Market Beat: Difference between golf balls, electric cars
April 21, 2014
You may be wondering what the difference is between a golf ball and an electric car. The answer is simple: You can drive a golf ball a lot farther, at least 200 yards or so.
One of the drawbacks to owning an electric vehicle has been the range that it can be driven before it has to be re-charged. Car makers have been improving the range recently. According to the U.S. Department of Energy, the average range for compact all-electric vehicles is about 73 miles. Some of the new Teslas can go over 200 miles without having to be re-charged.
Researchers at the USC Viterbi School of Engineering announced this month they have developed a method of improving lithium-ion battery performance and lowering the cost by using silicon as an anode instead of graphite.
Sales of electric vehicles have been increasing annually and are forecast to continue with a strong rate of growth into the future. A report from Navigant Research forecasts that electric vehicle sales will just about double to over 12 million vehicles by the year 2022.
I wrote about electric vehicles back in February of 2013, and in that article, I discussed Tesla quite a bit. Since then, Tesla has risen from about $40 per share to $265 and has since fallen back to just below the $200 mark recently. I still think that Tesla is a good company with a solid future, but would be reluctant to chase it at this price.
Investors who want to have some exposure to electric vehicles in their portfolio should consider the well established automobile companies. There is an ETF now that gives investors diversification and exposure to all the major car and motorcycle makers in one investment.
Of all the major car manufacturers, Toyota appears to have a pretty good valuation right now with a price to earnings ratio of 9.3. Toyota is a $169 billion dollar company that has a dividend yield of almost 2.4 percent. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals.
In addition to savings at the gas station, there are some strong government incentives to purchase electric vehicles in the form of tax breaks. Right now there's a $7,500 federal credit, and the Obama administration wants to increase that to $10,000.
Many states also have tax incentives including California. The global automobile market should continue to diversify away from internal combustion engines at a brisk rate.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information on his money management service can be found at his blog at http://www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.