Has The Electric Vehicle Investment Craze Run Off Course?

Includes: GM, TM, TSLA
by: Insider Monkey

by Anil Nain

Supporters of the electric vehicle continue to cite the advantages of zero or near zero emissions, claiming EVs run on "domestically" produced energy and will make recharging and maintenance simpler and more efficient. However, those with a more negative view highlight the prohibitive costs of buying an EV, the restrictive range offered by a single battery charge, the length of time required to achieve a full charge and the lack of infrastructure currently in place to support the vehicle when in use.

There are many intriguing tactics out there with market-beating potential, but let's look at what is going on among the electric vehicle manufacturers for further insight as to which side is closer to the "investment" truth.

On Thursday, Henrik Fisker, the former BMW designer and cofounder of Fisker Automotive, resigned citing "several major disagreements" with "Fisker Automotive executive management on the business strategy." He was also said to be seeking a major investment partner in China. Apparently, this investment partner was needed to fill the void created by the freezing of its loan facility from the Energy Department last year. Not so pretty.

In the electric car market, Fisker competes directly with Tesla Motors (NASDAQ:TSLA), which is up 16% to date in 2013. While both companies have recently focused on the high-end sedan category, only Tesla appears to be making any real headway. On a recent conference call, CEO Elon Musk said he was "quite certain we [Tesla] will deliver more than 20,000 cars this year." He added that if Tesla were to shut down all its stores and stop taking orders, they would still sell out in 2013.

Since November, Fisker has been working on building the Atlantic-a smaller sedan revealed in April 2012 and previously code-named "Nina"-at an old General Motors (NYSE:GM) plant based in Delaware. But in February, Reuters reported that the cash-strapped hybrid-maker was considering bids from two Chinese automakers: Geely, which owns Volvo, and Dongfeng Motor Group.

And certainly Tesla is not without its issues. According to Musk, a critical New York Times review of the Model S alleging that the car failed to meet its promised 300 mile range in cold weather resulted in "probably a few hundred" order cancellations and "probably affected [Tesla] to the tune of tens of millions, to the order of $100 million [in market cap]."

Earlier this month at the Geneva Auto Show, Tesla articulated its intent to focus on sales of the Model S and Model X crossover in Europe, citing Germany, Switzerland, Norway and the Netherlands as important markets. Toyota's (NYSE:TM) Prius commands market share in the electric-and-hybrids segments, selling in 80 countries and regions, with the U.S., Japan and Europe as its largest markets. Meanwhile, General Motors , Chrysler and Nissan (OTCPK:NSANY) make lukewarm progress with their all-electric entrants: the Volt and the Leaf. The Chevy Volt was the best-selling U.S. plugin electric, delivering 1,626 units in February, while the Leaf sold 653 units.

So let us just take a look at the (sales) facts:

GM sold 23,461 Chevy Volts in 2012; three times last years' sales. However, this record number of sales still fell short of GM's 2012 (reduced) target of 40,000 units, which was revised down from original expectations of 60,000.

Nissan's Leaf sales hit 9,819, a 1.5% increase over 2011, but still less than half of Nissan's projected 20,000. Toyota's Prius Plug-In Hybrid sales exceeded those of the Leaf with 12,750 sales in 2012, and Ford sold 685 of its Ford Focus Electric in 2012.

In perhaps a fitting end to 2012, Waltham, MA-based A123 Systems, which supplied faulty lithium ion batteries to Fisker, filed for bankruptcy in October. In November, Tesla's Model S became the first electric car to win the Motor Trend Car of the Year.

Whether the electric vehicle investment craze has run off course may not be perfectly clear at this point. What does seem well defined is that the optimists have been disappointed, and the pessimists have yet to be proven correct.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article is written by Insider Monkey's writer, Anil Nain, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.

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