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We might quietly scoff at the Toyota (NYSE:TM) Prius drivers - after all, the car only gets slightly better mileage than the average car in its class, so it's not all that special as far as environmentalism goes.

But don't scoff too hard, because it just might be that we'll all be driving hybrid cars in the not-so distant future.

You might be thinking that we simply don't have a model of fuel-source change for automobiles - so we really don't know what the future will hold - and whether our cars will be powered by natural gas, lithium-ion, or even solar power - or perhaps some combination.

And you're right - there's basically no model for automobile fuel conversion.

But there is a very robust model for home heating conversion.

Today there are at least as many heating technologies as there are fuel types, but 100 years ago, most people used coal and wood.

We certainly didn't switch from all wood to all heating oil, or all coal to all natural gas. I'm guessing that most people have "hybrid" heating systems, in that they have heating oil or propane or coal supplemented by firewood and electric space heaters; or solar, wind, etc.

When I asked Tyler Laundon, my colleague and coworker here at Wyatt Research if he had a hybrid heating system - he said he didn't.

But then he thought about it. Tyler is in the process of remodeling a mid-19th century farmhouse, and while he primarily heats his house with a wood stove, he supplements the labor intensive firewood with expensive heating oil to keep the Vermont winter chill out of his ancient shack. Actually it's ancient, but with amazing upgrades. His newly installed radiant floor actually heats the entire house.

So he heats his house using a hybrid of two different methods. To someone 100 or even 50 years ago, the idea of using more than one heating source for a home might have been somewhat ridiculous.

You might think it equally ridiculous that a car would run on two or three different fuel sources, but it's already happening.

There's a bus in the Czech Republic that runs on three different power sources. There's a hydrogen fuel cell, lithium ion batteries, and ultra capacitors.

Granted, the hydrogen fuel cell does feed electricity to the batteries and capacitors as well as power the bus, but the batteries can be charged independently of the fuel cell. The capacitors actually charge themselves as the bus accelerates and slows, so they're recuperative - but an automobile's inertia is certainly a type of energy source that's so far largely untapped.

In the future, it might be that all cars have recuperative capacitors reaping some of the inertial energy that's otherwise lost when we put the brakes on.

The new model Prius also has a solar powered air conditioning unit - so it too is a quadruply-powered automobile. It runs on gasoline, nickel-metal hydride batteries, it has regenerative breaking AND it uses solar energy for its AC.

Obviously, the Prius is an early example of the potential for "hybrid" cars - and packaging so many technologies into one car is somewhat prohibitively expensive. The Prius is in many ways identical to the Corolla or the Matrix models, with the aforementioned added systems. Today you can buy a Corolla for about $10,000 less than an otherwise identically equipped Prius. The Matrix is about $9,000 less expensive.

That means that you'd have to go through about 85,000 miles worth of driving, or 3,333 gallons of gasoline (at $3 a gallon), before the Prius starts to get cheaper to drive than the Corolla.

My assumption is that the Prius and the Corolla would have similar repair costs over those 85,000 miles - which they almost certainly won't.

But of course the hybrid technology will get better and cheaper.

Another potential model for the "hybridization" of automobiles might be that Americans have different cars powered by different fuels. You might have your old gasoline powered car for longer trips, and then you might have a liquid natural gas powered car for regular commutes, and maybe a smaller nickel-metal hydride plug-in for quick trips to the grocery store.

In any event, it's pretty clear to me that Toyota is leading the pack on this type of conversion. And the good news is Toyota's stock is about as cheap as it's been all year.

It's an even better bargain than it was back in February when it was in the middle of dealing with negative consumer sentiment due to its faulty brake issues.

But it's been in a sustained uptrend since its July lows, and like it or not, Toyota is arguably the best car company on the planet.

If you look at a stock search portal like yahoo finance, you'll see that Toyota has a current PE valuation over 40. That's pretty rich, but if Toyota's forward PE is to be trusted (a reasonable assumption given the accuracy of analysts' forecasts), it'll be selling at less than 17 times earnings - a much more reasonable valuation, even on a forward basis.

Whatever your personal bias on alternative fuels, the fact remains that Toyota is going to be leader in whatever fuel technology we use in our cars. It's definitely a long-term play on the transportation fuels of the future.

I'd look for an entry point under $75, and back up the truck if the stock dips below $70 again.

Disclosure: No positions

Source: Toyota: Long-Term Play on Transportation Fuels of Future