With two growing daughters--a three-year-old and an
18-month-old--my wife and I knew we needed to abandon the small,
sporty cars we've been driving and trade up to a bigger vehicle.
In deciding what to buy, we had to work around each others'
varying preferences. My wife does not like SUVs because of their
poor gas mileage and their sheer size. Personally, I believe (as
I have written about before) that one's money should go into
appreciating assets, not depreciating ones. So I see spending a
lot of money on a car as frittering away money best directed
elsewhere, especially since so many luxury vehicles are simply
marked up versions of their parent company's mass market
We both wanted good gas mileage and good legroom in the front and
back seats. Perhaps highest on our list of features: We wanted a
car that had a trunk large enough to hold our double stroller and
plenty of supplies for sledding in the winter and hiking in the
That whittled down our universe of potential cars pretty fast to
the mid-size segment populated by Ford, Hyundai, Nissan and other
major brands. We ended up buying a Mazda 6 because it has the
biggest trunk available, and it also appealed to my wife's love
of sporty cars (she still thinks the zippy Mazda Protege is the
best car she's ever driven) and to my sense of value: We paid 32%
off MSRP, primarily because we bought the last available premium
trim of the prior year's model.
I love getting a deal and I loved the fact that buying the former
model year version reduced the excise tax we have to pay on the
car. (We have to pay a percentage tax on our car's value every
year, even the year we buy it, having already paid sales tax! For
my money, it's the most annoying tax we have to pay in
So now we drive around with not only the double stroller but also
a single stroller in the trunk and have no problem fitting
everything else I used to cram into the trunk of my 3-series BMW.
And, I'll admit that I like the car's sporty look, even if it's
worth half of what I paid for it already.
The reason I bring this up isn't to brag about my car-buying
prowess, but the fact that our list of finalists didn't include
one electric or hybrid vehicle. That's unusual because as editor
of Cabot Green Investor, I've been foreseeing the sharp rise in
energy prices for years, and my wife feels strongly about trying
to be environmentally responsible.
But we're also realists. No electric vehicle of sufficient size
was available and the hybrids are typically just a converted
gasoline body with a large battery pack taking up valuable trunk
space. I wish there had been a realistic alternative though
because I filled up my car yesterday and about half a tank cost
me $35. Ouch! But it won't keep me from driving.
This lead me to wonder, how much does gasoline have to cost
before you'd consider an electric or hybrid car?
The consulting firm Deloitte recently conducted a study of
consumers on this very question. The answer? $5 a gallon will get
78% of Americans to seriously consider an electric car.
Interestingly, the survey, which polled 12,000 people worldwide,
found that at less than $5 a gallon just 54% of Americans would
even consider putting an electric vehicle on their list, compared
to 93% of consumers in China and 69% in Europe.
However, that may just be because Americans have more realistic
expectations of car pricing, with most saying they expect to pay
less than $30,000 net of government incentives--about where the
Nissan Leaf falls--while that price expectation drops to $20,000
in China and Europe.
Expectations of what electric vehicles (
) can do also appear to be different from the current reality.
Most people want EVs to charge in less than two hours and have a
range of 300 miles per charge, with a smaller majority requiring
wide availability of public charging stations. Electric vehicles
fall about 40 to 60 miles short on range right now and take
longer to charge, but not too much longer if you have a
high-powered connection. At a 240-volt connection, the Chevy Volt
will charge in four hours, the BMW Mini E in three hours and the
Tesla Roadster in under four hours. Using standard household
120V, each will take much longer, however.
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Batteries ... Playing Catch-Up
Charge time and range are heavily dependent on the battery
installed in the vehicle. That has the long-dormant battery
industry charged with excitement these days. Until a few years
ago, the two greatest innovations in batteries in the past 70
years were changing the chemistry in the 1980s to make home
rechargeables possible, and adding mercury to battery packs in
World War II to withstand the heat in the North African desert
while chasing Rommel.
Now we're seeing a wholesale changeover in the types of batteries
used in vehicles, from conventional combustion-drive cars to
hybrids to EVs and from lead acid to lithium-ion (li-ion), and a
barrage of technologies designed to make li-ion batteries work
better and last longer, as well as technologies designed to
complement li-ion systems. This includes everything from nanotech
alteration of chemical properties to re-application of
long-proven technologies in innovative new ways.
Right now, we have five stocks related to the next generation
automobile and fuels industry in the Cabot Green Investor
portfolio that we either own or are watching for an entry point
to buy (other stocks in our portfolio cover commodities,
energy-saving electronics, energy infrastructure construction,
making fossil fuel plants burn cleaner and organic food). I can't
tell you all their names of course, since that information is
reserved for subscribers, but there is one I'd like to recommend
to you today.
It's a company that makes high tech filters used inside
lithium-ion batteries (and lead-acid, in which it is market
leader), in the filtration and separation processes of
manufacturing energy storage products and in pharmaceutical
production and desalination. Its li-ion battery products are
currently used in
wildly successful iPad tablet computer and are seeing a surge in
automaker interest as that industry gears up to roll out new
hybrids and electric vehicles in coming years.
I first recommended PPO to Cabot Green Investor subscribers in
May of last year at 22 and it has been a consistent riser every
since. At 53 now, my subscribers are enjoying a healthy
triple-digit gain, yet I still think the stock has excellent
upside. Apple and iPad have been behind much of the past year's
price growth, helping Polypore double sales since 2005 through
last year. It's safe to say the iPad is built into the current
share price, but the hybrid and electric vehicle segment is what
will provide the truly exceptional growth I see ahead.
By 2015, one estimate says that automakers will roll out or have
serious designs for over 80 new models of hybrid and electric
vehicles! A mere 5% of automotive builds going to EVs would more
than double demand for the type of high tech li-ion membranes
that Polypore produces. The low estimate of EV world demand has
market penetration of 4% by 2015; the high estimate has nearly
10%. Given rising automaker interest, Polypore is expanding its
North Carolina facility this year, adding another plant in that
state and expanding its Korean facility. By 2012, the company
will have 200% the capacity it had during the latter half of
But will demand be there to support all the EV investment being
made by Polypore and automakers? As we enter summer, I foresee
even greater pressure on gasoline prices, which will heighten
consumer interest. At the start of the year, I dismissed
expectations of $5 a gallon gas as over exuberant. With Libyan
supply now largely gone from the market, $5 a gallon gas is much
more likely, especially since the turmoil in the Middle East has
essentially removed the industry's room for error. If $5 a gallon
gas happens, even I'll feel my new car isn't the bargain I
thought it was when I hand over $93 to fill that 18.5 gallon
All the best,
For Cabot Wealth Advisory
P.S. You could buy Polypore here and hope for the best, or you
could check out
Cabot Green Investor
, where you'll find Brendan's latest recommendations on this and
other top stocks.