The electric vehicle revolution is essentially here. It will be expensive and disruptive. It will create enormous opportunities for investors of every stripe. Perhaps most importantly, writes Jim Collins, it will come in large part from the mainstream market that EVs have so far largely ignored.
As Collins wrote recently in Real Money: “Elon Musk can bring on stage a guy in a robot suit at Tesla's (TSLA) - Get Tesla Inc Report AI Day and grab all the media attention, but the move toward electrification won't be that simple. Also, crucially, it won't just involve entry-luxury and luxury cars, which comprise the entirety of Tesla's current offer.”
The shift to electric vehicles is much bigger than any one company, Collins adds. “What I am talking about here is process. The process of shifting from vehicles powered by internal combustion engines to those powered by batteries. This process is enormous, global, and will cost trillions of dollars. Governments will subsidize some of that, but the real economic value (and, presumably, share price appreciation) will be created by the true innovators.”
Electric cars have so far been essentially a luxury product, one driven by the technology’s high prices and first-adopter demand. The electric cars which hit the market tend to be technological wonders, but that doesn’t do much for someone who just needs a way to get to and from work in the morning.
This is why Collins is paying so much attention to companies that are developing more market-friendly versions of EV technology. Companies which can make electric vehicle components at a mass market price will be poised for potentially explosive growth in the years to come, he argues.
At a recent conference, Collins writes: “William Trainer of Vicinity Motor VEV described how Vicinity will use the revenues from its existing ICE-powered bus business to fund a new completely electric offer called the Lightning, This product features BMW (BMWYY) -supplied batteries located under the bus' floor, as opposed to the Rube Goldberg-style on-the-roof solutions offered by companies like Proterra PTRA, which I have mentioned as an attractive short in prior columns.
For Vicinity’s solutions to work they “will need to be designed in, not retroactively jerry-rigged, and that's where Exro's EXROF CEO Sue Ozdemir and the company's core coil driver technology enter the picture. Batteries produce power in direct current, or DC, and motors spin a vehicle's wheels using power inputs captured in alternating current, or AC, like the kind you get from your wall outlet at home. That's a gross oversimplification of the process, admittedly, but what it points out is that there needs to be an inverter, which changes voltage from DC to AC. Exro's coil drivers enable multiple torque profiles to be created from the same electrical input, so it's especially useful for vehicles that are heavier than passenger cars, and buses obviously fit that description.”
These are infrastructure companies. They aren’t building artificial intelligence pilots or buttons to make your car break the sound barrier. Instead they’re building the nuts and bolts products that will go into millions of vehicles in the years to come.
And that’s the kind of thing, Collins says, that investors should pay attention to.