more than we are, especially motorcycles and small carts and vehicles. China in one area is also setting up a battery switch stations for electrical vehicles. Get your batteries switched like stopping for fuel. That may be the solution for many of the battery problems. With maps for switchouts, the sky is the limit. They will replace, discard, charge, and service the batteries. Most people may never have an easy location to charge batteries.

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