John Petersen is an attorney specializing in venture capital investments in the alternative energy space with Fefer, Petersen & Cie in Berne, Switzerland. He argues that the entire electric car movement is a complete fraud orchestrated by a few big car companies pandering to growing numbers of ‘green’ consumers. Batteries are expensive, and do a poor job of replacing a gas tank.
For example, the $100,000 all-electric Tesla roadster uses 6,000 model 18650 cell phone type batteries, which is akin to using ’6,000 hamsters to pull a stage coach.’ Deutsche Bank says that there are enough new factories on the drawing board to build batteries generating 36 million Kwh by 2015. These will be used to power vehicles like the $44,300 Nissan Leaf, which launches in December, and will be powered by several hundred larger, soda can sized batteries.
But even if the world’s total battery output is devoted solely to vehicles like the Leaf, fuel savings would amount to only 600 million gallons of gasoline a year, worth only $1.8 billion, about five hours worth of global oil production. If these batteries were devoted to hybrid vehicles like the Prius, the energy savings would amount to 3.8 billion gallons worth, a much more substantial $11.4 billion. The low hanging fruit for investors in the fuel efficiency race can be found by pushing forward existing, simpler, and cheaper technologies.
A great example is the ‘stop-start’ integrated starter/alternator. Cars burn about 10% of their fuel idling at traffic lights while driving in cities. ‘Stop-start’ turns the engine off, and then restarts it when the light turns green. European car manufacturers are rushing forward with this fuel saver, which costs about $600 per vehicle, to meet stringent CO2 standards. The system requires more advanced batteries which can handle dozens of engine starts a day, instead of a handful.
The Department of Energy recently handed $34 million to Xide Technology (XIDE) to develop just such a product using a lead-carbon formula. Global auto parts supplier Johnson Controls (JCI) is also involved in the space. The play here is that far more versatile batteries can command much higher prices, possibly $150, compared to the average $57 for traditional car batteries. Those taking a look at XIDE will find a $429 million market cap selling at $5.57/share versus $20 a year ago. In the meantime, car companies are going to hold back on making major capital investments in lithium battery power trains until the technology becomes proven. Better to invest in a company that may become profitable next year, rather than in five years, or never.
To learn more about John Petersen’s views on alternative energy, please visit his blog at altenergystocks.com. You can also find an archive of his past work at http://seekingalpha.com/author/john-petersen/articles.You can contact him directly at firstname.lastname@example.org. To listen to my complete interview with John Petersen on Hedge Fund Radio, please click here.
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