The Financial Potential of the New Electric Vehicle Market
While Electric Vehicles (EVs) gear up to hit Main Street next year, EVs are already rolling through Wall Street.
An example is the recent (and successful) initial public offering (IPO) by the American battery maker A123 (AONE). A123 provides lithium-based batteries for EVs, and through its IPO, has now provided the finance community with one of the first mainstream opportunities to invest in a pure EV play. The overwhelming response from the “Street” reflects tremendous market confidence in the future of the EV business.
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That confidence shows through even more clearly when you look at the events surrounding A123’s IPO. The firm’s underwriters, Goldman Sachs and Morgan Stanley, first priced the A123 IPO in the range of $8 to $9.50, a share; but after preliminary public presentations about the company, the public response and buzz was so strong that the initial offering price was eventually adjusted to $13.50 a share. On the first day shares were publicly trading on Nasdaq, A123 opened at nearly $17 a share and closed at $20.29, nearly triple its original IPO price. Currently, A123 is trading between $22 - $24 a share. It is important to point out that A123’s value is not based solely on previous performance (for example, 2008 sales of $68.5 million led to a loss of more than $80 million), but on the potential for future earnings (they just received a $250 million grant from the U.S. Department of Energy). It is an important sign of economic recovery; it also signifies the awakening of the financial markets to the reality that electric transportation has arrived and is here to stay.
At ECOtality, we are cheering A123 on in its success, because we’ve been there. A123 represents one of the early instances in which the public markets have been able to directly purchase shares of a purely EV-centric business on a national exchange; the first was ECOtality (ETLY.OB), the leading provider of EV infrastructure.
Some sectors are intensely optimistic about investors’ shift in focus. In a recent article for CNN Money, Steve Hargreaves writes: “Many analysts believe electric cars will begin replacing internal combustion engines… Since the battery is the most expensive component in an electric car, the conventional wisdom has it that whoever controls the battery market may ultimately control the auto industry.” We love that kind of thinking, but we are cautious that the “conventional wisdom” may over-simplify the relationship between the battery market and the auto industry. For example, who “controls” the auto market today? The major auto original equipment manufacturers? The battery makers? The fuel companies?
While we don’t share the certainty of control, we do think that EVs will have a tremendous impact on the auto industry, perhaps attracting anywhere from 10-25% of the entire auto market over the next decade. The major automotive manufacturers, tier-one automotive parts suppliers, and major fuel providers will certainly play a huge role in defining our transportation methods, but with the introduction of EVs to the marketplace, we are forging a brand-new EV world.
In this new EV market, battery companies like A123 may not control the entire industry, but they will certainly be major players. The value chain will become longer, extending to include new fuel providers (perhaps utilities?), new EV service shops, a new aftermarket for EV customized products, and a new workforce to install the EV charging systems around the world. Most significantly for us, that value chain will also include innovative providers of infrastructure – like ECOtality. Every EV, and every EV-dependent business, needs to get its power somewhere; answering questions about where, how and how fast the batteries are charged will be as important as which battery a EV uses.
Photo Credit: epicharmus via Flickr under Creative Common’s License
Although EV’s will have a significant future in this world, anyone who understands the criminal nature of Goldman Sachs will avoid anything they touch. They’ve already stolen tens of billions from the the public in the recent hand outs, thanks to their bought-and-paid-for politicians and an ignorant public.
Do you think they have any intention in their promotion of this IPO other than separating the public from what money they have remaining?
Then before you buy this IPO, learn about the physical limitations of different batteries, their life expectancy under normal and severe conditions (especially temperatures below 50F) and the replacement costs of the batteries. If you have even basic knowledge of these matters, and are aware of the IPO’s that have bilked investors with “blue-sky” promises (take a look at EEstor, their promises, lack of delivery, and the supposed experts who believed them) of technological breakthroughs with EV’s and their components, you will quickly realize that growing the EV fleet in this world will be a slow process.
Go spend your almost worthless dollars on a nice weekend for your family (or if you are single, a weekend of drunken debauchery). You’ll have a much better experience and memories worth holding onto.