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Electric Cars: Long-Term Thinking Vs Short-Term Analysis

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2013 Nissan Leaf (Japanese trim)

2013 Nissan Leaf (Japanese trim)

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Are electric cars a risk?

Not mechanically, or electrically, or if you're intending to drive a long distance, that is. But from the eyes of a financial trader, looking for a safe place to put their money, the answer is often a cautious "yes".

But should it be? One investor writing for The Globe And Mail (via Charged EVs) says not--and his investment in Tesla is testament to a business he feels will deliver longer-term gains, rather than the short term view many take.

It's a metaphor for the market as a whole.

Detractors of electric cars see them as nothing more than a fad. They look at existing levels of range, or performance, and dismiss the concept as little more than greenwashing.

If you ignore the fact that most drivers could happily use an electric vehicle for their day-to-day journeys, there's a fragment of truth to this.

Many electric cars really aren't that spectacular at the moment. There have been teething issues with some, others have curious styling to differentiate themselves from more conventional vehicles, and more still deliver range numbers that could be off-putting at first glance.

If electric cars continued that way, they'd likely remain products for only small sections of the population.

It takes an incredibly limited outlook to assume they'll remain this way forever though, and just like investors expecting short-term gains, it doesn't acknowledge the longer term improvements electric cars will see.

In his article, investor Chris Umiastowski references the Tesla Model S as an example of an electric car offering distinctly longer-term figures. In range, charging times, performance and features, it's well ahead of the curve.

While it's in a relative minority, it would take a brave man indeed to bet against other electric vehicles catching up in the coming years--and Tesla pushing its own cars even harder.

Umiastowski highlights familiar aspects we're expecting to cause improvements--reducing battery costs, and increasing production volumes. We'd be tempted to throw another in there, in the form of familiarity--the "butts on seats" problem, where experience with the vehicles is the best way of generating interest in them.

Similar things happened with hybrid vehicles--a category we already know that electric car sales are outpacing, on early-year figures.

Toyota in particular has sold millions of Prius hybrids and other variants--6 million as of Dec 31, in fact--a vehicle once the preserve of a small band of early adopter enthusiasts. Just like many modern electric vehicles.

Umiastowski's premise is that most investors simply don't understand the market for electric cars, feeding their short-term outlook on the industry.

But look at the signs, the reduction of costs, the increase in economies of scale and the natural improvements of a fast-growing segment, and the long-term outlook looks much more realistic. By the early 2020s, says Umiastowski, electric cars will be virtually a "no-brainer".

Others think electric cars may have their day even sooner--like the futurist who thinks gasoline vehicles will be obsolete in just two years time.

However quickly electric cars really come on song, their long-term benefits seem fairly solid--whether you're an investor or simply a buyer looking to reduce their costs and environmental impact.

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