The UK government has extended its financial support for electric vehicles by a further £500m, which is likely to accelerate the steady growth in this sector. Yet investors looking for low-risk growth should also consider the broader theme of vehicle efficiency, says Ben Goldsmith.
A new, futuristic-looking car has appeared on London’s streets. It is the Vauxhall Ampera, called the Chevrolet Volt in the USA, an electric-powered family saloon, which uses an on-board 1.4 litre petrol engine to recharge its batteries. The result is a usable car – 0-60 in ten seconds and around a 300 mile range – which can achieve over 100 miles per gallon.
Cramming a hatchback-sized engine, an electric generator, batteries and an electric motor into one car may seem the opposite of efficient, but doing so reveals two key truths about cars and energy. First, electricity is a more efficient medium than petrol for managing power around a car. It can be generated while braking, and dispenses with the need for the heavy gearbox needed for internal combustion engines. Secondly, recharging electric cars presents challenges; hence General Motors’ decision to generate electricity on board. The Ampera is a clever piece of systems integration. It also says a great deal about where the personal transport sector stands in 2014 – so much so that it is easy to imagine it as a museum piece of the future. Its design has a fully-electric power train for efficiency but recognises petrol as the most economical and portable underlying energy source.
So is the Ampera ‘just another hybrid?’ The answer is no. In our automotive museum of the future, the preceding exhibit would be the Toyota Prius, first released in Europe in 2001. The Prius – which became a runaway success and is still a top seller for Toyota – is essentially an internal combustion engine car which uses a battery to extend range. The Ampera is the opposite, which is a big difference; and it was awarded 8/10 by the UK’s demanding Top Gear magazine, which is a bigger one.
Pure-play electric cars – those without range extenders – are also appearing. These include the Nissan Leaf with its quoted 80-mile range and the BMW i3 with a similar range, although it also comes in a range extended model. Of these, the i3 is the more radical. It is a root and branch electric car, drawing on a BMW development programme that started with the electric Mini E of 2009. The i3 is built for lightness with a carbon-fibre body, and it is tipped for success by the UK motoring press.
Sales of these cars are supported in the UK by a buyer subsidy of £5,000. This forms part of a broader system of support, including free recharging points in urban centres, which recently received a further £500m commitment from central government. Although this should further boost the steady growth in this market, these vehicles still represent a small (though growing)
proportion of overall sales for established carmakers.
In the UK, 1,200 grant-eligible vehicles were registered in March 2014[i]; while in the US, the equivalent figure was just under 5,000 [ii]. Consumer constraints include ‘range anxiety’ (hence the introduction of extenders), lack of charging infrastructure (although some retailers like Ikea have seen an opportunity to offer this as a perk to visiting customers) and, ultimately, cost. The Ampera and i3 are both around £30,000, which could easily buy a fast, frugal German sports saloon. And yet some markets are proving to be front-runners in the adoption of electric cars – in Norway, for example, around a fifth of new vehicles registered are electric.
So how ought investors to get exposure to this fast moving theme? Automotive majors are not an option, given the small proportion of their business devoted to electric vehicles and the narrowing profitability many face on their traditional lines (not surprising, given that the value chain of car manufacturing and distribution has hardly changed since Henry Ford). The one large, pure-play electric car manufacturer is Tesla. It is selling over a thousand units of the Model S in the US every month, a car which has received extremely positive reviews in the petrol-loving US motoring press.
Investor demand is currently outstripping the supply of the company’s shares, resulting in an eye-popping $30bn valuation or 135 times expected earnings this year. This market capitalisation may represent a broader vote of confidence in the future growth of the market, especially now that Tesla expects to produce batteries for other car manufacturers. Tesla’s founder, Elon Musk, is living proof that one visionary entrepreneur can transform a market – he is nothing short of a modern-day Thomas Edison.
As far as batteries go, fears over raw materials constraints – of lithium, for example – appear to have eased. New supply has come on stream and more plentiful alternatives are emerging, while institutes such as MIT regularly post new research updates. However, as is often the case with scale and cost reduction challenges, China is likely to hold the key. It has been China’s vast investment in solar photovoltaic manufacturing that has given the world competitive, ever cheaper solar power.
Feeling unable to overtake the West and Japan on internal combustion engines, Chinese companies are investing heavily in battery technologies. This should provide a boost to the electric vehicle market. In 2009, our private equity team at WHEB made an investment predicated in part on future price reductions in batteries, which has since proved correct. The team backed electric outboard motor manufacturer, Torqeedo, which has now benefited from battery price reductions to increase the power output of its largest unit tenfold to 80 HP – now the most powerful commercially available outboard electric boat engine.
