You'll Be Driving An Electric Vehicle Sooner Than You Think

Published in Investing on 18 February 2012

Better electric technology puts you in the driver's seat.

A version of this article was originally published on our US site, Fool.com.

The biggest oil companies in the world want you to believe that electric cars are inferior to their gas-guzzling counterparts. Recent reports by ExxonMobil (NYSE: XOM.US) and BP (LSE: BP) say that few, if any, of you will see electric cars outnumber gas vehicles in your lifetimes. However, recent breakthroughs in electric powertrain technology tell a different story. With or without biased reports, disruptive innovation ultimately leads to change.

It's important to understand that oil behemoths like Exxon and BP get hundreds of billions in backing each year, which is put toward new and expensive oil projects. It would be much harder for these companies to validate those investments without optimistic reports on the demand for oil in the future.

A sponsored opinion

So it's hardly a surprise that Exxon, the biggest oil and gas company in the world, says that in 20 to 30 years only 5% of the world's cars will be electric. BP voiced a similar outlook. According to Reuters, the company's CEO said, "Oil will remain the dominant transport fuel and we expect 87% of transport fuel in 2030 will still be petroleum based."

Someone should tell big oil that its self-serving opinion clashes with government initiatives aimed at green technologies and independence from foreign energy. Less biased reports project a brighter future for electric vehicles, or EVs. Data from Deloitte suggests that by the year 2020 a third of all cars purchased in developing countries will not be powered by an internal combustion engine.

The not-so-distant past

To put this in context, let's take a realistic look at the automotive industry. The past few years, the industry's been in peril. A struggling global economy put the brakes on consumer demand and led to industry-wide restructuring. The world's largest car manufacturer, GM (NYSE: GM.US), filed for bankruptcy protection at the height of the financial crisis and only recently swerved back on track. Today, the industry is making a steady recovery. GM recently returned to profitability after being bailed out by taxpayers in one of the largest restructurings in U.S. history. But now the company faces new challenges, including a race to make more fuel-efficient vehicles.

Admittedly, I'm coming down pretty hard on the oil companies. But, the truth is, until recently I wouldn't even entertain the idea of driving an electric car. However, that's changed. Today, I can't wait to drive one electric vehicle in particular: the Model S sedan by Tesla Motors (NASDAQ: TSLA.US). Like many fans of EVs, my change of heart was influenced by more factors than the volatile cost of petrol.

The not-so-far-off future

Soon, you too will be longing to get behind the wheel of one of the new performance driven EVs. Electric technology companies such as Tesla are shifting the competitive landscape of the automotive industry. Tesla's not building toy cars or asking drivers to sacrifice performance. The zero-emission-car maker is gearing up for the launch of its Model S -- a seven-passenger car capable of accelerating from zero to 60 mph in 5.6 seconds.

With a $49,000 price tag (after the $7,500 EV tax cut), the Model S appeals to a much broader market than Tesla's Roadster sports car. The Palo Alto-based company is pushing the technology envelope. The company currently supplies powertrain components to traditional car companies like Daimler and Toyota. Cash from these relationships should help Tesla's liquidity as it invests in upcoming vehicle launches.

For a start-up trying to make it in the auto industry, Tesla's stock is gaining speed as well. Shares of Tesla are up 54% since the company's IPO in 2010. Not bad, considering shares of GM are down more than 30% following its 2010 IPO.

Nevertheless, there will be significant challenges on the road to profitability. Specifically, Tesla needs to ramp up production volume in record time if the company wants to meet its manufacturing target of 20,000 vehicles per year by 2013. Investors able to handle moderate risk would be wise to get in on this growth stock before it takes off. Tesla is redefining the green tech space and building electric cars that people want to drive. It's only a matter of time before many of us are driving cleaner cars.

> Get the latest on investing and the markets, direct from the desk of David Kuo. You'll also receive a special free report on '10 Steps To Making A Million' if you join The Motley Fool Collective today.

> Tamara owns shares in Tesla Motors.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

Mari11ion 18 Feb 2012 , 5:30pm

Wake me up when you can recharge it with an extra 400 miles of range in less than 10 minutes.

NoFoolRules 19 Feb 2012 , 12:41pm

You can buy a brand new Chevy Cruise or many other cars for less then 20K. 30K left over will buy a heck of a lot of gas? Think EVs need to become more competitive on the price before they will sell a lot of them. If I could buy an EV for 20K with those performance numbers it would be a no brainer choice.

tux222 20 Feb 2012 , 11:23am

Electric technology may arrive quicker than fully electric cars or even hybrids. Cars ought to have regenerative braking to catch the energy when you slow down, and re-use it when you speed up again. There's also thermo-electric technology maybe coming , that uses heat from the exhaust to charge your battery or run electric accessories, rather than extra fuel (via the engine and alternator).

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