PHEVs And REITs Finally Say Hello

By Aaron Levitt | August 05, 2011 AAA

As oil and gasoline prices have continued to rise, the promise of hybrid and electric vehicles has also increased. With consumers reevaluating the potential long-term cost savings of these vehicles, many analysts believe more will switch out their gas-powered cars for rechargeable or hybrid models. The National Highway Traffic Safety Administration estimates that nearly 20% of the United States auto market will be in the form of hybrid vehicles by 2015. While the long-term picture for plug-in hybrid electric vehicles (PHEVs) is rosy, range-anxiety in the short term will continue to be a problem. Without proper charging infrastructure, the sector is dead in the water. However, more and more real estate firms and retail outlets have begun installing capacity. With more places to grab a quick charge, the PHEV sector finally could go mainstream.
TUTORIAL: The Industry Handbook: Automobiles

Malls, Shopping Plazas and Restaurants
The dream of PHEVs may finally be coming to fruition. Across the country, a variety of retailers have begun installing charging stations for the growing fleet of electric cars, bikes and scooters. This is an important step as these charging stations will ultimately help calm consumers' range-anxiety fears. Drivers of plug-in hybrids such as the new Chevrolet (NYSE:GM) Volt will now be able to extend trips by using chargers while on the road, rather than having to return home and use a home-based station. The Department of Energy reports that there are currently about 800 public charging stations across the U.S. The DOE's data shows that roughly 100 of these stations were at individual retail stores, and about 35 were in shopping malls or outlet centers. According to Pike Research analyst John Gartner, by 2015 Americans will have access to nearly 21,500 public charging stations. So there is certainly room for growth. (For related reading, see New Wheels: Lease Or Buy?)

Real Estate Firms Offering EV Chargers, Too
Real estate firms also comprehend the benefits of offering EV chargers. Brian Koontz, vice president of strategic corporate development with ECOtality, a company that specializes in charging stations, recently spoke to industry group NAREIT. Koontz said that property owners benefit by putting charging stations at their properties and becoming a "destination" for the wave of electric cars coming to market. Koontz's comments help underscore a report by think-tank McKinsey, which showed that EV owners are willing to drive less often and adjust their parking habits to only patronize merchants that offer charging stations. Demographics are also key in the real estate charger-building binge. With a Tesla (Nasdaq:TSLA) roadster costing about $100,000, early adopters of PHEVs tend to have a high amount of disposable income. It's no wonder why companies such as Whole Foods Market (Nasdaq:WFM) and Buffalo Wild Wings (Nasdaq:BWLD) have scrambled to add chargers. (For related reading, see Top Tips For Cheaper, Better Car Insurance.)

Playing the Growing Market
With chargers springing up at more locations, the electric vehicle sector should see more gains over the long term. For investors, placing a few bets on the sector may seem prudent. Here a few ways to play:

While the first wave of charging was backed by DOE funding, privatization has made its way into the sector. Utility NRG Energy (NYSE:NRG) has unveiled its eVgo charging network. NRG plans to add about 60 stations by the end of the summer and double that by the end of next year. The utility will charge plug-in vehicle user-access fees, including $79 a month for unlimited access. Both Best Buy (NYSE:BBY) and Walgreens (NYSE:WAG) have joined the eVgo network.

Mall REIT Simon Property Group (NYSE:SPG) recently added a series of chargers to its flagship Florida Mall in Orlando and to its Stanford Shopping Plaza in California. George Caraghiaur, Simon's senior vice president of energy and procurement, said of the chargers, "We believe that a well-developed EV charging infrastructure is going to be key to the success of EVs." With Simon's size and scope, the company could be a leader in offering this infrastructure.

The Bottom Line
With energy prices continuing their long-term climb, the outlook for electric vehicles is glowing. The recent introduction of public charging stations is helping underscore their place in society. For investors, adding funds like the Global X Lithium ETF (NYSE:LIT) or the previously mentioned stocks are a great way to play the trend in PHEVs. (For more on ETFs, see Using ETFs To Build A Cost-Effective Portfolio.)

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