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6 Reasons Why 2013 May Be The Turning Point For Electric Vehicle Industry

In 2008, the electric vehicle industry entered into the hearts and minds Americans. What followed however, were years was wrought with many challenges and difficulties; the high costs of cars, limited range distance and poor planning each played a role in the slow adoption of electric vehicles. That’s in the past, and with lessons learned, the electric vehicle industry is poised for an unprecedented upswing; from an investment standpoint, these stocks could not be any cheaper than they are now.

1. Valuable lessons from past mistakes

During the past few years, many companies who have received alternative energy grants from by the US Department of Energy have failed. A good example would be A123 Systems (AONEQ), a start-up company from MIT, to manufacture battery packs for electric vehicles and General Motors (GM) main battery supplier. The Company received a grant of $249 million dollars for a product that had numerous defects. Early this year, the Company announced a first quarter net loss that reached approximately $125 million due to a recall. Just last month however, the company filed for Chapter 11 bankruptcy and sold its assets, contracts and rights to Johnson Controls Inc., (JCI).

Right now, with critics hitting the president and his policies from every angle with articles published in Bloomberg and Planetizen, we can bet that this particular failure as well as all the others will cause the US government to be more meticulous in its screening process of giving out future grants to companies. I.e., companies showing a successful track record, effective business models and perhaps injecting cash based on completing successful milestones.

Manufacturers of electric vehicles have learned the hard way that people will not buy electric vehicles without enough charging stations and support structures for electric vehicles. Companies such as Tesla Motors, Inc. (TSLA) and Nissan Motor Co. Ltd. (NSANY) are now investing in infrastructure and partnerships to support and promote the use of their electric vehicles.

On the infrastructure side, companies such as Ecotality Inc., (ECTY) and Coulomb Technologies, Inc with multi-million dollar grants from the government started to deploy numerous charging stations around the country. This, in my honest opinion, is not how a profitable business should be run. Instead of carefully studying the market for patterns and populations that own electric vehicles before deploying the EV charging stations, these companies went for deployment speed instead; sinking in millions of dollars in EV charging system deployments where no market exists. By the time the market arrives, however, those systems would most likely be outdated and rarely used.

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2. Unifying charging station locations

Last year, Google (GOOG) together with the Department of Energy launched a new project to map out commercially available EV charging stations (see sample below). Prior to that, the only way an EV owner could find a charging station was by linking to maps of individual charging station service providers. As of this moment, Google has mapped out approximately 4,806 EV charging stations in the US, excluding private charging stations and new installations.

This functionality enables an EV owner to easily find the nearest EV charging station in his/her vicinity regardless of provider. The numbers of charging stations have been growing at a steady rate, and according to a projection done by Pike Research, the number of electric vehicle charging stations sold will increase from less than 200,000 to more than 2.4 million in 8 years time, with a total distribution of 11 million operating units worldwide.

3. Increasing gasoline & diesel fuel prices a boost for demand in electric cars

With declining supply of petrochemical products, the increasing trend of oil prices is projected to rise over the coming years while the emergence and recent advancements in alternative energy sources such as solar, wind, hydro and geothermal energy promises to lower the price from our grids.
This divergence in fuel cost (fossil fuel vs. electric) will be a major factor in pushing consumers to think long-term on their next vehicle purchases and probably favor electric vehicles.

4. President Barack Obama’s 2nd term

In a recent Reuters article on the President’s win and what it means for the electric car industry, Tesla Motor’s chief executive, Elon Musk, was very optimistic regarding the electric vehicle Musk said:

I think that we can expect at least that things will continue as they have, I wouldn’t expect it to get any worse for electric vehicles, hopefully it will get a little better.

Back in 2010, Tesla Motors received a $465 million dollar loan from the US government and more recently received a grant for $10 million for new hires and equipment. Currently, the company aims to produce cheaper and affordable electric vehicles and plans to put up numerous fast charging stations in strategic locations across the US.


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