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Electric Car

As investment professionals, we tend to take notice when we hear how something new is going to take over the world. The reality is that most big changes tend to be more evolutionally than revolutionary as is the case with electric vehicles (EVs). Their ‘efficiency’ will clearly continue to improve over time but the time scale is we need to consider is decades and not just years.

From a South African investment perspective, the evolution of EV’s will have the largest and most significant impact on our already struggling PGM sector. The sooner these vehicles gain traction, the closer the sector comes to a potential demand cliff. Also, petrol vehicle production remains an important industry locally and mass adoption could have devastating consequences for the industry.

The state of the EV

Charge time and range

If you can afford a Tesla, then you need to consider the following:

Range on fully charged battery: 330 km – 430 km when driven ‘normally’.
Time to recharge at home (using a household power source): 5 hours. This translates to ~80 km range per hour of charging.

Using a high current “Charging Station”: About 2 hours to a full charge.
Interesting comparisons relative to a similar petrol engine:

Time to fill up/charge: It takes say 10 minutes to fill up with petrol and 5 hours for a EV. This means that petrol is 30 times more time efficient.

Range on full tank/charge: Petrol is ~1.5 times more efficient.

Price: Current research seems to indicate that a Tesla is 50% more expensive than a comparable car, but cheaper to run. However, if you take the savings on running expenses compared to the extra initial investment, you have around a 10 year plus “payback” period. This muddies the argument for buying a EV currently on purely financial grounds.
A more affordable electric car has a range of 100 km and takes around 8 hours to fully charge at home, and even these cars are still expensive when compared to similar petrol engines.

Charging Stations

Nobody knows for sure what the future holds, but it seems that even if significant strides are made in battery and charging technology, it will only be viable to charge an EV in an acceptable time frame through a heavy-duty power source. Therefore, unless we move towards integrating industrial electrical supply into our houses soon, we will need charging stations to be at least as plentiful (perhaps even more – considering current charging times) as petrol stations.

While a few countries have charging stations dotted around the place, the current distribution infrastructure is relatively small compared to petrol stations. Even converting existing petrol infrastructure will require a massive investment in electricity distribution and generation. Current power supply at parking lots, and either at retail destinations or workplaces, will also probably be insufficient.

Therefore, if you believe that EV’s are going to make meaningful inroads in the next decade, you must also have confidence that electrical reticulation and generation infrastructure will also be massively upgraded over this period.

The GREEN argument

Although one of the key marketing angles for EVs is that your vehicle will have zero emissions, emissions from the source of the electricity and in the manufacturing the car must also be considered. In countries where the generating capacity is more skewed towards greener production (hydro, wind, nuclear) there is definitively less overall carbon emissions from a EV than a petrol car.

However, in countries like South Africa (and India, Australia, China etc), where coal is the main source of fuel for power generation, they are roughly equal. The carbon footprint of an electric car In South Africa is five times that of an electric car in Sweden.

Other considerations.

Forget exploring off the beaten track (in the bush) for a while.

Towing a trailer or a caravan severely restricts range.

Back-yard DIY maintenance and servicing is off the table. Maintaining and servicing EV’s are probably already beyond the ability of your family mechanic and even your dealer. As technology progresses, maintenance will become even more complex and most likely your local dealer will simply just become a part exchanger. If your EV breaks down near Colesburg, you will not be able to fix anything next to the road. Then, after being towed into Colesburg, you will probably struggle to find a local mechanic who can fix your car. If you do manage to find a capable mechanic, you will likely have to wait a few days if a part needs to be delivered. EV’s are more reliable BUT… what if something goes wrong?

The anticipated advancements in technology is perversely a negative against buying an electric car today. There are clearly going to be great advances in EV technology in the years and decades to come. However, this will make the (expensive) car that you buy today quickly obsolete. The likelihood is that as with any technological advance, EV’s may become a more affordable alternative much later in its evolution.

Current batteries simply do not last as long as an internal combustion engine.

The above seems to indicate that the advancements that are needed to make EV’s ‘comparable’ to internal combustion engines are a few decades away in advanced economies and even longer in South Africa. They must be driven by advancements outside of just battery and recharge efficiencies. EV sales will continue to increase and the relatively small existing market that will continue growth as technology advances, although adoption may be much slower than some predict.

While the vehicle manufacturing industry and platinum sector will be relieved by this, much still needs to be done to mitigate the very real future impact EVs will ultimately have.

The manufacturing industry needs to gear up for potential production shifts while the platinum sector better get a move on in ramping up investment and jewelry demand. Unfortunately for them, hydrogen fuel cells (also with close to zero emissions – and using platinum) are a long way off because of hydrogen production and distribution infrastructure.

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