Log inThe electric vehicle revolution is about more than just Tesla
On the 29th June 2010, Tesla started trading on the US Index, the NASDAQ. During the eight years since, Tesla has seen its share price rise from $17 to around $345.
The company have waiting lists for vehicles that purchasers are prepared to spend upwards of £60,000 on without even seeing or test driving the cars. These are vehicles with infrastructure challenges in the UK, a lack of charging points being but one of those concerns. Tesla don’t operate showrooms as UK car buyers are used to, they rent units in shopping centres in places like Milton Keynes for customers to experience the car and imagine the lifestyle, but the whole buying and decision-making process is an alien world for the traditional UK car buyer.
Tesla has not made a profit at any point since it listed on NASDAQ. That hasn’t seemed to make any difference to the sentiment and faith shown towards Tesla and its founder Elon Musk. There is no doubt he is an innovator and can inspire confidence in investors by his vision for the future with the world moving towards electric cars, lorries and driverless vehicles. Musk, will no doubt lead global thinking in these areas, whilst also planning our commute into the solar system.
The problem for us as investors is that fundamentally the stock has yet to make money and so whilst we may buy into the theory, it is hard to invest in Tesla wondering at what point it will become profitable.
So, rather than invest in Tesla directly, increasingly we are finding our preferred fund managers are investing in the components of the electric vehicle story, those stocks which will benefit no matter which brand ultimately wins the race for electric car reliability and cost effectiveness.
The JPM Natural Resources fund traditionally invested in industrial and precious metals, but recognising the move to electric vehicles in the future, has increased exposure to Copper, Aluminium, Lithium, Nickel and Cobalt. All of which are key components in the battery power technology associated with electric vehicles.
On average there is around 80kg of Nickel used in the engine of a battery operated electric vehicle compared to 15kg in a hybrid electric vehicle and 4kg in an internal combustion engine. For Copper the numbers are 80kg for a battery operated electric vehicle compared to 50kg for a hybrid and 25kg for an internal combustion engine. With Volvo leading the way in traditional car manufacturers by stopping the manufacture of internal combustion engines in 2019, the demand for these component metals will only increase in the future.
The story doesn’t just apply to commodities and resources though, Emerging Market fund managers invest in Chinese stocks such as Bizlink which supply wire harnesses that are a necessary part of the construction of a Tesla and presumably future electric vehicles.
Renewable energy as a global target will take a long time to replace fossil fuels across the globe and faces significant barriers, by contrast electric vehicles seems to be a matter of how soon. When the big brands make a breakthrough, prices will come down, technology will become more reliable, availability of charging points will cease to be a problem and the likes of Tesla will have further challenges on their hands to retain investors and grow the share price.