Electric Vehicles: The Final Piece of the Puzzle

Oct 16, 2017

Rahul Shah, Editor, Smart Contrarian

Back in my college days, I used to hate winter mornings. Not so much for anything else but what they did to my bike.

Getting the bike to start in cold, freezing temperatures was always a pain. Like the bikes of today, I did not have the luxury of a starter switch. There was this lever (or 'kick' as we call it) which you had to push with your foot to start the bike. And if you were not careful giving good, firm kicks - you were risking a serious leg injury.

Cranks are Injurious to Health

Some of the earliest cars had a similar problem. They did not have a starter switch, so you had to go to the front and turn the engine over with a hand crank, which was a real pain.

I've heard of people breaking arms and dislocating shoulders, while 'cranking' the engine. And imagine someone leaving the car in gear by mistake. The person turning the crank would get run right over.

This inconvenience was a key reason people preferred electric over gasoline (ICE) cars. In an electric car, you could simply climb in, push a button and drive off.

Electric Cars? Not as New as We Think...

Yes, you read that right. Electric cars were around back then, too. In fact, the first car to ever hit the roads was an all-electric. As surprising as it sounds, conventional ICE cars and electric cars co-existed for many years.

It is difficult to pinpoint exactly when and why electric cars started losing the battle with ICE cars.

But it probably has to do with two innovative gentlemen: Charles Kettering and Henry Ford.

Kettering's invention - the electric starter - eliminated the need for a hand crank; and Henry Ford's legendary mass production system brought ICE cars within reach of the average American. Almost overnight, gas car prices crashed to half the price of electric cars.

The automobile industry has never looked back since. Electric cars, on the other hand, completely vanished from the roads.

Tables have finally started to turn though. Electric cars are fighting back. And with a little help from regulators, entrepreneurs and environmentalists, they are about to mount a serious challenge to ICE cars.

Who knows, a couple of decades from now, the landscape could be completely changed: Electric cars will dominate the roads, and ICE cars wallow in the museums.

But as I've said before, my job is not to predict whether electric cars will partially or fully replace their ICE brethren.

My quest is to be fully prepared to pounce on great long-term opportunities should an electric vehicle boom get underway.

What's Under Your Hood? Electric or gasoline?

How an EV Wave Will Affect Stocks

Last week, we discussed some of the stocks that will benefit from an increased demand for EV cars.

But let's also look at those companies that could see their business models go up in smoke if EVs really take off.

Since EVs will be powered by batteries, not engines, companies that manufacture engine parts such as piston, engine valves, and carburetors are at risk. Clutch and gear manufacturers may not be safe either.

The thing about EV's most interesting to me is the near total absence of moving parts.

An electric vehicle has only about 24 moving parts in comparison to a whopping 150 moving parts in ICE cars. This might explain why major auto ancillary companies in India are sweating at the idea of India turning all electric.

Now, manufacturers of parts like tyres, seats, headlights, shock absorbers, steering systems and brake lining, etc need not worry - these parts will be used in EVs just as the way they were in ICE cars.

So tyre stocks, seat stocks, auto headlight stocks could be set to ride the EV wave profitably too.

Also, since the batteries inside the cars will be heavy, EVs will need to be as light as possible. Aluminium, a much lighter alternative to steel, could replace steel in building car bodies.

Consequently, demand for steel could go down and that for aluminium go up in the EV era. So, do watch out for aluminium stocks as well.

Already, we can see how many existing sectors could change in some or the other way by the EV wave. And new sectors that we can't even begin to fathom could also emerge.

Therefore, while I will keep adding to the list from time to time, I hope this series on EVs readies you, dear reader, to be able to spot a few opportunities for yourselves.

Good investing,


Rahul Shah
Editor, Smart Contrarian

Brain Food for the Day

Are Electric Vehicles Really More Efficient?

IC engines are so complex - and so inefficient - it makes me wonders how conventional cars kept EVs off the streets for so long. 60% of energy generated by IC engines is lost to things like friction and other inefficiencies.

Electric engines, on the other hand, are more than 90% efficient...sometimes even up to 98% efficient.

Some people think in EVs the inefficiency is elsewhere - specifically in that electricity to charge electric batteries comes from power plants, so the journey of power from coal in power plants to the wheels of an EV makes EVs as energy inefficient as ICE cars.

But this is not necessarily true. If we take into account the energy used to extract, refine and transport petrol or diesel from an oil well to the tank of an ICE car, an EV engine would leave a MUCH smaller carbon footprint than an ICE car.

And if EV batteries are charged through renewable sources like solar and wind, then the equation shifts even more in favour of EVs.

Little wonder, then that everyone - from environmentalists to regulators to governments - is gung ho about electric vehicles.

To read more on my Electric Vehicle series, click here and here.

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2 Responses to "Electric Vehicles: The Final Piece of the Puzzle"

B B Raina

Oct 16, 2017

Dear Mr Shah,
In the evolving EV market there is one very critical raw material that needs to be kept in constant monitoring mode to see how the EV industry will grow and evolve. That material is Lithium. This material is going to be the game changer in EV growth. My question is do we have Lithium producing capabilities in India, I mean Lithium as raw material. Are there any industries in our country under your watchful eyes who use this maerial to produce Li-ion batteries.
Kindly enlighten.
Your posts are superb.
Thanks

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Sanjay Balbhim Limaye

Oct 16, 2017

While the observations regarding electric vehicles are all feasible and have been clarified well in the article, the possibility of electric power based public transport with a unique technology of transporting ultra light weight vehicles on overhead rails should also be evaluated. When realized this system is likely to make the concept of private ownership of vehicles obsolete. Safe and cost effective by design this system will be highly Eco-friendly using alternate energy sources and can move men and material at much higher speed with superior control.

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