Is There Really a Future for Electric Cars?

Note: This article contains one or more stocks with a market cap between $350 million and $2 billion. Such small-cap stocks tend to be volatile.

NEW YORK (TheStreet) -- It's time to settle the issue: are electric cars more efficient than gasoline powered cars? Not in terms of miles per gallon, as gallons only apply to liquid fuel, but in terms of miles per kilowatt hour, which applies to all forms of energy. In other words, can an electric vehicle squeeze out more miles per unit of energy than an internal combustion engine?

If not, then the entire EV industry is nothing more than a pipe dream funded by fantasy-driven environmentalists who just haven't done the math. But if so, then perhaps there is a real future for EV.

When considering this question, there are several key factors to take into account. First, there is the fact that you typically lose 90% of the energy when converting fossil fuel, in whatever form, to electricity. This means that powering a car by electricity produced by fossil fuel is about 10 times less efficient than powering a car directly by fossil fuel, all other things being equal.

So on the face of it, electric cars are much less efficient in terms of miles per kWh. But there's a catch, and that is that all other things are not equal. Not only are they not equal, but they cannot be.

Why not? Because in order to harness the power of fossil fuel directly, an engine needs to be in constant rotation. Even in the case of a hybrid that idles in suspension, the entire engine and all of its connected parts, drive train, transmission, alternator, etc., needs to be rotating at around 2,000 revolutions per minute in order to get the car to move at a decent speed.

The process of rotating an engine and all its parts that fast all the time takes a lot of energy -- energy that does not need to be used in an electric car. With electric power there is no need for constant rotation at thousands of RPM of an entire apparatus at all times the car is in motion. That is the main reason electric cars are so quiet; they have very few moving parts.

So while converting fossil fuel to electricity is 10 times less efficient than using fossil fuel directly, all other things being equal, the efficiency of an electric engine over internal combustion may yet compensate for that.

An (almost) thorough answer comes from Tom Murphy of the University of California at San Diego physics department. According to Murphy, a 40 mile-per-gallon gasoline-powered sedan consumes 91.5 kWh per 100 miles. A Hummer, by comparison, eats 305 kWh per 100 mi, and a Toyota  (TM)   Prius hybrid about 73.

When we get into fully electric, the numbers improve even more. The best of them is Tesla  (TSLA) , which goes 244 miles on 53 kWh, for a total of only 22kWh per 100 mi.

There are two more catches though.

82% of the electricity in the U.S. comes from fossil fuels -- oil, gas and coal -- and the efficiency of converting fossil fuels to electricity in the average power plant is about 35%, 90% of which makes it into your car through charging it. This brings the kWh/mi number for the Nissan  (NSANY)   Leaf, for example, from 33 back up to 130 kWh per 100 mi, or the equivalent of about 28 mpg.

Up next: efficiency numbers and the big news in EV.

Murphy concludes by saying that despite the inefficiency of EV compared with gasoline, EV still has a future because carbon capture is more efficient at power plants than in car exhaust pipes.

But Murphy is missing one thing: The are 7,000 power plants in the U.S., and 121,446 gas stations. Fossil fuel, then, needs to be physically transported and delivered to 5.7% the amount of distribution points and in much greater and more efficient bulk in order to power electric cars as opposed to gasoline cars. Once the fossil fuel is in the power plant, the electricity produced can then travel through the grid instead of by gasoline tanker to 20 times the amount of gas station distribution points. That saves a lot of energy, which, in the end, is why charging an EV is so much cheaper than filling it with a full tank of gasoline.

This brings the electric car past par with internal combustion in terms of kWh/mi. With electric cars, you can travel more miles per unit of energy than with internal combustion, giving the EV industry a future after all.

With that out of the way comes the big news out of EV, released Aug. 20.

Audi (owned by Volkswagen (VLKAY) ) and South Korean battery company LG Chem have signed a deal for batteries for Audi's plug in hybrid.

This brings the German market almost fully invested in EV, with Mercedes, BMW and Volkswagen all participating. LG Chem is looking for $9.8 billion in sales from large batteries by 2018.

Also of note are the rumors surrounding GM's  (GM)   200-mile, $30,000 electric car planned for 2017.

While this is of course exciting for the car manufacturing companies themselves, it is important not to overlook the charging apparatus and its associated companies. On that score, the tipping point for EV to the mass market has been estimated at a 200- to 300-mile range and a $40,000 price tag by Car Charging Group's  (CCGI)   Michael Farkas.

For this EV charging company, the largest independently operated company of its type in the U.S., 2017 could see that tipping point finally be hit by a Chevy.

At the time of publication, the author was long CCGI.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


TheStreet Ratings team rates TOYOTA MOTOR CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TOYOTA MOTOR CORP (TM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 23.0%. Since the same quarter one year prior, revenues rose by 44.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TOYOTA MOTOR CORP has improved earnings per share by 16.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TOYOTA MOTOR CORP increased its bottom line by earning $11.17 versus $6.46 in the prior year. This year, the market expects an improvement in earnings ($12.61 versus $11.17).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Automobiles industry average. The net income increased by 17.1% when compared to the same quarter one year prior, going from $2,737.00 million to $3,204.00 million.
  • Net operating cash flow has significantly increased by 61.50% to $9,495.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 29.74%.

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