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Number of Electric Vehicles to increase despite Chevrolet Volt incident

Many new Electric Vehicles (EVs) will be brought onto the market this year, with many more planned to be developed for the next year. There has been a recent setback for the Chevrolet Volt, whose battery has failed some tests, but the future looks strong for EVs, and the companies that support them.

Chevrolet Volt Incident

In two crash tests for the Chevrolet Volt, one of the EVs currently on the market in the US, the battery has set on fire a while after the crash, the minimum time was one week. Although General Motors, who manufacture the Chevrolet Volt, and the National Highway Traffic Safety Administration (NHTSA) have both said that Volt owners have no reason to worry, and that in normal crash procedure the battery would be removed and taken to be repaired.

In the long run, this news may actually be a good thing for the EV industry, as regulations and crash procedures are clarified. It must be put into context, as of now no reports have been made of fires in electric vehicles on the road, compared with tens of thousands of fires in petrol-driven cars. The Nissan Leaf, currently the main competitor of the Chevrolet Volt, has a different system for keeping its battery cool, and both companies seem to be looking to the future, together with many other companies looking to enter the EV market.

Car manufacturers are increasing their EV ranges

VW have announced that they intend to manufacture EVs in China from 2013, which is the fastest growing market for vehicles. The Chinese government is supportive of electric vehicles but previous sales figures have been disappointing considering the high growth in vehicle sales overall. It would seem that the Chinese are focused more on brand name. BMW, a company that has been doing well in China, is also planning to introduce an electric vehicle in 2013, the BMW i3, together with a petrol-electric hybrid, the i8. BMW have heavily invested in research into the future of the industry, and is planning initiatives to encourage car-sharing to further reduce emissions.

EVs from Renault and Nissan are being used to transport delegates at the climate change conference at Durban in the next two weeks. Renault are set to introduce the Z.E Fluence and Twizy next year, two very different designs for EVs. The Nissan Leaf, which is on sale in China, Japan, the US and much of Europe, and has been well received by consumers and has won multiple awards.

Other companies allow a more direct investment into the theme

As the sector grows, supporting companies are set to benefit, such as producers of batteries like LG Chem and Johnson Controls or companies that offer solutions to car efficiency issues, such as Borgwarner. Other potential beneficiaries are companies that provide supporting infrastructure for charging EVs (such as Schneider Electronics), companies that produce the components, and energy producers.

Risks for investment in this theme include the state of the economy, as the automobile manufacturing industry is particularly sensitive to economic downswings, and changing government policy. America in particular is tightening its fuel economy standards at the moment, in line with similar movements worldwide, and if these trends continue this will benefit the sector, but governments may still reduce subsidies for these vehicles, which could hurt the related companies.

Fund context:

Both Schroder Global Climate Change and Henderson’s Global Care and Industries of the Future funds have Sustainable transport as a theme. Other ways to access the theme are through energy funds, such as BlackRock New Energy and Pictet Clean Energy who invest in Schneider Electronics and DWS Invest Clean Tech, who invest in Johnson Controls.

Related funds:

BlackRock New Energy IT
Deutsche Invest I Clean Tech
Henderson Global Care Growth
Henderson Inst Global Care Managed
Henderson Global Care UK Income
Henderson Industries of the Future
Pictet Clean Energy
Schroder Global Climate Change

Useful links:

Wall Street Journal: GM's Volt Woes Cast Shadow on E-Cars

Wall Street Journal: China Revs up BMWs Sales

The FT: GM faces Volt safety probe

The Guardian: Top 10 cars coming out in 2012 in pictures

Comments (1)

  1. This Bloomberg article highlights some key updates on this story:

    The NHTSA have announced "electric vehicles are no more prone to fires than other autos", but the article explains that GM still have a way to go on rebuilding their image.

    Toyota have also announced that they have developed an EV that runs without Rare Earth Metals, one of the worries around EV production, which is explained in this Reuters article: http://www.reuters.com/article/2012/01/23/us-toyota-rare-earth-idUSTRE80M0JK20120123

    By Louise Fallon on Jan 23, 2012 at 11:44 AM

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Louise Fallon starting working for Worldwise Investor as an intern over the summer and has written a number of articles during that time.

Louise is studying for a degree in Mathematics and Economics BSc at London School of Economics and Political Science, and graduates next summer.

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