electrical vehicles

Green Energy FTW!
photo shows a wind farm across hills

For years we’ve had the theory that the next energy revolution would come from the declining costs of solar energy and battery storage.

According to research by Bloomberg, the most cost-effective way to provide new electricity generation for two-thirds of the Earth’s people right now is either solar or wind. The pattern is clear: green energy is winning.

Green energy costs continue to drop. Battery storage is 50% cheaper than it was two years ago. Wind projects are benefitting from larger scale. Solar photovoltaics continue to improve efficiency as time goes on.

These studies are based on actual costs of utility-scale projects. Compelling economics are the key factor—not a shift in consumer behavior. It remains to be seen whether dispersed generation and storage in user-owned systems reshapes the utility industry in the future.

Battery technology improvement has an impact on the price of electric vehicles, since batteries can represent about 30% of the total vehicle cost. Despite advantages in maintenance and fuel expense, acquisition cost remains a hurdle to wider adoption of electric cars and trucks.

But current trends point to a future in which electric vehicles cost less than those powered by internal combustion engines.

We think about winners and losers as the future unfolds. Companies that produce and transport fossil fuels for electricity generation may face a dimmer future. Those that provide the materials needed for the new equipment may prosper. Less expensive electricity will have effects we cannot predict, just as past energy revolutions reshaped society.

We will continue to research and think about these issues. Clients, if you would like to talk about this or share your views, please email us or call.

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Autonomy: Freedom, Independence…

© Can Stock Photo / RioPatuca

Dictionary definitions of autonomy talk about freedom and independence. This is fitting, when you think about what autonomous or self-driving vehicles (AV) are going to do for those who are unable to drive. And that is just part of the story.

In our society, a drivers license has long represented freedom and independence – autonomy, in other words. One of the toughest issues in dealing with friends or elders with diminishing abilities has been that moment when driving a car becomes a threat to one’s self and others. And some among us have never been able to drive, due to injury, sickness, or congenital conditions.

Progress has been made in the development of autonomous cars. Within the next few years, we are likely to see the first widely available autonomous vehicles. This will make it possible for those who cannot drive to live autonomously, independently, on their own. Delivery of goods and services may be more widely available than ever before. Getting to a medical appointment or store will be routine for nearly anyone, in any condition.

An even larger benefit might come from a reduction in motor vehicle injuries and fatalities. When a self-driving car is implicated in an accident, everybody hears about it – the news covers it extensively. Yet these incidents rarely happen. And each month, more people die in US traffic accidents in conventional vehicles than were killed on 9/11.

From an investment standpoint, it is possible to own stock in several of the leading approaches to autonomous vehicles. A significant fraction of the value of one of the traditional auto companies is in its autonomous vehicle division. With another company, you gain ownership in an aggressive AV development program along with the leading internet search business, among other things. These are established, profitable companies. The third is a somewhat controversial, newer company that has yet to book a full-year profit, as it works on building an electric vehicle business.

In the investment advisory accounts we manage through LPL Financial, we have chosen a number of paths to gain exposure to the evolution of the automobile. This diversified approach will hopefully bear fruit in the years to come. No guarantees, of course.

Just as in the 1990’s, it was difficult to understand the pervasive changes the internet would bring to everyday life, autonomous vehicles may present a transformation as sweeping. We humans tend to believe things will be as they are now – it is hard to visualize change. But we believe change is coming.

We will continue to study and watch. Clients, if you would like to talk about this or anything else, please email us or call.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

The Big Payoff from Automobile Evolution

© Can Stock Photo / esperanzacarlos

Clients know we’ve been investing in different facets of the auto business for years. It is a vital industry. People need to go places, after all—to school, work, and play. The more we research, the more interesting the future becomes.

Here are some of the surprising things we have learned:

Going a mile in an electric vehicle, or a hybrid in electric mode, costs only three cents. Gasoline takes a dime. The seven cent difference adds up to $175 billion dollars annually in the US. 1

The idea of ‘autonomous vehicles’ or self-driving cars seems fantastic today. Rapid advances in radar, other forms of sensors, artificial intelligence, and communications are making the technology a reality. We will see it, at least in some form, in some places, in the not-too-distant future.

Engineers project that autonomous vehicles will experience a 90%-to-95% reduction in accidents compared to human-driven vehicles. We thought about what this could mean, and ran the numbers. Across the whole country, this means thirty thousand fewer traffic fatalities per year. Two million injuries would be avoided. In economic terms, $135 billion in property and human damage would be prevented every year, if the accident rate were reduced 90%.2

In a related development, the cost of solar electricity is falling about 10% per year3. This makes sense, because solar power is a technology and the price of technology tends to fall year by year. So the cost advantage of electric propulsion may grow even larger.

With these compelling economic factors, it is easy to forget that the price of electric vehicles is not yet low enough to be competitive with internal combustion engines. But as a client reminded us recently, “Wide screen televisions used to cost $12,000, too.” As volumes go up, prices will come down. We know how this works.

The benefits we’ve cited above amount to thousands of dollars per year, per household. This doesn’t count the time we might gain from not having to drive, or the significant health advantages from reduced vehicle emissions.

The prospects for a healthier, wealthier society are exciting. Change usually creates winners and losers. You know we will be studying these issues intensely and watching closely. Please call if you have questions or comments about how this may affect you.

1Calculated from US Department of Transportation figures

2National Transportation Safety Board statistics

3Farmer, J. Doyne & Lafond, Francois. How predictable is technological progress? Research Policy, 2016. Volume 45, Issue 3.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.