Why Electric Car Plays Are Getting Crushed Right Now

By Larsen Kusick, analyst, Phase 1 Investor
Monday, April 18, 2011

Despite the big hype campaign, investing in electric cars is turning out to be a dud.

Over the past few years, one of the biggest "next big thing" stock stories has been the coming revolution in the battery industry… driven in part by the coming explosion in the electric car market.

The hype came to a head over the past six months with the release of the Chevy Volt and Nissan Leaf. These plug-in electric cars joined a market that already included Tesla's Roadster, Mitsubishi's MiEV, the Th!nk City, and others.

In his January 2011 State of the Union address, President Obama even said, "We can break our dependence on oil… and become the first country to have 1 million electric vehicles on the road by 2015."

But when we look at hard sales numbers and the judgment of the stock market, we see the hype isn't amounting to much action. Here are the month-by-month sales results for the Volt and Leaf so far…

As you can see, the reality is still nowhere near the hype. Compare, for example, the 471 Nissan Leafs sold so far to the company's September announcement of 20,000 pre-orders. There's a LONG way to go before this becomes anything more than a small fad.

Last month, Consumer Reports came out with a critical verdict on the Chevy Volt. The magazine noted "compromises in passenger comfort," including a cramped rear seat and a poor heating system. Still, the biggest issue has to do with the core reason for buying an electric car – saving money by avoiding high gas costs.

Consumer Reports figures at $48,700, the Volt "is not really much of a money saver in many places… For now, it seems that owning a Volt is an expensive way to be green."

Factoring in the national average electricity rate of 11 cents per kilowatt hour, Consumer Reports calculated that the Volt costs about 5.7 cents per mile to drive in electric-only mode. That's not much in savings compared to the Toyota Prius hybrid, which costs 6.8 cents per mile to drive. More important – the Prius is half the price of the Volt.

This kind of press means 2011 won't be the much-anticipated year of the electric car boom.

(Further investment information is deleted....)