Electric Cars: Dream or Nightmare for Auto Industry?

By Tony D'Altorio

NEW YORK (TheStreet ) -- Investors often get excited over new technologies. Sometimes they have a reason to and sometimes not so much.

Take electric cars, a topic Tesla Motors(TSLA) just reopened with its IPO.

After years of development, road tests and marketing hype, it seems that the vehicles are hitting the showrooms by the end of the year.

Some of the companies set to roll are:

Japan's Nissan(NSANY) ADR, which plans to market its Leaf in the U. S. and Japan.

France's PSA Peugeot Citroen (OTC: PEUGY), ADR, which has two electric cars under each of its brands and a joint venture in China with Dongfeng Motor Group (PINK: DNFGF).

General Motors and its Chevy Volt.

And over the next three years, Toyota(TM) ADR, Volkswagen (OTC: VLKAY) ADR, Ford(F) and BMW (OTC: BAMXY) ADR have plans to do the same.

Daimler (PINK: DDAIF) plans to make electric cars under a new brand in China with local automaker BYD (OTC: BYDDF). And it has further ideas for its own brands.

In other words, the hype is definitely on...

New Auto Industry Generation

Initially, electric car sales will only claim a tiny share of the world's car market. But many industry insiders believe it could quickly take over from there.

They see electric motors and batteries increasingly operating engines. Some even think the technology could overshadow the combustion engine altogether.

That would change car designs, production, driving, sales and services. It could push the auto industry into a whole new business model altogether, and even turn the global hierarchy upside down.

So far, Chinese automakers can't seem to beat American, European and East Asia when it comes to the internal combustion engine. But they do have the skills, manufacturing capacity and domestic market to take over the electric car and battery markets.

The aforementioned BYD, which designs both, serves as a good example.

Regardless, electric cars have doubtlessly captured automakers' imaginations. They've largely abandoned cheaper -- though less impressive alternatives like clean diesel and downsized, turbo-charged gas engines.

Instead, large global automakers have bet a large part of their future on electric cars. And admittedly, this new generation offer better batteries than past attempts, which tanked.

Still, Englebert Wimmer of PA Consulting, which advises several automakers, doesn't hold much stock in the idea. To him, "it's like the e-business hype."

He claims that in the U.S., the electric battery industry has three times more capacity than what the market actually wants. "That won't result in cheap batteries" either, only "a number of bankrupt factories."

Most automakers, however, believe they need to invest in the technology all the same. And Credit Suisse's Arndt Ellingshorst, head of European automotive research, agrees, saying, "Electric vehicles, if you miss it, could be the end of a company."