The electric car market is heating up

KUWAIT: Great investment returns are made when there is a new and revolutionary investment theme takes place. Even much greater when it is a newly emerging technology backed by governments, business, consumers and other nonprofit making organization such as environmentally friendly institutions and societies. The Electric Vehicle revolution is no different. If electric vehicles gain the wider public approvals and get huge popularity, then investing early rather than late would be much wiser.

My investment view is that the electric cars industry is at the early stage and it is offering at least 15 years of great investment returns for those who logically see the investment argument. I believe that in the coming years there will be more electric cars on our roads than the internal combustion engines that are polluting our beautiful planet.

Investment Opportunities
The EV industry is growing rapidly, well coming from a very low base, but since it is in its early stages, is also susceptible to sudden changes. Sustainable changes in any industry that is for the best are good investment opportunities. For instance, there are already lots of different lithium-ion battery components in the electric vehicle market now. As the technology improves and cost falls, some of these lithium-ion battery makers will do very well but others will disappear. I personally think the ones that are cost effective will be the best performers. Apart from battery manufacturers, some high technology companies that supply the electric car manufacturers are good investment opportunities to watch.

There are others that will see their business growing strongly on the back of the fast development in the electric car industry. The electric vehicle manufacturers will benefit the most but others like the battery building martials, charging stations makers, assembly line manufacturers, electric vehicle infrastructures, makers of those high technology components manufacturers and suppliers that go into all electric cars are most likely to benefit too. The most likely option to retail investors is to invest in a car manufacturer that will dominate the electric car industry for the next decades. Unfortunately, at present there is only one that is 100% electric car manufacturer and that is Tesla. Tesla is leading the transformation of the traditional car manufacturing industry and has made great commitment with some positive results. I am sure others will follow soon but Tesla has made the big move already. Its share price has increased by 1000 percent since 2010.

Traditional car manufacturers have been announcing that they will at some time in the future will be making all electric cars. Some have been very bold and committed already such as Volvo that from next year all its cars will be electric. Volkswagen has just pledged that it will launch 30 pure electric cars by 2025. The main and crucial component of the electric car is the Lithium-ion battery. When the internal combustion engine cars first produced over 100 years ago, it increased the demand for oil year after year. Now, the electric car is doing exactly the same but for the demand for Lithium the main component of the electric car battery. It is estimated that 30 percent of the total cost of producing an electric car goes to the Lithium battery. However, as Lithium is a pure commodity so its exposed to supply and demand. The more the demand will be for Lithium the higher the supply hence falling cost of production that ultimately will make it cheaper to produce electric cars. Anyone who can produce Lithium more economically and very cost effective could be a great investment opportunity.

The electric car revolution is an investment theme that is worth looking into very seriously. It is real and has taken off already. There are lots of ways for investment and there is lots of money to be made if you invest wisely. Investors should be aware that the transformation from the traditional car making to electric ones will be hugely costly and some for the financially weak manufacturers will disappear. Also some of the electric cars makers will not be profitable at the beginning. Their operating margins will dip as their costs increases. Selecting the ones that have the financial power is a wise move.
Investing in electric cars related stocks is for those investors that are patient and can accept volatility. So, it is not for the faint-hearted but this is where the big money is going to be made. @rasameel

By Hayder Tawfik

 

 

 

This article was published on 17/09/2017