Elec­tric car rev­o­lu­tion

Kuwait Times - - BUSINESS - By Hay­der Taw­fik

The fos­sil fuel auto in­dus­try like any other com­mod­ity that is too old, un­cre­ative, cause pol­lu­tion and dam­age the en­vi­ron­ment is com­ing to an end. Well, it has truly be­come com­modi­tized, i.e. it can only sur­vive on sup­ply and de­mand. Over the past decades, clean and en­vi­ron­men­tally cheap en­ergy killed the coal in­dus­try. In re­cent years, the smart phone fin­ished off the old and bor­ing mo­bile phone and now is also killing the cam­eras in­dus­try.

At present, we are wit­ness­ing a new rev­o­lu­tion in the auto in­dus­try. The emer­gence of the smart elec­tric car. The high-tech smart elec­tric cars will out­sell fos­sil-fuel pow­ered ve­hi­cles within two decades as the cost and the price of bat­tery plunge, turn­ing the global auto in­dus­try up­side down and sig­nal­ing eco­nomic tur­moil for the tra­di­tional car pro­duc­ers, its sup­ply chain and pos­si­bly oil-ex­port­ing coun­tries.

The lat­est and most re­li­able fore­cast says adop­tion of emis­sion-free ve­hi­cles will hap­pen more quickly than pre­vi­ously es­ti­mated be­cause the cost of build­ing elec­tric cars is fall­ing so fast. This dra­matic shift will see cars with an elec­tric plug ac­count for a third of the global auto fleet by 2040. This trans­late to over 58 per­cent of all the cars on the planet. Also it will dis­place about 13 mil­lion bar­rels a day of oil pro­duc­tion.

This is just pure eco­nom­ics. As the prices of Lithium-ion bat­tery prices are going to come down sooner and faster, the cost of pro­duc­ing ef­fi­cient elec­tric cars will come down too and de­mand picks up ac­cord­ingly. There has been a surge of in­vest­ment in lithium-ion bat­ter­ies, higher man­u­fac­tur­ing ca­pac­ity at com­pa­nies in­clud­ing Tesla Inc. and Nis­san Mo­tor Co., as well as emerg­ing con­sumer de­mand from China to Europe sup­ports the ex­pec­ta­tions and fore­cast that by 2025 elec­tric cars will be as cheap as gaso­line ve­hi­cles, push­ing the global fleet to 530 mil­lion ve­hi­cles by 2040, this is equiv­a­lent to around 58 per­cent of the cars in the world. There’s around 90 gi­gawatt hours of Elec­tric Ve­hi­cles lithium-ion bat­tery man­u­fac­tur­ing ca­pac­ity on­line now, and this is set to rise to 270 gi­gawatt hours by 2021. Charg­ing in­fra­struc­ture will con­tinue to be an is­sue with bot­tle­necks cap­ping growth in key Chi­nese, US and Europe.

One of the rea­sons why there has been a sud­den surge in the pro­duc­tion and de­mand for elec­tric cars is the steep fall in the cost of the Lithi­u­mion cell. The cost has fallen by 70 per­cent since the peak in 2010. Se­vere com­pe­ti­tion and in­no­va­tion by bat­tery man­u­fac­tur­ers will ac­cel­er­ate and lead to fur­ther steep de­clines in av­er­age prices over the next two decades. There is a clear el­e­ment of com­pet­i­tive dy­nam­ics that will ul­ti­mately will lead to over­sup­ply in the lithium ion bat­tery mar­ket that will drag down prices.


There will be win­ners and losers once the global trans­for­ma­tion to­ward elec­tric ve­hi­cles gets into full swing. It will lead to a real and fun­da­men­tal shake up in the auto in­dus­try. Most car parts man­u­fac­tur­ers such as tra­di­tional bat­ter­ies, spark plugs, gears, fuel in­jec­tion, tires man­u­fac­tur­ers and oil ma­jors will face up­heaval. While tra­di­tional car sup­pli­ers may be hurt by the growth in the elec­tric car in­dus­try, some in­dus­trial com­mod­ity pro­duc­ers such as Graphite, Nickel, Alu­minum, Cobalt, Man­ganese and ob­vi­ously Lithium will be great win­ners.

It will be the world’s big­gest economies, USA, Europe and China that will drive the de­mand for the elec­tric car in the next decades. Com­pa­nies and gov­ern­ments which have al­ready been the most ad­vanced in pro­vid­ing sub­si­dies and in­stalling charg­ing points, will reap the ben­e­fits sooner than other economies.

Elec­tric cars are ba­si­cally much cheaper than gas or oil fu­eled cars be­cause they’re sim­ple, lighter and ser­vic­ing them are much eas­ier, quicker and cheaper. The fu­ture elec­tric car may not look much dif­fer­ent from the ex­ist­ing tra­di­tional cars but the new ma­te­ri­als and the high tech­nol­ogy that goes into them are com­pletely new and dif­fer­ent. These new com­po­nents will sim­ply rev­o­lu­tion­ize the mar­ket for met­als and tech­nol­ogy used in the in­dus­try, open­ing a new field for com­modi­ties and high tech­nol­ogy sup­pli­ers and in­vestors. This could be an in­flec­tion point for de­mand that could make great for­tune for sup­pli­ers and in­vestors. Just imag­ine that you had in­vested in Gen­eral Mo­tors and Ford about hun­dred years ago.

The num­ber of elec­tric and hy­brid ve­hi­cles on the road world­wide sur­passed 1.3 mil­lion last year per the In­ter­na­tional En­ergy Agency. This num­ber com­pares with 14,000 back in 2010 and 4m cars by 2019. It is quite clear that the de­mand for elec­tric car is grow­ing ex­po­nen­tially.

For in­vestors to make the most out of this ex­treme and promis­ing growth, they first need to iden­tify what sits be­low the bon­net of the elec­tric car. The most ob­vi­ous one is the Lithium bat­tery. Lithium be­ing a nat­u­ral com­mod­ity will ul­ti­mately be­come com­modi­tized and over time its price will con­tinue to fall in line with sup­ply in­crease. The elec­tric car is all about tech­nol­ogy. It filled with high tech soft wares, from Cen­sors, GPS’s, Con­nec­tives, An­ten­nas and High-Tech Chips. High tech­nol­ogy com­pa­nies that supplies these com­po­nents are mostly based in Europe, US and Ja­pan. Some of them are listed and oth­ers are pri­vately owned. It is a frag­mented in­dus­try and most likely there will be a fu­ture con­sol­i­da­tion in the in­dus­try.

It is a hard and com­pli­cated task for in­vestors but the starting point is that, in­vestors in the elec­tric in­dus­try should study the in­dus­try very care­fully, un­der­stand the fu­ture elec­tric car fully, find out what is the elec­tric car about, how it works, what is un­der the bon­net and then iden­tify those com­pa­nies that are geared up to sup­ply the elec­tric car man­u­fac­tur­ers. It is a hard task ahead but it worth it in the long run.

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