AOL Auto ran an article this weekend on hybrid cars, by no means an uncommon subject in any medium these days. Interestingly, their headline was “Insight Costs Less than Prius” (http://autos.aol.com/gallery/hybrids-under-30?icid=main|htmlws-main|dl6|link3|http%3A%2F%2Fautos.aol.com%2Fgallery%2Fhybrids-under-30 ). With electric power in cars more common, it is worth looking at what that means — and what investors should be looking for if they find the electric and hybrid car markets interesting.
For one thing, there are many different types of hybrid vehicles, and the differences are meaningful in HOW they are designed, HOW they save fuel, and HOW they are powered — even to what extent they are dual-powered.
There are lots of overlapping definitions, but basically the most common range is from “power-split” hybrids to “mild” hybrids. Although it may not be the snootiest resource, Wikipedia has a useful article on the types of hybrids (http://en.wikipedia.org/wiki/Hybrid_vehicle), and you will have to scroll down through heavy vehicles and other types of transport before you get to autos. The point being that the two vehicles in the AOL headline are entirely different types of cars, and whether you are shopping for a car or shopping for stocks that might benefit, you need to know the differences.
Power-split hybrids. First of all, in terms of road cars (not golf carts or campus people movers), in today’s world almost all cars that are not strictly dependent on burning fuel (gas, diesel, CNG, ethanol — whatever) are hybrids, not “EVs.” That means they are capable, in varying ways and degrees, of being powered by BOTH internal combustion engines AND electric-powered motors. The most common variety of hybrid on the road today (Toyota Prius, Ford Escape, and Lexus Gs450 and LS600) is the “power-split hybrid,” cars in which a standard internal combustion engine is assisted and co-powered by 2 electric motors that can either take over at various times (like when coasting), or help supercharge the car (like during passing). The gas engine and braking mechanism can help recharge the batteries that power the motors, and you can save gas as a result. But power-split hybrids carry a lot of “extra” weight from having two complete powertrains, and replacement batteries for the electric motors can be dizzyingly expensive. Nonetheless, they dominate the public consciousness about “EVs” or “hybrids” and many people assume that the other cars that are called “hybrids” are in some way similar.
Mild hybrids. Because the extra weight in a power-split hybrid cuts into the fuel saving, an alternative variety of hybrid seems, at least in the sort and mid-terms, to be more practical — and popular with car companies. They are real fuel-savers and predicted by many marketing experts to be the most common such cars in Europe and the US very shortly. They are called “mild” hybrids, and they include 2 Hondas (Civic Hybrid and Insight), Mercedes-Benz S400 BlueHybrid, and BMW 7-series hybrids — so far. Mild hybrids generally use one compact electric motor to assist the gas engine (which is generally downsized to save fuel), and can run the AC and other peripheral systems, while partially recharging on the fly. These mild hybrids do not suffer from extra weight penalties, and they do not need the extraordinarily expensive battery packs that power-split hybrids need. To a large extent they rival the power-split hybrids on fuel efficiency, but cost far less to purchase.
In either case, the batteries that power the electric motors that work alongside the internal combustion engines are a clear segment for the investor interested in the EV industry.
What does that mean? From an energy-storage point of view, if you cast your investment vote for power-split hybrids, you can have your pick of energy storage companies (lithium-ion, NiMH, and a variety of exotic others). The pioneer power-splits are running, for the most part, on NiMH batteries today — primarily because that’s the road that Toyota chose to take when they introduced the market-share-dominant Prius.
But if you read the media, whether it is AOL, Green Car Congress, the Wall Street Journal or Earth2Tech, you have to be aware that there is a growing gaggle of lithium-ion battery companies who loudly proclaim that their batteries, not NiMH, are the batteries of the future EV or hybrid. These include NYC-based Ener1 Inc (Nasdaq: HEV, http://www.ener1.com/), easily the most visible US li-ion car company, followed closely by the privately held (but not for long, apparently) Watertown MA-based A123 Systems (http://www.a123systems.com/company), and truly a bunch of others, like Boston Power, which recently announced that it too will get $100 million in federal stimulus money to build a li-ion plan in MA (http://www.zoomilife.com/2009/06/06/boston-power-gets-100m-in-federal-stimulus-to-build-li-ion-manufacturing-facility/). The little-talked-about fact of li-ion batteries is that very few real cars are currently being powered by them. How many people have actually seen a Tesla on the road? A Fisker? A Th!nk? Show of hands? I thought so. Not many.
And the further fact is that many of the world’s large car and components companies are forming alliances with none of the above or with non-US li-ion manufacturers for their future models of power-split hybrids: http://seekingalpha.com/article/148248-lithium-ion-batteries-for-hybrid-vehicles or http://www.greencarcongress.com/2008/06/continental-tak.html or http://www.thedeal.com/corporatedealmaker/2009/07/quallion_uses_gov_stimulus_mon.php.
The further complication is that the power-split hybrid is by no means guaranteed to be the winner in the hybrid sweepstakes. Remember the “mild” hybrid? The Honda Insight? The next article in this series will have a closer look at that version of hybrid, which may well become standard-issue on many production cars from all over the world while power-split hybrids continue to be a small minority of cars sold.