Monday 18 December 2017

Jump-start your investment in electric cars by plugging into lithium

Thomas Molloy

THERE is little doubt that the green revolution is here to stay and offers opportunities to investors willing to take a chance.

One really large bet is electric cars. It is a big bet because they have failed to catch on several times in the past.

At the turn of the last century, when cars were rare, around a third of all cars were electric but the petrol engines that allowed cars to go further eventually displaced their battery-powered rivals.

There was a brief revival in the '70s and '80s with milk floats and Clive Sinclair's ill-fated C5 and then again in the past few years where once again we appear to be living in a time when electric cars are poised to finally catch on following advances in battery production and costs.

Governments around the world are introducing tax breaks for electric cars, but it is worth noting that Europe still has just a few thousand privately owned electric cars.

Despite this fact, Warren Buffett's Berkshire Hathaway pumped $230m into a Chinese battery company that's developing environmentally friendly cars two years ago, while we saw the first IPO of a car company for 50 years in the United States this July when the maker of the improbably beautiful Tesla sold shares on the Nasdaq.

Assuming you are persuaded that electric cars are the answer to some of the world's problems, the question of what system or manufacturer to back remains tricky.

The problems of the once-promising AIM-listed Tanfield Group (whose shares have tumbled from a high of 204p to 5.5p) highlight the dangers for those aiming to electrify their portfolios.

Warren Buffett's punt on China's BYD has been rather more successful with the Hong Kong-listed shares rising 5.7pc earlier this week after Morgan Stanley raised them to "overweight" from "equal-weight", and praised the prospects for its renewable-energy business and "compelling" valuation.


Despite this week's gains and Mr Buffett's backing, BYD shares have had a rough ride, with reports that some dealers have given up on the cars and sales in China are still low compared to the combustion engine.

Despite this, or perhaps because of this, the company has aggressive plans to expand into the US and Europe next year. One (so far brief) success for investors has been the Tesla IPO. There has been strong demand since July when shares were first sold in the loss-making California-based company which is led by the 39-year-old PayPal entrepreneur Elon Musk.

Another interesting option for those wishing to take a punt on electric cars is Nissan Renault, where chief executive Carlos Ghosn is investing heavily in what he believes is the future -- unlike the heads of most other conventional car companies.

Here in Ireland, the company expects to introduce cars next year in collaboration with the ESB and there are similar projects elsewhere in Europe.

While all these companies look good on paper, the problem remains that they all use different types of batteries and success will ultimately depend on what system gains traction with ordinary drivers and the garages that will recharge their batteries.

That is almost impossible to guess at this stage and depends on countless variables as we saw in the battle between video and the superior Betamax, which eventually saw the inferior product triumph.

What seems probable is that whatever battery system eventually wins out will use lithium-ion, which is why Sharescope readers interested in electric cars may prefer to invest in lithium through a fund or EFT rather than a car manufacturer at this stage.

It certainly isn't as exciting as the sexy Tesla, but it may make much more sense than trying to pick a winner among the worthy pioneers vying to bring electric cars to the masses.

Irish Independent

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