ASX Retirement Today: Crystal Ball
Looking out of our hotel room window in a small town in Portugal I noticed an oversized parking meter with a car connected by cable. It wasn’t a parking meter it was an electric car recharging point. It made me reflect on the number of electric cars we see in Europe and on the dominance of the internal combustion engine for all of my lifetime. My generation has seen enormous change in so many aspects of our lives. Our grandchildren roll about laughing when I tell them about gathering around the wireless set to listen to children’s radio or putting coins in a telephone box to make a call. It was a different world, but the one thing which has remained constant is the internal combustion engine. It began life around 1890 and our current car engines still work on the same principles today. The pistons pop up and down and the valves flick open and closed in a complex coordinated dance as the fuel gets sucked in. It’s a lot of bits and pieces to go wrong but thanks largely to the Japanese production methods we now seem to have achieved remarkable reliability.
Surprisingly electric cars existed before the internal combustion engine with the first one going into production in London in 1884. In 1919 Harrods ran their customer delivery service using 1 ton electric vans from America, (no respectable Harrods customer would be seen actually carrying a parcel home in the 1930s!). The vans had a range of 50 miles and a top speed on 18 miles an hour. Things have changed and Harrods has recently bought Nissan e-NV200 vans with a range on one charge of 100 miles and a carrying capacity of three quarters of a metric ton.
The early vehicles had one big problem, batteries, and that problem hasn’t gone away. Battery technology has improved immensely but it’s still holding back the sales of electric cars. The power is there, there’s no problem pulling a boat or carrying a tradesman’s tools. Electric buses are running in many European cities and are being trialled in Australia. Garbage trucks are ideally suited to electric power and are also being trialled in Australia. Even aircraft are being powered by electric motors and batteries.
The problem with batteries is not power it’s cost. Petrol tanks are cheap by comparison. Electric cars are expensive, and you would have to travel a very long way to recover the capital expense from lower running costs. I’m sure that will change. There has been a big change in batteries in the last ten years and I’m sure there will be big changes in the next ten. Electrical Engineering departments in Universities around the world are working on new battery technology and one of them will succeed in increasing the storage capacity or decreasing the cost or both. Harley Davidson owners will still want to enjoy the thump, thump of their long stroke engines and car enthusiasts will still want to take their engines apart and rebuild them to perfection. For the rest of us the writing is on the wall but electric car dominance will still be a long time coming. Even the Tuk-Tuk has had a makeover.
The average age of cars on the road in Australia is slightly over 10 years so petrol station owners will have heaps of time to adjust. From an investment point of view opportunities have been there for a while. Many of us have invested in the lithium miners, GXY and KDR in the hope of catching a ride but it’s been patchy. The only way to have made money from them has been to trade. That is until Westfarmers moved on KDR. I was fed up of my KDR and sold too early. It looks like Wesfarmers has decided batteries and electronics are going to be big as they have also moved on rare earths miner Lynas. Electric motors contain lots of copper so we can expect copper to continue to be in big demand, maybe even a shortage. Then there’s the infrastructure, who will provide it and will there be a profit in it? The internet café might need a car park with chargers.
Sales of electric cars are low in Australia compared to most developed countries. China has the highest sales almost twice the whole of Europe and twice that of America. China has strongly supported the electric car to help combat the chronic pollution in their cities. In Australia whilst the great majority of car journeys are easily within the current range of electric vehicles we all like to make that big trip every so often. Most of us are discouraged from going electric by having to charge up on the way and take that unusually long time over coffee.
It’s worth noting that the Tesla 3 was the top selling car in Switzerland in March this year. That may say as much about Swiss disposable income as it does about electric cars but it points the way. We might lose that macho feeling of accelerating slickly through the gears and hearing the engine roar but we will be accelerating just as fast if not faster.