EV Woes at Tesla and Toyota: The Week In Cleantech, 9-28-2012

Jeff Siegel

September 25: Toyota (NYSE:TM) Scraps Electric Car

320px-2012_Toyota_Prius_plug-in_hyrid_--_07-14-2012[1].JPG
2012 Toyota Prius photographed in Washington, D.C., USA.. (Photo credit: IFCAR via Wikimedia Commons)

Claiming the company misread the market, Toyota (NYSE:TM) is scrapping its plans for a global roll-out of an electric mini-car called the eQ.

To be honest, I'm not particularly surprised. Toyota has not been very aggressive, or interested really, in pursuing the electric vehicle (EV) market. And I get it. When it comes to delivering a superior conventional hybrid vehicle, Toyota still runs the show. The Prius is one of the most popular vehicles in the marketplace, with more than 3 million units sold since the hybrid superstar first launched.

My point is, it doesn't need EVs to lure fuel economy-conscious drivers into showrooms.

Look, it's no secret that when gas prices head north, so do Prius sales.

Hell, back when oil crossed the $140 mark and gasoline was well over $4.00 a gallon, folks were running to Toyota dealers and paying above sticker price to get one of these vehicles. Even today, boasting 50 miles-per-gallon can certainly help provide a nice hedge against unstable gas prices.

So when it comes to superior fuel economy, Toyota's got a good thing going. And I suspect the company has no interest in pouring a bunch of capital into EV development, when all it has to do to keep fuel economy-conscious drivers coming in, is continue to inch those miles-per-gallon up every few years with Prius upgrades.

That being said, I do wish company reps would back off the anti-EV rhetoric – however subtle it may be.

Here's what I mean. . .

In response to this recent decision, Toyota's vice chairman Takeshi Uchiyamada said:

“The current capabilities of electric vehicles do not meet society's needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge.”

Do not meet society's needs?

Roughly 70 percent of US consumers drive no more than 40 miles per day. Every all-electric car from a major automaker on the road today can deliver that – and then some.

How long it takes to charge?

This is such a bullshit argument. Every EV owner I know charges while he sleeps, wakes up, drives to work, returns home and plugs back in. It ain't rocket science, and unless you only sleep for four hours a night, long charging times are really not the deal-breaking issue that some would have you believe.

Look, the thing is, Toyota doesn't need to come at it this way. The company does not need to justify its decision to anyone. And certainly management doesn't need to recite the tired and inaccurate arguments of the anti-EV brigade.

Truth is, Toyota has done a lot to help integrate fuel economy into the car-buying lexicon. The company charged forward with its hybrid offerings when a lot of folks mocked the technology and the ability of Toyota to even make it work economically.

The company proved the naysayers wrong, and today Toyota gets the last laugh.

So if Toyota decides not to pursue electric vehicles right now, that's fine. This doesn't change my opinion of the company or of the Prius, which is a superior vehicle. And it definitely doesn't change my opinion regarding Toyota's leadership role in providing vehicles that can help us reduce our foreign oil consumption.

But putting out those careless and untrue comments about the electric vehicle market? Come on, Toyota. You're better than that!

September 25: Will Tesla (NASDAQ:TSLA) Crash and Burn?

English: Photo of the Tesla Model S, from the ...
The Tesla Model S, from the unveiling on 26-Mar-2009. (Photo credit: Wikimedia Commons)

Back in March, I was speaking at a conference about the future of personal transportation.

I discussed how a new generation called the Millennials or Generation Y would ultimately force change in the marketplace and present a real challenge to car makers.

You see, there have been a number of studies that have suggested this particular generation, which represents the kinds of numbers that allowed the baby boomers to dictate a lot of our consumer decisions today, is less interested in car ownership than previous generations, preferring public transportation, biking, walking and car-sharing services like Zipcar (NASDAQ:ZIP).

And for those folks who are now around the ages of 19 and 31 that are receptive to car ownership, they account for about 25 percent of the US automobile market. In ten years, that's expected to rise to 40 percent.

So what will they drive?

According to a recent Deloitte study, these folks tend to mock gas guzzlers and embrace hybrid, plug-in hybrid and electric vehicles (EVs).

If you're a regular reader of these pages, you know I've long been a supporter of electric vehicles, and I firmly believe that by the end of this decade, EVs will capture between one and 1.5 percent of the total vehicle market.

On the surface, this may not seem like much. But it's actually a pretty aggressive target, and a pretty big deal.

As a result, we've profited from the early development of this market from every angle. Although most of this was the result of riding the early wave of lithium and high-performance battery plays a few years back. Today, it's a bit more difficult. And while I remain a strong supporter of electric vehicle development, I'm extremely cautious as an investor. In fact, the only EV-related stock I've played this year was Tesla (NASDAQ:TSLA), and I jumped out back in March after the stock started looking a bit top-heavy after crossing the $36 mark.

Since then, I've watched the stock tumble and rise a few times. I've seen a number of trading opportunities (although I did not play the stock this way), and I've read some pretty long and detailed analyses of the company by both credible analysts, overly optimistic bloggers posing as analysts and the typical anti-EV narcissists who get off at watching a game-changing industry struggle with the early bumps and bruises that come with any disruptive technology. The latter, of course, typically provide little more than noise. But I suspect they'll be coming out in full force this week after Tesla's recent announcement that it was cutting its 2012 revenue forecast.

Due to a slower-than-expected rollout of the Model S sedan, the company has adjusted its full-year revenue to come in at around $400 million to $440 million. This is down from Tesla's prior outlook of between $560 million and $600 million.

This is a pretty big discrepancy, and in pre-market the stock has fallen about ten percent.

So today, the haters will be busy little bees, finding as many ways as they can to not only trash Tesla, but the EV market as a whole. We'll hear about how no one wants these cars, how sales are disappointing, how the technology “isn't there yet” and probably a few cheap shots at Washington for supporting the development of something that can ultimately help us displace a decent amount of foreign oil.

It's all bullshit.

Don't get me wrong. I'm not rushing out to buy Tesla. And quite frankly, I think some of these recent upgrades are insane. I was truly surprised, and a bit suspicious, when I read that Morgan Stanley put a $50 price target on this one.

Of course, I don't have access to the same intelligence and data as the suits over there, so perhaps I'm missing something. But I don't believe Tesla will really impress enough to push the stock to those levels until we get some better clarity on Model S volumes and gross margins in Q4.

I remain bullish on Tesla as a small, but growing force in the auto industry. And I definitely wouldn't bet on Tesla to crash and burn. But I'd be hesitant about believing overzealous price targets. At least until we see how Q4 shakes out.

Editor's Note: Also in EVs...

While EVs are struggling in the West, China has a plan for their rapid adoption.

DISCLOSURE: No positions

Jeff Siegel is Editor of Energy and Capital, where these notes were first published.


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