And yet, as with any emerging sector, there is risk. Better Place, a well-backed Israeli start-up with the breakthrough idea of a network of ‘battery stations’ at which drivers could change one leased battery in a matter of seconds for a fully recharged replacement, went bust last year. For those looking for thematic growth coupled with lower risk, a better mindset may be to replace the words ‘electric cars’ with the less catchy ‘vehicle efficiency sector’.
Urged on by increasing fuel-efficiency regulations (the EU’s latest standard calls for companies to reduce emissions to 95g/km across the EU car fleet by 2021) and by the demands of consumers suffering from high fuel prices, car makers are competing intensely on miles per gallon. Even in the U.S, where fuel is cheaper than in Europe, over a third of motorists list fuel efficiency as a top factor in choosing a car. The result is a great stimulus to automotive supply chain companies focusing on delivering this outcome for large carmakers. ‘Stop-Start’ technology, which saves fuels and cuts down on urban pollution while paying for its upfront cost in a year, is now widespread.
There is also a multitude of more complex solutions, such as thermal management, ‘lightweighting’, and engine cooling. WHEB’s listed equities team owns US-based Borg Warner, which achieved sales of $7.4bn in this market in 2013, in the portfolio of the FP WHEB Sustainability Fund. Investors in search of an environment for accelerated take-up of pure battery electric vehicles should look, for the moment, to niche users with predictable journey patterns. These include urban car clubs, taxis and local vehicle fleets.
A reminder of the suitability of electric power for such uses is provided by the humble milk float – probably the first electric vehicle seen by many of us. Although such vehicles may become obsolete through the changing face of retail, it is likely that after much refinement, similar technology will one day dominate the roads.
Ben Goldsmith is a partner at WHEB Asset Management. For a fully referenced version of this article, see WHEB’s blog, where it originally appeared.
Photo: the rabbit via Flickr
How to be More eco-Responsible in 2018
Nowadays, more and more people are talking about being more eco-responsible. There is a constant growth of information regarding the importance of being aware of ecological issues and the methods of using eco-friendly necessities on daily basis.
Have you been considering becoming more eco-responsible after the New Year? If so, here are some useful tips that could help you make the difference in the following year:
1. Energy – produce it, save it
If you’re building a house or planning to expand your living space, think before deciding on the final square footage. Maybe you don’t really need that much space. Unnecessary square footage will force you to spend more building materials, but it will also result in having to use extra heating, air-conditioning, and electricity in it.
It’s even better if you seek professional help to reduce energy consumption. An energy audit can provide you some great piece of advice on how to save on your energy bills.
While buying appliances such as a refrigerator or a dishwasher, make sure they have “Energy Star” label on, as it means they are energy-efficient.
Regarding the production of energy, you can power your home with renewable energy. The most common way is to install rooftop solar panels. They can be used for producing electricity, as well as heat for the house. If powering the whole home is a big step for you, try with solar oven then – they trap the sunlight in order to heat food! Solar air conditioning is another interesting thing to try out – instead of providing you with heat, it cools your house!
2. Don’t be just another tourist
Think about the environment, as well your own enjoyment – try not to travel too far, as most forms of transport contribute to the climate change. Choose the most environmentally friendly means of transport that you can, as well as environmentally friendly accommodation. If you can go to a destination that is being recommended as an eco-travel destination – even better! Interesting countries such as Zambia, Vietnam or Nicaragua are among these destinations that are famous for its sustainability efforts.
3. Let your beauty be also eco-friendly
We all want to look beautiful. Unfortunately, sometimes (or very often) it comes with a price. Cruelty-free cosmetics are making its way on the world market but be careful with the labels – just because it says a product hasn’t been tested on animals, it doesn’t mean that some of the product’s ingredients haven’t been tested on some poor animal.
To be sure which companies definitely stay away from the cruel testing on animals, check PETA Bunny list of cosmetic companies just to make sure which ones are truly and completely cruelty-free.
It’s also important if a brand uses toxic ingredients. Brands such as Tata Harper Skincare or Dr Bronner’s use only organic ingredients and biodegradable packaging, as well as being cruelty-free. Of course, this list is longer, so you’ll have to do some online research.
4. Know thy recycling
People often make mistakes while wanting to do something good for the environment. For example, plastic grocery bags, take-out containers, paper coffee cups and shredded paper cannot be recycled in your curb for many reasons, so don’t throw them into recycling bins. The same applies to pizza boxes, household glass, ceramics, and pottery – whether they are contaminated by grease or difficult to recycle, they just can’t go through the usual recycling process.
