Electric Car Myths

6 Myths Every Investor Should Know About Electric Cars

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*Editor's note: For a more recent report on electric car misconceptions, click here to see Jeff Siegel's article.

Last week, I spouted off about how embracing electric cars was not some random left-wing agenda, but rather a patriotic endeavor.

Not surprisingly, there were some who disagreed with me. And that's fine. I'm not above criticism or opposing viewpoints.

However, I did notice that in many of the criticisms, there were an awful lot of arguments that were based on information that was either inaccurate, or just plain wrong.

And unfortunately, I know a lot of folks actually believe half the crap that's written by partisan slaves or just uninformed readers on message boards and comments sections.

For investors, this can be a dangerous thing. Because the fact is if you follow the advice of anonymous critics or just the opinions of those who are not on the inside of the clean energy movement — instead of focusing on credible, objective data — you can miss out on some pretty big scores.

To give you an example of what I mean, at a conference in November 2009, I touted JA Solar (NASDAQ: JASO) as my top solar pick for 2010.

Following my presentation, a gentleman came up to me and told me that he had read Chinese solar stocks were going to tank in 2010. He couldn't tell me who had written this piece of wisdom because it was merely a comment left on a Reuters article. And apparently, there were dozens of other comments bashing China solar plays, too...

So how did JA Solar end up performing?

The stock was trading around $4.00 a share when I was speaking at that conference in November 2009. By October 2010, the stock hit a high of $10.24.

That Chinese solar stock that was "going to tank" catapulted more than 150% in less than a year!

I don't know if that guy took the advice of that faceless commenter or listened to me, and did some actual research on the stock. I hope he chose the latter option, based his investment decision on actual facts, and at least doubled his money.

Now last week, I recommended an electric vehicle play to Green Chip Stocks members. The stock is only up about 4% right now; but just like JA Solar, I don't think we'll have any problem walking away this time next year with another fat gain.

In the meantime, I still want to clear up a few misconceptions about electric vehicles so that those of you who are looking to make a few bucks in this sector are not being swayed by tall tales and deliberate falsehoods.

Six myths about electric vehicles

1. At some point, these electric car batteries will just end up in a landfill.

Although lithium-ion batteries are actually rated for landfill disposal, it is highly unlikely that they'll end up in one. Because these batteries can contain materials such as nickel, cobalt, and various rare earth metals, the batteries are far too valuable to send to a landfill...

In fact the recycling of these batteries is going to be a huge opportunity for recycling companies. Just ask Toxco, Inc., which recently landed $9 million to expand its recycling facility in Ohio to process vehicle-grade batteries.

2. No one wants them.

I've heard this argument a number of times, yet there is no objective data to back up such a claim. Moreover, it's dangerous to assume that consumers don't want them when commercial sales of electric vehicles (other than pre-orders) haven't even begun yet.

That being said, a few months ago, Nissan reached its goal of 20,000 reservations for its all-electric LEAF. That was three months ahead of schedule. The next round of reservations will begin in 2011 after these first 20,000 have been processed.

3. Electric cars are no less pollutive than conventional vehicles because most of our electricity is generated from coal.

In a 2006 DOE report, researchers noted that although most of today's power plants emit greenhouse gases, with electric vehicles, the overall levels of greenhouse gas emissions would be reduced because the entire process of moving a car one mile is more efficient using electricity than producing gasoline and burning it in a car's engine.

Also worth noting is that as many of our older coal-fired power plants retire, new solar, wind, and geothermal operations will pick up some of the slack, thereby increasing the amount of clean energy being sent to the grid.

4. Our grid can't handle it.

According to a 2007 study conducted by the Pacific Northwest Laboratory, if every vehicle on the road was a plug-in electric vehicle, today's grid could support more than 75% of them charging at night without adding a single power plant.

It is highly unlikely that any of us will see a 100% penetration of electric vehicles in our lifetimes. And while many in Washington want to tempt us with the promise of ten percent penetration in ten years, it is likely that within the next ten years, less than 5% of the vehicles on the nation's highways will be electric.

So the fear of our outdated grid being unable to handle an influx of electric cars is overblown.

5. Electric cars are not as energy efficient as gasoline-powered cars.

According to the DOE, about 20% of the energy from the fuel you put in your tank actually gets used to move your car or run accessories; the remainder is lost to engine and driveline inefficiencies and idling.

Electric drive systems, however, see about 75% or more of the energy from a battery reaching the wheels. So even with transmission and distribution losses (as someone had mentioned last week), electric cars still come out ahead.

6. Can't sell electric cars without subsidies.

I've covered this dozens of times before, so I'll make it brief.

Bottom line: Oil is heavily subsidized, and the price you pay at the pump does not reflect the true cost. If all direct and indirect subsidies were figured into the equation, you'd likely be paying anywhere between $8.00 to $11.00 a gallon for 87 Octane.

Yet how often do we hear people asking how well internal combustion engine vehicles could sell if we weren't subsidizing our oil addiction?

End the tax payer support for oil and electric vehicles, and see which sells the best. I'll give you a hint: When 87 Octane hit $4.00 a gallon, car buyers were paying above sticker price to get their hands on a Prius, Toyota's hybrid superstar which now gets 50 miles per gallon.

What do you think will happen when we hit $5.00 a gallon?

You think you'll need a tax credit to sell a Nissan LEAF or a Chevy Volt?

Just something to think about.

To a new way of life, and a new generation of wealth...

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Jeff
Editor, Energy and Capital

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