Industry Plays For Electric Vehicles

By Aaron Levitt | October 11, 2010 AAA

The National Highway Safety Commission estimates that nearly 20% of the United States auto market will be in the form of hybrid vehicles by 2015. Similar findings from J.D. Power and Associates show Europe reaching 50% hybrid saturation in the same time frame. As a greater focus is placed on energy efficiency, fuel economy and lowering carbon emissions, hybrid and electric vehicles will become more and more common place in our streets. While the industry is still in its infancy, investors with long enough timelines may want to consider the coming trend.

IN PICTURES: Top 10 Green Industries

The Power of Electrons
Within the next decade, many analysts see electrified vehicles sharing the roads with more traditional automobiles. IDC Energy Insights forecasts that Plug-in Electric Vehicles (PEVs) will number 2.7 million by 2015, with 885,000 PEVs in North America and more than 780,000 PEVs in Europe. With oil creeping back to the $90 mark, these types of vehicles are certainly gaining popularity, with charging costs around 11 cents per KwH. With the hype surrounding the recently IPO of PEV manufacturer, Tesla Motors (Nasdaq:TSLA), many major automakers have been unveiling their electric plans. Nissan (OTCBB:NSANY) predicts 10% of its cars will be all electric by 2020. Volkswagen (OTCBB:VLKAY) is planning on an all-electric Audi in 2012 and a Volkswagen in 2013. Toyota (NYSE:TM) will release an all electric version of the RAV4.

The auto makers are not the only ones with fervor for the industry. Many governments around the world have recently stepped up their intentions. The U.S. has committed $2 billion in Recovery Act spending for advanced batteries production and nearly $25 billion for programs to promote car makers to retool their production lines for production of more fuel-efficient vehicles. Hawaii has announced plans to build as many as 100,000 charging stations for electrified vehicles by 2012. Renewable energy superstar China has also gotten into electric vehicle mania, creating a partnership and investing nearly $15 billion into PEV development, on top of all grant commitments. Its state-owned electric grid has plans to build charging facilities in at least three of the country's largest cities by 2011.

An Electrified Portfolio
With so many varieties of electric and hybrid vehicles expected to hit the market over next few years, it can be difficult to predict who the real winners will be. The only broad green transportation play, the PowerShares Global Progressive Transport (Nasdaq:PTRP) is expected to close due to lack of investor interest. However, there are ways to play the growth of PEV's across the planet.

The proliferation of electrified vehicles will also require mass improvements infrastructure. New transmission lines, power plants and charging stations will be required to make the electric dream come true. The First Trust Nasdaq Smart Grid Infrastructure (Nasdaq:GRID) is still one of the best ways to play the gird build-out and AeroVironment (Nasdaq:AVAV) was recently selected as the producer of charging stations for the Nissan Leaf PEV. In addition, the Utilities Select Sector SPDR (NYSE:XLU) should see gains as utilities observe new revenue streams from charging EV's.

One thing all electric and hybrid vehicles have in common is batteries. The Global X Lithium ETF (NYSE:LIT) is a play on battery production and lithium production. Investors can use this as a proxy for the advanced battery market. While most investors have never heard of neodymium, you can't make a rechargeable battery or wind turbine for that matter, without it. Molycorp (NYSE:MCP) represents a domestic play on these rare earth metals. (For more Rare Earth Plays, Please See A Rare Opportunity In Rare Earth Metals.)

Bottom Line
As oil makes its way back to the $100 a barrel mark, interest in electric and hybrid vehicles is returning. Offering zero carbon emissions and low charging costs, these automobiles will only gain in popularity as governments around the world push for their adoption. Investors with long enough timelines should consider the various plays in the area. (Outfitting your home with solar power can be a long-term investment, or just a step toward greener living. To learn more, see A Solar-Powered Home: Will It Pay Off?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

You May Also Like

Related Analysis
  1. Stock Analysis

    Ford (F) Expands Recall for Takata-made Driver-Side Airbags - Analyst Blog

  2. Chart Advisor

    Profit From Holiday Spending With This ETF

  3. Stock Analysis

    Tesla (TSLA) Down on Target Price Cut by Morgan Stanley - Analyst Blog

  4. Stock Analysis

    Auto Stock Roundup: Ford Launches SYNC 3, Honda Announces Fresh Recalls - Analyst ...

  5. Stock Analysis

    Honda to Recall 570K Vehicles in China for Takata Airbags - Analyst Blog

Trading Center