People usually forget to do is to rinse plastic and metal containers – they always have some residue, so be thorough. Also, bottle caps are allowed, too, so don’t separate them from the bottles. However, yard waste isn’t recyclable, so any yard waste or junk you are unsure of – just contact rubbish removal services instead of piling it up in public containers or in your own yard.
5. Fashion can be both eco-friendly and cool
Believe it or not, there are actually places where you can buy clothes that are eco-friendly, sustainable, as well as ethical. And they look cool, too! Companies like Everlane are very transparent about where their clothes are manufactured and how the price is set. PACT is another great company that uses non-GMO, organic cotton and non-toxic dyes for their clothing, while simultaneously using renewable energy factories. Soko is a company that uses natural and recycled materials in making their clothes and jewelry.
All in all
The truth is – being eco-responsible can be done in many ways. There are tons of small things we could change when it comes to our habits that would make a positive influence on the environment. The point is to start doing research on things that can be done by every person and it can start with the only thing that person has the control of – their own household.
Top 5 Changes You can Make in Your Life to Reduce Your Carbon Footprint
In a world, where war rages and global warming threatens our very existence, the inhabitants of earth need to be extra vigilant in their efforts to go green. This includes reducing your carbon footprint on the earth and leading a more sustainable life.
Many homeowners feel perplexed by all of the options available to reduce their carbon footprint. They may even feel (falsely) that making their household more green will fail to make that much of a difference in the fight to save our planet.
Even a single home going green has a massive impact on the environment. We can win this battle on home at a time. If you’re interested in accepting the challenge of making your household a green home, read on below for a few of the top changes you can make in your life to reduce your carbon footprint. We all stand to benefit from making the earth safer for future generations – and your wallet won’t complain when you start to see the savings in annual energy costs.
Switch From Dirty Energy to Clean Solar
The ION Solar reviews tell it all–solar is the best way to go. Whether your goal is to slash your energy bills, or to reduce your carbon footprint, the sun is a fantastic source of renewable energy.
It’s important to get past the hype from solar installers. Instead, listen to the plethora of impartial customer reviews that mention everything from a $20 energy bill, to the incredible feeling of knowing that you are doing your part by going green and minimizing harmful emissions in to our atmosphere.
The average investment is $15,000 to $30,000 for installation and purchase of solar panels. Optional battery power packs can help provide consistent power during both night and day. And many government agencies provide federal, state or local grants to help offset upfront investments in clean energy.
Depending on which installed you choose, your household may qualify for low-interest or zero interest loans to cover the up-front cost of your installation. And the loan payments are usually less than your current monthly power bill.
It really is a win-win, as home buyers are looking for homes that feature this technology – meaning solar power installation improves the resale value of your property.
And there are a number of additional home modifications that can help improve the energy efficiency of your home. A programmable thermostat can better manage energy consumption from home cooling and heating systems while you’re away from home. And weather stripping your doors can help keep cool air in during the summer, and warm air in during the winter.
Of course, energy conservation starts at home. And this includes setting a powerful example for your kids. Teach your children how to close windows, strategically keep doors open or closed based on airflow, and encourage them to leave the thermostat alone – opting for adding or removing layers of clothing instead.
Unplug Appliances and Shut Off Electronics
Unplugging your appliances when they aren’t in use, such as the toaster and the coffee maker, has more of an impact than you might think. Set your TVs and stereos on sleep timers, instead of letting them run around the clock. The cumulative impact of wasteful electronic device usage is horrible for our environment – putting unnecessary strain on our electrical grid.
One of the simplest and easiest ways to reduce your carbon footprint is by recycling. You are already throwing this stuff away anyway, right? It doesn’t take much more effort to just put recyclables in a separate container to be recycled, now does it?
Oh, and did I mention that you can earn money for recycling? Yes! Many cities and towns have recycling centers that will purchase your clean plastic and glass bottles for reuse.
Minimize Your Water Usage
Water is one of the easiest things to forget about when it comes to reducing your carbon footprint. Preserve water by turning off the faucet while brushing your teeth. Shorten your shower by a few minutes and turn down the heat on that water heater. You’ll be surprised at how much lower your water bill and your energy bill will be.
Saving money and reducing your carbon footprint? What isn’t to love?
These are just a few of the top ways that you can reduce your carbon footprint and start living a greener lifestyle. And we aren’t factoring in all of the advantages that we’ll reap from public investments in a smarter energy grid.
From decreasing your water usage, to switching to solar for your home’s energy needs, you will feel good at the end of the day knowing you are doing your part to save the future of this planet for generations to come!
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