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Transport Revolution

A slow transport revolution is under way

From environmental and increasingly a cost point of view, electric powered vehicles are becoming popular. It’s a trend boosted by significant technological changes and now some countries have mandated towards Electric Vehicles (EVs) to reduce carbon pollution. EVs range from: hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), battery electric vehicles (BEVs), and fuel cell electric vehicles (FCEVs) – ‘scuse the jargon.

Though hydrogen fuel cells may be the best long term solution, efficient EVs can solve current environmental issues as we move away from fossil fuels. But EVs do have their challenges. Rapidly charging of EV batteries markedly reduces their service life – one fast charge can take 20 charge cycles off a battery’s useful life. This is why until recently, slow charging times were expected to make fuel cell hybrid EVs the best long term EV solution.

Top three automotive manufacturer, Toyota expects hydrogen to become the next-generation propulsion technology via a highly efficient hydrogen fuel cell EV hybrid. This is because slow charging, limited driving range and high costs were expected to limit Battery EVs to a small niche. But China, Europe, India and others have started to mandate eco-friendly vehicles to minimise harmful emissions at a time when the ultimate fuel cell EVs are not yet mature. So Battery EVs may bridge the gap, especially if a future battery breakthrough can improve the driving range, re-charge time, cost and weight. It’s a bit like the VHS and Betamax face-off in the 80’s. In the end, the one that receives mass take-up will prevail.

It’s only the beginning – less than 0.5% of all vehicles in the world are now fully electric. France and the UK, have already mandated a date to stop further combustion engine sales. The UK now has a diesel vehicle levy and a capital city congestion charge – this affects diesel resale, encouraging EV take-up. Battery technology costs are falling with solid state, energy-dense, solid-state batteries being developed to re-charge faster with longer range. But battery-electric cars are too heavy.

Hydrogen fuel cell cars

The change away from fossil-fuelled cars is slow and despite the rise of EVs, hydrogen cell cars may be the long term solution if its challenges can be overcome. Hydrogen cars can travel almost 500 kms and refuel in minutes, much as we do now – whereas today’s EVs take many hours to charge. Hydrogen also has advantages in storing energy that can be distributed via the current petrol network for use in fuel cell cars. Toyota’s Mirai is a hydrogen fuel cell car, akin to its early Prius EV hybrid. You can learn how Mirai works here – https://ssl.toyota.com/mirai/fuel.html

Batteries and hydrogen gas store energy without themselves decreasing carbon emissions. They shift the emissions problem to the electricity grid where emission reduction requires use of renewables but not if generated from dirty coal or natural gas. Another source of emissions is in making batteries, so an electric car might emit more CO2 over its life than an efficient petrol one.

Burning hydrogen emits no carbon, so if it can be made using excess renewable energy and stored until needed, it can replace natural gas (methane) for business or home heating.

Doing this might be too expensive, but so is upgrading our electricity grid to deal with electric cars.

Instead of putting hydrogen fuel cells into existing cars, it may be best to design them around hydrogen’s characteristics, overcoming any hydrogen related quirks. The car industry may also need a completely different business model – leasing rather than selling cars. This could increase the car’s life to encourage designs that conserve natural resources instead consuming them as we do now.

Regardless, while all the technology settles itself out there are some questions to resolve for improved EV appeal (even if it turns out to be a temporary stage on the way to hydrogen cell cars):

Buying an EV is still more expensive.
Relatively high EV purchase prices compared with reciprocation engines needs lower fuel cost savings over many years to justify the difference. As EV technology improves, it creates perversely lower old EV resale value EV for early adopters. So for the immediate future, a hybrid car or low cost petrol car may be preferable to a fully electric car until EV technology stabilises.

Improving EV recharging infrastructure.
Electric recharging stations are sparse and it takes a long time – our 240V system takes over 8 hours to charge a car battery (even slower for the 110v US system). So, significant infrastructure spending is needed and currently installing a charge point at home seems the best solution. But for oil companies to avoid becoming this century’s blacksmiths, they may start converting petrol stations to electric charging posts.

An alternative is to charge wirelessly from cables under the road – high cost but good for re-charging on the move with limitless range. Regardless, infrastructure costs will be high and history suggests it is better to avoid investing in the high capital cost phase and instead wait to see which technology succeeds, then prosper from it.

Improving EV’s driving range.
Battery EVs aren’t viable without hybrid alternative power, especially as fast re-charging is currently unwise. Petrol/electric hybrid power is one way to address this shortcoming. Otherwise, EVs can be popular where a short range is only ever required. Long haul freight will be harder to crack.

Are EVs environmentally sound yet? 
It is not yet clear whether EVs have a less polluting overall footprint than traditional petrol engines. Are the carbon emissions from generating the electricity to re-charge an EV less than a combustion engine? Is mining heavy metals needed for an EV battery environmentally sound?

How can investors profit from all this? 

Bigger car companies are more likely to have deep enough pockets to survive the transport revolution best – but it’s too early to pick winners. Toyota and Lexus led with hybrid drive and have an edge among the top 3 – and success needs high volume sales. In Battery EV Tesla has a head start, though it is yet to pave a profitable path. The top 3 car makers are VW, Toyota and Renault/Nissan – no doubt China/India will be prominent in future.

But as with the gold rush, it may be best to focus on the general stores and providores rather than (miners) the source of the revolution. So in this transport revolution, who will prosper? Is it those who supply the car makers, car parts manufacturers, battery suppliers, or R&D specialists? Current battery technology (‘scuse the pun) focuses on lithium, cobalt, copper, nickel and magnesium – so mining companies with large holdings of these minerals may continue doing well.

Surely electricity production and renewable energy will prosper handsomely? Electricity utilities are now priced for little growth and may in hindsight prove to be cheap. Will electricity consumption rise significantly or will fuel cells (like hydrogen) divert our course from re-charging. Even if re-charging grows dramatically, it may be that most re-charging uses our solar panels and batteries at home.

But at this rather speculative stage, it may be best to either wait for winners to emerge, then invest; or invest a modest amount in specialised ‘sustainable environment’ EFTs/managed funds and await developments.

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Disclaimer: All information in this article is intended to be general in nature for discussion purposes only. So you should not rely on it and seek personalised professional advice before making any decision.