ANDREW DITTBERNER, Chief Investment Officer at Old Mutual Private Client Securities, explores the vast investment opportunities in the electric vehicle value chain.
As vehicle manufacturers continue to face unprecedented challenges, due to disruptive technology and a higher level of environmental consciousness, the growing list of countries that have committed to going electric-only is a good indication that the demand for electric vehicles (EV) is set to boom.
As such, the automotive industry is in the midst of a significant transition – one that offers a promising investment opportunity. Just as the internal combustion engine (ICE) displaced horses as the means to propel vehicles in the late 1800s, the electric engine is set to be the largest disrupter in the automotive market 120 years later.
This promising outlook for the electric car has already had an impact on many industries, shining a spotlight on potential investment avenues such as lithium-ion batteries and the elements used in their production. For example, with an increasing list of countries now introducing bans on petroleum and diesel-fueled cars, the rise of electric vehicles has contributed to the soaring price of cobalt – a key ingredient in the lithium-ion batteries used in electric vehicles.
According to Bloomberg, Samsung has joined Apple in taking an unprecedented step by reportedly negotiating directly with a mine in the Democratic Republic of Congo to secure cobalt supplies. “The element is an essential component in the rechargeable batteries used in smartphones, but increasing competition — mainly from electric car manufacturers — has made an already-scarce element even more valuable.”
Companies that we see as offering investment potential in this respect include Glencore – a large producer of copper, nickel, and cobalt, all of which are critical elements in the manufacturing of electric vehicles – as well as Anglo American Platinum, the world’s largest primary producer of platinum.
Earlier this month, Glencore Plc agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM Co Ltd. Currently the largest purchaser of cobalt in the world, China is vying to be the leading manufacturer of electric vehicles. The deal between Glencore and GEM will see China purchase 50% of the global supplies of cobalt by the end of 2018.
While there may be questions around the relevance of platinum with the onset of EVs, the mass adoption of pure EVs is still many years, if not decades, away. As a result, platinum and its derivatives will remain critical in reducing carbon emissions through their use in catalytic converters, in both the ICE as well as in hybrid EVs that make use of both fuel and batteries.
Other stocks to watch that may not necessarily be obvious candidates to benefit from the ongoing transition in the automotive industry include Alphabet (Google) – who are currently investing large amounts of capital in the autonomous vehicle market and Continental – who produces technologically enhancing products ranging from electric mobility and automated driving components to vehicle infotainment systems.
The onset of electric vehicles, however, has not happened overnight. Although their origins can be traced back long before the invention of the internal combustion engine, it was only in the 1960s following the need to reduce exhaust emissions along with our dependency on crude oil, that the electric vehicle came back into vogue.
A significant driver of the more recent push for EVs is the Electric Vehicle Initiative (EVI) – a body that was established in 2009 with the purpose of bringing together representatives from member governments and partners bi-annually to share knowledge on policies and programmes that support EV development. Ten countries are currently members of this initiative – including China, the United Kingdom, the United States and South Africa, among others – representing the vast majority of the global EV market.
This initiative recently launched the EV30@30 campaign, which set the ambitious goal of 30% market share for EVs in the member countries by the year 2030.
Although some motor vehicle manufacturers have committed to phasing out petrol and diesel-only vehicles by a specific date, we believe that investors should treat the transition as a longer-term, global megatrend, as opposed to an overnight development. Abandoning traditional motor vehicles in favor of elective vehicles will happen, but it may occur over a much longer timeframe than originally anticipated.
Why sports cars make us feel good
Forget romance, fine dining or an epic boxset binge – new preliminary research reveals that driving a sports car on a daily basis is among the best ways to boost your sense of wellbeing and emotional fulfilment.
The study measured “buzz moments” – peak thrills that play a vital role in our overall wellness – as volunteers cheered on their favourite football team, watched a gripping Game of Thrones episode, enjoyed a passionate kiss with a loved one or took an intense salsa dancing class. Only the occasional highs of riding a roller coaster ranked higher than the daily buzz of a commute in a sports car.
Working with neuroscientists and designers, Ford brought the research to life with the unique Ford Performance Buzz Car: a customised Ford Focus RS incorporating wearable and artificial intelligence technology to animate the driver’s emotions in real time across the car’s exterior.
Watch the video here https://youtu.be/AFpt6jziFsU
“A roller coaster may be good for a quick thrill, but it’s not great for getting you to work every day,” said Dr Harry Witchel, Discipline Leader in Physiology. “This study shows how driving a performance car does much more than get you from A to B – it could be a valuable part of your daily wellbeing routine.”
Study participants who sat behind the wheel of a Ford Focus RS, Focus ST or Mustang experienced an average of 2.1 high-intensity buzz moments during a typical commute; this compared with an average of 3 buzz moments while riding on a roller coaster, 1.7 while on a shopping trip, 1.5 each while watching a Game of Thrones episode or a football match, and none at all while salsa dancing, fine dining or sharing a passionate kiss.
For the research, Ford took one Focus RS and worked with Designworks to create the Buzz Car:
From concept, design and installation to software development and programming, the Buzz Car took 1,400 man-hours to create. Each “buzz moment” experienced by the driver – analysed using a real-time “emotional AI” system developed by leading empathic technology firm Sensum – produces a dazzling animation across almost 200,000 LED lights integrated into the car. The Buzz Car also features:
- High-performance Zotac VR GO gaming PC
- 110 x 500-lumen daylight-bright light strips
- 82 display panels with 188,416 individually addressable LEDs
Driver state research
Researchers at the Ford Research and Innovation Center in Aachen, Germany are already looking into how vehicles can better understand and respond to drivers’ emotions. As part of the EUfunded ADAS&ME project, Ford experts are investigating how in-car systems may one day be aware of our emotions – as well as levels of stress, distraction and fatigue – providing prompts and warnings, and could even take control of the car in emergency situations.
“We think driving should be an enjoyable, emotional experience,” said Dr Marcel Mathissen, research scientist at Ford of Europe. “The driver-state research Ford and its partners are undertaking is helping to lead us towards safer roads and – importantly – healthier driving.”
|Activity||Buzz Moments *|
|Game of Thrones||1.5|
* Average number of high-intensity buzz moments per participant
Car that sees round corners
Jaguar Land Rover is leading a £4.7 million (approximately R79 million) project to develop self-driving cars that can ‘see’ at blind junctions and through obstacles.
Britain’s biggest carmaker is leading a project called AutopleX to combine connected, automated and live mapping tech so more information is provided earlier to the self-driving car. This enables automated cars to communicate with all road users and obstacles where there is no direct view, effectively helping them see, so they can safely merge lanes and negotiate complex roundabouts autonomously.
Chris Holmes, Connected and Autonomous Vehicle Research Manager at Jaguar Land Rover said: “This project is crucial in order to bring self-driving cars to our customers in the near future. Together with our AutopleX partners, we will merge our connected and autonomous research to empower our self-driving vehicles to operate safely in the most challenging, real-world traffic situations. This project will ensure we deliver the most sophisticated and capable automated driving technology.”
Jaguar Land Rover is developing fully- and semi-automated vehicle technologies, offering customers a choice of an engaged or automated drive, while maintaining an enjoyable and safe driving experience. The company’s vision is to make the self-driving car viable in the widest range of real-life, on- and off-road driving environments and weather.
AutopleX will develop the technology through simulation and public road testing both on motorways and in urban environments in the West Midlands. Highways England, INRIX, Ricardo, Siemens, Transport for West Midlands and WMG at the University of Warwick join the AutopleX consortium, which was announced as part of Innovate UK’s third round of Connected and Autonomous Vehicle Funding in March 2018.