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August 8, 2013

The age of the electric car is upon us – or is it?

The Chevy Volt is the “best selling plug-in America,” and Chevy just announced another price reduction this week in order to help boost demand for their product. In addition to the Volt, the Nissan Leaf has also made a splash into the purely electric car business, and these two vehicles have become commonly referenced examples of the decline of “traditional” autos. This appears to be a self-fulfilling prophecy – after years of shrugging off warnings of declining oil reserves and scoffing at the thought of natural gas supplanting oil, the easily accessible oil reserves are in decline, and the new resources are in locations that are much more difficult to drill/explore.

Even BMW, a luxury auto maker, has introduced an electric hybrid model.

Electric auto sales are on the rise in the face of rising gas prices, and Tesla announced blow out earnings today – a $0.20 EPS figure versus an expected current period loss, and a loss of $0.89 last year at this time. Elon Musk, the founder and CEO, laughs (literally) away thoughts of competition from the established market leaders such as BMW. Late to the “electric” party, there are certainly reasons to doubt the ability of the large automakers to leapfrog past Tesla in the all electric category.

That does not mean, however, that the future is paved with roads of gold and money trees. Despite showing up to the party I do not think it is wise to completely discount the traditional automakers quite yet. These firms has deep pockets, experienced personnel, and the proper motivation – sustained profitability.

What seems to be missing from this conversation is what I am really intrigued by. Fuel efficiency has improved dramatically over the last 20 years, many people have traded in gas guzzling SUV’s for more fuel efficient vehicles, and there are now even fuel efficient pickup trucks. Is it truly so hard to believe that 50, 60, or 70 mpg rates are attainable in the near future? With regular autos so fuel efficient, would that effectively neutralize the electric auto industry?

As always, there are links below with additional information.

Food for thought!

Happy Reading! – the word cloud for Tesla’s earnings release


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