The Electric Car Market: Wise Energy Use Stocks

This is a continuation of a series looking into the financial stability of companies in Energy Tech Stocks' "Wise Energy Use" index, described in part 1.  The first article in the series looks at three efficient lighting companies, while this one looks at four electric vehicle stocks and a private company, as described here.

Electric Vehicles... Good, but not Disruptive

I personally don't consider investing in any car companies, even relatively fuel efficient ones.  Either or both lean economic times and high oil prices are likely to lead to lower use of cars over the next few years, and this will likely weigh on car companies.  I'm more enthusiastic about relatively economical forms of transport, such as bikes, scooters, light rail, and buses.  Electrification is likely the future of ground transport, but which will come first, the electric car, or the electric bus?

New car sales typically rely on financing and consumer demand, something which could weigh heavily on all automobile manufactures, even for efficient vehicles.   But I didn't create the index, I'm just screening it for companies I think will stay strong in a prolonged downturn.  

I agree with Neal's post yesterday where he says, "In energy, there is no disruptive technology, only disruptive policy that makes some technologies look disruptive after the fact."  Neal makes an excellent case that Silicon Valley ingenuity will not overcome the energy industry.  The disruption, when it comes, will not be a better car, like a plug-in hybrid - it will come in the form of people abandoning the personal car for something better.

Today, I was at the Colorado New Energy Economy Conference, and I saw Neal's "disruptive policy" coming in the form of Denver's new Strategic Transportation Plan.  According to Bill Vidal, of Denver Public Works, Denver transportation planning has taken a new focus.  No longer will Denver transportation be car-centric.  It will instead focus on moving people, goods, and info, becoming more multi-modal.  A move to multi-modal transport will not be good for car companies.  While Denver may be on the forefront of progressive transportation, they are not the only ones, and a slowing economy is as much a driver of multi-modal transportation options as is a rising oil price.

So while I don't like any of the car companies in the Wise Energy Use Index, there is a bus company I like. 

Nissan (NSANY):   Financial data from 1Q 2008.  First quarter operating income was a positive 80 Billion yen, and they have a current ratio of about 1:3.  This is not bad, but I'd spend a lot more time scrutinizing the company's financing needs over the next few years before I would invest.  Nissan may be looking into electric vehicles, but if few people are buying any vehicles, how much will that help the company?

Mitsubishi Motors (MMTOF.PK):   Financial data from 1Q 2008.  Although Mitsubishi had positive operating income of about 10 billion yen in the first quarter, current liabilities exceeded current assets, with a current ratio of 0.87.  This might not be a reason to worry in ordinary times, but we are not living in ordinary times.

Toyota Motor (TM):  Toyota's current ratio is almost exactly one, but they did have operating cash flow of $30 Billion in the first quarter.  Like Nissan, Toyota may be able to survive without tapping the financial markets for a while, but I'm still uncomfortable owning any auto firm, even a progressive one such as Toyota.  Also like Nissan, I'd take a hard look at the next few years' financing needs before I decided to invest, if I were so inclined.

Ener1 (HEV): Battery, Fuel Cell, and Nanotech company Ener1 is not one I've considered before, partly because the ticker and company description make me think that they're slick marketers, while I'm more interested in boring companies that don't know how to get investors interested in their story.  Nevertheless, the company's technology is not totally tied to cars, and they have a fairly solid balance sheet with a current ratio of 7:7.  Its current assets less current liabilities are slightly larger than its twelve month operating cash loss, and they have no debt.  Ener1 should be able to survive for about a year without going to the capital markets again for new financing, so if you're betting on a quick resolution of the financial crisis, this is a company you might consider for your wise energy use portfolio.  I will not be making that bet.

A123: This widely acclaimed lithium-ion battery company is private, and so not available to stock market investors, nor dues it publish financial statements.  They are planning an IPO, but until the prospectus is available, I won't be able to say anything about the financials.  Unless markets improve, I don't expect the IPO to take place.

Disclosure: The author has no position in any of these companies.

Comments

[Deweyp:]

Two points:
1) Most people will not give up the personal freedom an auto provides, even if the operating cost is higher by a few points.
2) The world is in the beginnings of a transition from petro power to electric and eventually hydrogen or even something more exotic. This would explain why there are few sales of electric vehicles. Few are being built yet. At the turn of the last century many made just the same argument about autos vs horses, and look where we are now.
There will always be a need for mass transport and some may find that to their liking, but I really do not believe autos are on the way out. I wouldn't bet against the auto companies, troubled as they are.

2008 Oct 16 09:41 AM

[Paul Killinger:]

There have been "few sales" of EV's since the 1909 Baker, generally credited with being the world's first (working) electric car. Until there's some technological breakthrough involving their power source (batteries) which no one yet knows about, they will NOT replace the ICE, nor even compete with it, no matter how much money the Congress throws at them.

Whether you EV-philes like it or not, T. Boone has it exactly right. NGV's will run the 250 million ICE's that now exist (in the U.S. alone!) and the ones yet to be built for the next CENTURY thanks to our 100 year supply of NG and its much more energy laden (16X!) cousin, gas hydrates.

Wishing something sometimes makes great theater, but it doesn't always work where the rubber meets the road (sic).

2008 Oct 16 01:20 PM

[Prudent Inv...:]

ABAT is the best run LI-ION company I've come across.

Generating EPS, chinese based & tied to "the party." You said

"I'm more enthusiastic about relatively economical forms of transport, such as bikes, scooters, light rail, and buses. Electrification is likely the future of ground transport, but which will come first, the electric car, or the electric bus?"

They produce the batteries for DROVES of electrical bicycles right now, helped with some Electric Buses for the Olympics and are working on car related batteries.

Worth checking them out.

I didn't really care for their last round of fund raising myself though. I find that "shareholder friendly" mentality not there yet with Chinese run companies.

2008 Oct 16 09:48 PM

[lefty37:]

cannot see electric cars as the answer. we simply cannot store enough electrical energy on board. there is a really simple formula, One horse power = 746 watts x effiency. example--- One 12 volt, 70 amp hr. heavy duty battery will run a one hp. motor for 51.6 minutes

2008 Oct 17 06:56 AM

[Kunst:]

aptera.com

2008 Oct 21 12:27 AM