As crude oil resumes its climb towards the $100 a barrel mark, consumers are once again staring at the face of $4 per gallon for gasoline. According to data from the Oil Price Information Service, consumers last paid prices that high in September of 2008.

As transportation fuel costs continue to rise right alongside the recovering global economy, alternatives become more cost efficient. One such alternative, the electric and hybrid vehicle, is poised to gain in popularity as these cost savings come to fruition. It's a safe bet that over the long term, consumers will eventually switch out their gas powered cars for rechargeable or hybrid models. The question for investors is how long they will have to wait for their bets to pay off. That answer may be sooner than most think.

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Life in the Electrified HOV Lane
A new study by research think tank McKinsey has shown that the need for richer tax incentives or fleets of battery charging networks, may not be necessary to spark the electric vehicle revolution. The report found that early adopters are willing to adjust their driving and parking habits to own an electric car. People are willing to drive less often, shorter distances and adjust their parking habits to only patronize merchants that offer charging stations. McKinsey estimates that demand for electric cars in urban areas could account for 16% of overall new car sales in New York, nearly 9% in Paris and 5% in Shanghai, by 2015. Similar findings from the National Highway Safety Commission and J.D. Power and Associates estimate that nearly 20% of the United States auto market will be hybrid cars by 2015 and that hybrid saturation in Europe will reach 50% in the same time frame.

While the McKinsey focused on large urban cities, the suburban landscape is also preparing for the adoption of these vehicles. Hawaii has formalized plans to build as many as 100,000 charging stations for electrified vehicles by 2012 and California has made similar efforts to add charge stations in its populated areas. The private sector is also prepping for adoption. Electronics retailer Best Buy (NYSE:BBY) has added electric vehicle (EV) stations at 12 stores in California, Washington and Arizona. Green grocery, Whole Foods Market (Nasdaq:WFMI) has made comparable strides opening charging stations at several of its locations.

A Powered Portfolio
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. IDC Energy Insights forecasts that Plug-in Electric Vehicles (PEVs) will number 2.7 million by 2015. While the industry is still in its infancy, investors with long enough timelines may want to consider the coming trend. Pure-play EV manufacturers like Tesla Motors (Nasdaq:TSLA) aren't the only way to profit from the trend.

While the lack of charging stations may not affect early adopters, for EV's to really take off there needs to be improvements in new infrastructure. The First Trust Nasdaq Clean Edge Smart Grid Infrastructure (Nasdaq:GRID) is still one of the best overall ways to play the grid build out. In addition, as utilities observe new revenue streams from charging EV's, the Vanguard Utilities ETF (NYSE:VPU) will benefit.

The electric and hybrid vehicles movement can be summed-up in one word: batteries. The underlying holdings in the Global X Lithium ETF (NYSE:LIT) focus more on battery production rather than lithium prices. The fund is a perfect proxy for the advanced battery market and companies like A123 Systems (Nasdaq:AONE). Just as important to advanced batteries as lithium, metals such as neodymium are needed. The Market Vectors Rare Earth Metals ETF (Nasdaq:REMX) follows a basket of strategic minerals producers.

The Bottom Line
As transportation costs continue to rise, electric and hybrid vehicles are once again returning to the spotlight. New reports show that previous hurdles to the industry, such as range phobias, are having limited effects on early adopters. In addition, the private sector seems to be picking up the torch and beginning to construct charging stations. Investors with long enough timelines should consider adding some exposure to the EV sector, either through the previously mentioned funds. (For related reading, take a look at Solar Stocks To Watch In 2011.)

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Tickers in this Article: PBW, BBY, WFMI, TSLA, GRID, VPU, LIT, AONE, REMX

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