Do EV cars make sense financially, economically and environmentally? Which EV cars specifically?
The current progress of EV cars and how we are investing in this space
Pure EVs are not making profit for car manufacturers. In fact, China’s EV car manufacturers are turning to hybrids to pursue positive net profits.
Plug-in hybrid electric vehicles (PHEVs) use batteries to power an electric motor, as well as either gasoline or diesel, to power an Internal Combustion Engine (ICE). PHEVs can charge their batteries through charging equipment and regenerative braking. PHEVs are different from full hybrid cars in terms of size, cost and purpose of their electric batteries. A plug-in hybrid's electric battery can be recharged at home or a public charging station. A full hybrid car recharges its electric battery using its gas-powered engine.
EV Consumer Challenges and Concerns
Also from a consumer perspective, it is debatable whether or not EVs make sense financially, economically and environmentally:
The true total cost of replacing EV batteries in Battery EVs (BEVs) appear to be much higher than originally estimated.
The true total cost savings for owning EVs appear to be in many cases comparable to Internal Combustion Engine (ICE) cars, and in some cases more expensive than ICE cars.
The environmental benefits generally omit the end-to-end lifecycle including the mining and milling operations for the necessary critical minerals, such as cobalt, lithium and other metals, which actually create a considerable level of carbon emissions that are not calculated in the overall math of carbon emissions.
PHEVs Make Sense Financially, Economically and Environmentally
Hybrids like Plug-in Hybrid EVs (PHEVs) not only make better sense financially and economically for the car manufacturers, but also for the consumers:
Electricity costs in China are very inexpensive - “This incentivizes Chinese consumers to use electricity to power their cars as much as possible.”
In many areas of Asia, renewable-based energy is now cheaper than fossil fuel energy - link here - encouraging PHEV users to use DC fast charging offered from renewable energies.
“Chinese PHEVs are now less expensive than popular gasoline models in China — about half the price of comparable Internal Combustion Engines (ICE) vehicles in the US. And they are also less expensive than comparable Battery EV (BEV) models.” - source link
PHEVs use much less minerals/commodities than BEVs - with one-third of the critical mineral requirements.
And not only BEVs, but also hydrogen-based cars or fuel cell-based cars are still not economical, even though they may become economical in the future, especially for hydrogen as larger scale nuclear energy comes online.
Trader Ferg has written a great substack article on PHEVs - link here. Trader Ferg highlights that: “PHEVs need roughly 10% more PGMs [platinum group of metals] due to the more frequent cold start of the engine (switching back and forth between battery and internal combustion engine).”
Trader Ferg also makes the following interesting points:
China making cars to export to emerging markets as a focus market - not developed markets - source link of chart:
This chart below is from Gavekal, emphasized many times by Gavekal’s Louis-Vincent Gave.
Heavy-truck demand is also a growth market, while diesel trucks don't need a three-way catalytic converter, so they use no palladium or rhodium, driving platinum loading.
Palladium is also used more for catalyst in gasoline engines whereas platinum is used more in diesel engines.
“LNG trucks require three-way catalytic converter to meet China's latest China National VI emission standards (switch to stoichiometric engines from lean burn). Granted I'm not convinced the current LNG trend is anything to be extrapolated more a arbitrage of cheap LNG prices (if I'm wrong, it's just more PGM demand…)” - Trader Ferg source link
So the following trends are emerging:
The % of EVs in the form of PHEVs is growing rapidly.
PHEVs make sense financially, economically and environmentally.
PHEVs require some platinum and/or palladium.
PHEVs require some copper, nickel and some rare earth elements.
How we are Investing in PHEVs
We have considered several options and approaches for investing in this space. Here is our research and how we are investing as such: