By Maurice Stouse, Financial Advisor and Branch Manager
So much is being written and said about electric vehicles. The new administration, investors, environmentalists, car enthusiasts and just about anyone has heard about them of has an opinion on them. What then is the current and future state of electric vehicles from cars to buses, to tractor trailers and even school buses? And what will be the impact on the various forms of energy consumption?
Electric vehicles (EVs) are not new. According to the U.S. Department of Energy, the first electric cars were introduced well over 100 years ago. Early on the likes of Thomas Edison and Henry Ford collaborated on ideas for electric cars as far back as 1914. Ironically, it was Henry Ford’s mass production of gasoline powered vehicles that lead to the decline of EVs at the time. Gas powered vehicles proved to be less costly to produce, less costly to run and were more powerful and would go greater distances than EVs. The Energy Department went on to say that the early attraction of EVs was due to their being quieter, cleaner—however they were best suited for short distances. They were also two and half times more costly. It was not until Americans became more mobile that the demand for gas powered vehicles took on added growth. What then are the considerations for investors?
First, break down the components of EVs: There are electric passenger cars, light duty vehicles, and growing development of public transportation buses, school buses and freight vehicles like 18 wheelers. Investors see opportunities in the design, manufacture of all of these through the various companies in America and abroad. There is growing interest in public transportation buses and school buses, since they travel shorter distances on a given day and require less recharging of their batteries. This would also include the suppliers to these firms which include engines, batteries and drive trains. Interested investors can invest directly through these companies in the form of common stock or through several funds (mainly exchange traded funds).
Raymond James recently released its annual report on electric vehicle adoption. It includes a review of the EV industry as well as the potential impact it will have on the fossil fuel industry. That impact remains to be seen and, as of this writing energy stocks have rallied significantly from their 2020 lows. Reasons for this have been pointed out: 1) the economy is seen emerging from the effects of the pandemic, 2) inflation and the history of outperformance that energy stocks have typically enjoyed in times of price inflation 3) energy companies are investing at a rapid pace in to green or renewable energy.
The growth of EVs is going to have an impact on world oil consumption according to the Raymond James report. Today, electric vehicles sales make up 1% in the USA but are substantially higher in China (7%) and Europe (3%). In fact, the USA is a distant third to China and Europe in EV sales EVs on the roads. How significant might that impact be? According to Raymond James, it is having an impact today of approximately .6% of the world’s daily oil demand, expressed in millions of barrels per day (BPD).
The world currently consumes about 100 million BPD which is up from about 90 million BPD ten years ago. Expressed in numbers, about 576,000 barrels per day less are being used by autos since those are electric. By 2025 that is expected to have an impact of 1.95 million BPD or about 2% of today’s consumption. Where might this be in 2030? The EV leaders profess that it will be substantial. It really depends upon the growth of the EV market. Market share of sales ended 2020 at 6.9% of vehicle sales in December and 4% for the year worldwide. That is a year over year increase of 41%. It also depends upon recharging infrastructure and battery life as well.
What are considerations for investors who have an interest in investing in EVs? First, do your research or work with an advisor to learn about and discover potential opportunities. When analyzing and looking at investment, consider both value and growth. A value investor might look at legacy bus or semi manufacturers and determine if they hold value because of potential users within their current markets. Also, what about batteries? There are a host of equities and ETFs that offer opportunities. As always this involves risk and a personal analysis of the amount of risk and the amount of money you might want to risk.
Maurice Stouse is a Financial Advisor and the branch manager of The First Wealth Management and Raymond James and resides in Grayton Beach. He has been in financial services for over 33 years. His main office is located at First Florida Bank, a division of the First, A National Banking Association, 2000 98 Palms Blvd, Destin, FL 32541, with branch offices in Niceville, Mary Esther, Miramar Beach, Freeport and Panama City, Pensacola, Tallahassee and Moultrie, GA. Phone 850.654.8124. Raymond James advisors do not offer tax advice. Please see your tax professionals. Email: Maurice.stouse@raymondjames.com. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal.
Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. The First Wealth Management First Florida Bank, and The First, A National Banking Association are not registered broker/dealers and are independent of Raymond James Financial Services. Views expressed are the current opinion of the author, not necessarily those of RJFS or Raymond James, and are subject to change without notice. Information provided is general in nature and is not a complete statement of all information necessary for making an investment decision and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results.
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