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.
Project Bloodhound saved
The British project to break the world landspeed record at a site in the Northern Cape has been saved by a new backer, after it went into bankruptcy proceedings in October.
Two weeks ago, and two months after entering voluntary administration, the Bloodhound Programme Limited announced it was shutting down. This week it announced that its assets, including the Bloodhound Supersonic Car (SSC), had been acquired by an enthusiastic – and wealthy – supporter.
“We are absolutely delighted that on Monday 17th December, the business and assets were bought, allowing the Project to continue,” the team said in a statement.
“The acquisition was made by Yorkshire-based entrepreneur Ian Warhurst. Ian is a mechanical engineer by training, with a strong background in managing a highly successful business in the automotive engineering sector, so he will bring a lot of expertise to the Project.”
Warhurst and his family, says the team, have been enthusiastic Bloodhound supporters for many years, and this inspired his new involvement with the Project.
“I am delighted to have been able to safeguard the business and assets preventing the project breakup,” he said. “I know how important it is to inspire young people about science, technology, engineering and maths, and I want to ensure Bloodhound can continue doing that into the future.
“It’s clear how much this unique British project means to people and I have been overwhelmed by the messages of thanks I have received in the last few days.”
The record attempt was due to be made late next year at Hakskeen Pan in the Kalahari Desert, where retired pilot Andy Green planned to beat the 1228km/h land-speed record he set in the United States in 1997. The target is for Bloodhound to become the first car to reach 1000mph (1610km/h). A track 19km long and 500 metres wide has been prepared, with members of the local community hired to clear 16 000 tons of rock and stone to smooth the surface.
The team said in its announcement this week: “Although it has been a frustrating few months for Bloodhound, we are thrilled that Ian has saved Bloodhound SSC from closure for the country and the many supporters around the world who have been inspired by the Project. We now have a lot of planning to do for 2019 and beyond.”
Motor Racing meets Machine Learning
The futuristic car technology of tomorrow is being built today in both racing cars and
toys, writes ARTHUR GOLDSTUCK
The car of tomorrow, most of us imagine, is being built by the great automobile manufacturers of the world. More and more, however, we are seeing information technology companies joining the race to power the autonomous vehicle future.
Last year, chip-maker Intel paid $15.3-billion to acquire Israeli company Mobileye, a leader in computer vision for autonomous driving technology. Google’s autonomous taxi division, Waymo, has been valued at $45-billion.
Now there’s a new name to add to the roster of technology giants driving the future.
Amazon Web Services, the world’s biggest cloud computing service and a subsidiary of Amazon.com, last month unveiled a scale model autonomous racing car for developers to build new artificial intelligence applications. Almost in the same breath, at its annual re:Invent conference in Las Vegas, it showcased the work being done with machine learning in Formula 1 racing.
AWS DeepRacer is a 1/18th scale fully autonomous race car, designed to incorporate the features and behaviour of a full-sized vehicle. It boasts all-wheel drive, monster truck tires, an HD video camera, and on-board computing power. In short, everything a kid would want of a self-driving toy car.
But then, it also adds everything a developer would need to make the car autonomous in ways that, for now, can only be imagined. It uses a new form of machine learning (ML), the technology that allows computer systems to improve their functions progressively as they receive feedback from their activities. ML is at the heart of artificial intelligence (AI), and will be core to autonomous, self-driving vehicles.
AWS has taken ML a step further, with an approach called reinforcement learning. This allows for quicker development of ML models and applications, and DeepRacer is designed to allow developers to experiment with and hone their skill in this area. It is built on top of another AWS platform, called Amazon SageMaker, which enables developers and data scientists to build, train, and deploy machine learning quickly and easily.
Along with DeepRacer, AWS also announced the DeepRacer League, the world’s first global autonomous racing league, open to anyone who orders the scale model from AWS.
As if to prove that DeepRacer is not just a quirky entry into the world of motor racing, AWS also showcased the work it is doing with the Formula One Group. Ross Brawn, Formula 1’s managing director of Motor Sports, joined AWS CEO Andy Jassy during the keynote address at the re:Invent conference, to demonstrate how motor racing meets machine learning.
“More than a million data points a second are transmitted between car and team during a Formula 1 race,” he said. “From this data, we can make predictions about what we expect to happen in a wheel-to-wheel situation, overtaking advantage, and pit stop advantage. ML can help us apply a proper analysis of a situation, and also bring it to fans.
“Formula 1 is a complete team contest. If you look at a video of tyre-changing in a pit stop – it takes 1.6 seconds to change four wheels and tyres – blink and you will miss it. Imagine the training that goes into it? It’s also a contest of innovative minds.”
Formula 1 racing has more than 500 million global fans and generated $1.8 billion in revenue in 2017. As a result, there are massive demands on performance, analysis and information.
During a race, up to 120 sensors on each car generate up to 3GB of data and 1 500 data points – every second. It is impossible to analyse this data on the fly without an ML platform like Amazon SageMaker. It has a further advantage: the data scientists are able to incorporate 65 years of historical race data to compare performance, make predictions, and provide insights into the teams’ and drivers’ split-second decisions and strategies.
This means Formula 1 can pinpoint how a driver is performing and whether or not drivers have pushed themselves over the limit.
“By leveraging Amazon SageMaker and AWS’s machine-learning services, we are able to deliver these powerful insights and predictions to fans in real time,” said Pete Samara, director of innovation and digital technology at Formula 1.