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Tesla Motors; Automaker or Graphic Novel?

Tesla Motors; Automaker or Graphic Novel?

Posted: 15 Jun 2012 04:57 AM PDT

John Petersen

One of the hardest parts of blogging about energy storage and vehicle electrification is the inability of some readers to wrap their minds around large numbers. We throw around numbers like thousand, million, billion and even trillion with surprising alacrity, but many fail to grasp their significance because the underlying realities are too big to comprehend.

The other day I stumbled across a website that tracks the national debt and uses the humble second to put incredibly large numbers into perspective:

§ A thousand seconds is 16.6 minutes;

§ A million seconds is 11.6 days;

§ A billion seconds is 31.7 years; and

§ A trillion seconds 31,688 years.

In the last 12 months the US imported 3.25 billion barrels of oil and produced another 2.13 billion barrels domestically. That works out to a little over 226 billion gallons a year, an incomprehensibly large number. The following graph tracks monthly oil supplies in the US for the last 30 years and shows how slowly things change in the energy industry. We might want things to change quickly, but they can’t because the baseline numbers are so immense.

6.15.12 Oil Supply.png

Since hitting a peak in 2005, oil consumption in the US has fallen by about 6% as higher prices encouraged more efficient vehicles and driving habits. During that same period improvements in oil production technology have increased domestic production by about 25%. There are many who think domestic oil production will contribute more to supply than imports by the end of the decade. I hope they’re right because domestic production adds to the economic vitality of the nation while imports are a major drain. Whatever changes the future holds, however, they’re not going to be big or fast. Energy transitions take decades to unfold and while there are no panacea solutions, false promises abound like flowers in an alpine meadow.

I enjoy making fun of electric car advocates who believe that companies like Tesla Motors (TSLA) and its iconic CEO Elon Musk will change the world with ambitious plans to make 5,000 prohibitively expensive toys this year and 20,000 next year if they can find enough buyers. The reason is simple. I know that even if Tesla succeeds the success is irrelevant. The cars it plans to make in 2012 and 2013 would save about a million gallons of gas a year, or two minutes and nineteen seconds on the US oil supply clock. No matter how you slice and dice the numbers, Tesla just can’t matter.

From my perspective the most frightening aspect of Tesla hysteria is the pervasive view that Mr. Musk is some kind of new-age superhero. Earlier this week I got an e-mail from a group that had created a graphic that highlights the life and times of Elon Musk, “The Real Life Tony Stark.” You can access it yourself by clicking here.

My first impression was that the group had a rich sense of humor and had crafted a brilliant parody. As I researched the host website, however, it became increasingly clear that the creators are serious and honestly believe that St. Elon of Palo Alto is a larger than life superhero who can change the world with bold plans and magic beans.

A Branch Davidian or Jonestown mentality is tragic in a religious cult. It’s catastrophic in an investment security because those who believe in graphic novels usually believe in alternate universes where cruel realities like oil supply and demand and the physics of moving mass over distance at speed can change in the twinkling of an eye.

I track both short- and long-term volume weighted moving average prices for all the stocks I write about. At this point I think Tesla’s chart is looking pretty ugly. The Model S was launched in 2009 when Tesla started taking reservations. The deliveries that will start next week are already baked into the stock price. Without a big surge to the upside, a death cross where the 50-day average plunges down through the 200-day average is all but inevitable by the 4th of July.

6.15.12 TSLA.png

I don’t believe in superheroes and I haven’t read a graphic novel since I was an adolescent. I plan to watch this train-wreck unfold from the sidelines. I’ll be the first to congratulate Tesla and Mr. Musk if they can meet their lofty goals, develop sustained product demand and build stockholder value. I won’t be holding my breath over the risk of a stewed crow dinner.

Disclosure: I have no direct or indirect interest in Tesla and I have nothing to gain or lose from its stock price movements. While I am a former director and current stockholder of Axion Power International (AXPW.OB), a nano-cap company that has developed a robust and affordable lead-carbon battery for use in micro-hybrid, railroad and stationary energy storage applications, I can’t see how the success or failure of a graphic novel product like the Tesla Model S could impact the value of my investment in a company that’s focused on relevant mainstream markets.

Where Electric Vehicles Make Sense

Posted: 14 Jun 2012 07:39 AM PDT

Tom Konrad CFA

Electric Transit Buses Coming to North America

electric Bus.png

Quayside electric bus in Newcastle. Photo credit: LHOON

On June first, New Flyer Industries (TSX:NFI, OTC:NFYEF) unveiled its first all-electric bus prototype.

New Flyer is far from the first manufacturer to launch an electric bus.

The first deployment of electric buses on a commercial route was at the end of 2010 in Seoul, using buses developed by Hyundai and Hankuk Fiber. Wikipedia lists twenty manufacturers of electric buses worldwide. Even in North America, Balqon Corporation (OTC:BLQN), a maker of heavy-duty electric vehicles, launched their own 14-passenger electric bus a little over a month ago.

Yet so far, no major major manufacturer of heavy duty transit buses in North America has a battery-electric bus in commercial production.

The other major North American manufacturers of heavy duty transit buses are NovaBus, Gillig, and North American Bus Industries (NABI). Orion was a fifth player until earlier this year, when Daimler, its parent, announced Orion would be wound down.

Here is what the other transit bus manufacturers are doing on the all-electric front:

§ New Flyer is developing its bus in partnership with the Manitoba government, Mitsubishi Heavy Industries, and a local utility and college. They plan two years of operational testing before launching a commercial version.

§ In May, Nova Bus announced a partnership with Quebec to develop two electric buses over three years, a full size transit bus as well as a microbus like the one recently launched by Balqon.

§ Gillig and NABI have not yet made any announcements of electric bus development.

Assuming (a rather big assumption) that development proceeds on schedule, New Flyer?s more aggressive timeline should lead it to introduce the first full size, production model all-electric bus built to North American standards. These standards are important because the market for transit buses is very regional. New Flyer itself had a graphic demonstration of just how regional the world bus market is when it failed to find international buyers for a large number of used transit buses last year. It ended up selling them all much closer to home.

Electric Drive and Mass Transit

I believe buses are a much better use for EV technology than cars, because buses are generally used much more intensively. Intensive use allows for quicker recovery of the capital invested in expensive batteries. Transit buses also have predictable routes, meaning that range anxiety is not an issue, and there is potential to charge the bus while it is on route. Genoa and Turin have a system already in place to wirelessly quick-charge electric buses while they stop to pick up passengers. On route charging could also be accomplished with traditional trolley bus overhead wires even while the bus is in motion. Predictable routes and fleet ownership also make transit buses a good fit for battery swapping.

Since transit agencies are often owned by city governments, they may also be able to incorporate some of the non-financial benefits of electric drive in their investment decisions. While an individual Leaf owner will see little benefit from improved city air quality, a city government may see a move to electric buses as a way to meet air quality goals. Similarly, they may see benefits from reduced urban noise pollution, and increased ridership from the smoother ride that results from electric drive and regenerative braking, when compared to traditional buses.

Incidentally, I think New Flyer stock is quite attractive at the current price below $7. I added to my position on Friday, even before I heard of the electric bus announcement.

Disclosure: Long NFYEF

This article was first published on the author’s Forbes.com blog, Green Stocks.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

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