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Transportation Paradigm Shift

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By MariHelen
November 26, 2007

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Over on another board I just "heard" someone explaining how diesel engines had lost their advantage over gas engines. I can't help thinking that in 10 years our debates over gasoline versus diesel, and to a degree, ethanol versus bio-diesel, are going to look a lot like debates of 100 years ago over horses versus mules when the internal combustion engine was being introduced and the traditionalists didn't get it.

I've followed some of the hybrid automobile 'noise' of the last few years, but I had ignored the largest consumers of fuel, the large trucks and buses as being something we would tackle after we figured out the smaller vehicles. Yes, I've seen a few 'proof of concept' large vehicles on the roads the last few years, but I only recently drilled down through the NREL (National Renewable Energy Laboratory) website and saw that much of the HEV (Heavy Electric Vehicle) development and testing has been in progress for several years. Many of those tests are coming to an end and there are already new technology heavy vehicles available on the market.

Heavy equipment needs lots of low-end torque, so electric motors are ideal for that. Another of my favorite stocks, CAT, is teaming the Department of Energy's NREL and the Center for Transportation Technologies and Systems, especially on the Heavy Vehicle Power and Propulsion Systems. Currently, their focus is on their MorElectric (tm) Technology, a means of simply making diesels more efficient, but NREL's efforts are looking beyond that, although I wish I knew more about the actual state-of-the-art of the HEV (Heavy Electric Vehicles).

The US Navy is already going to electric drive ships, well after all major cruise ships already went that way. AMSC (American Superconductor) manufactures the PowerModule (tm) system and AMSC claims that their current generation of HTS (High Temperature Superconducting) electric motors are 1/3rd the weight and 1/2 the size of the traditional alternatives. The US Army is also on the hunt for both heavy trucks and lighter tactical vehicles that will be at least partially electric.

Other companies (Mack Truck, owned by Volvo, and Oshkosh, to name a couple) have already developed hybrid-electric heavy trucks and are being spurred on by the thought of military contracts in the near future (2010-2015) which will increasingly seek electric-drive solutions. It seems most of the fleet testing of the last three years has sought to figure out the energy part of the equation (natural gas, diesel-electric hybridization, hydrogen systems, ultra-capacitors, and/or advanced battery systems). Many of the drive sub-systems are being built in Europe, so I'm waiting for the light to turn on with some of my favorite US companies and get the competition fire burning while the dollar is still cheap around the world.

To support more electric systems it seems logical that more electrical energy must be created, and what we use has to be distributed in a more efficient manner. We are way past due on renewing our national electrical grid and that confused jumble of wires is simply a crisis waiting to happen, or worse yet, waiting to compound another crisis when we can ill-afford to have the lights, telephones, water pumps and elevators stop working. Alternative and non-traditional energy sources (like wind and solar) are starting to have an impact and are often gap-fillers that are nice to have. A return to nuclear power seems obvious, though contentious, also.

No, I don't know exactly where this is all going. My crystal ball is a bit cloudy. But I do believe that high-torque electric motors are going to find their way onto a lot of big equipment (buses, dump trucks, refuse trucks, fire trucks, tractor-trailer rigs, etc.) in the next 5 years. In the beginning, they will simply be hybrid systems, but the ICE (internal combustion engine) paradigm is changing quickly. I believe that all-electric vehicles, to include heavy equipment that we just associate in our minds with throaty diesel engines, will be here before we know it. And with that change, it seems there would be another push to renew the national grid.

Proposal - I wonder if the old stocks (GE, CAT, DE, TE, AEP) and a few of the new enabling technologies, like high-temperature superconductors, ultra-capacitors and (The Holy Grail) better batteries aren't the next big shift for us to profit from in the 2008 to 2010 time-frame?

Question - Is this too early? Am I being over-optimistic? Should I be trying to track that elusive 'next greatest technology' from some micro-cap company, or just sit back and wait for the established giants to either partner with them or in some cases, simply to gobble them up. If one of these is going to really succeed it seems that they will have to be a world class leader - not a second generation follower of applied Japanese, German or Chinese technology like Ford or General Motors. So, I guess the key question is, which of these 'classic' stocks will become our new paradigm by matching advanced transportation technologies with an ability to dominate the global market? Please answer with stock symbols...

Disclaimer - I own all of the stocks I mention by stock symbol, but not the ones with the company names spelled out.
Complaint - I certainly don't think I own enough of any of them.