Investing in Electric Cars

If there is one conversation central to society right now… it’s energy. More specifically oil. With gasoline passing the $4 per gallon mark in many parts of the country, it’s hard not to wonder what are our alternatives to the internal combustion engine automobile.

In the mid 90s, GM came out with quite a successful electric vehicle (EV), but mysteriously repossessed and destroyed all of them. While there are many theories as to their GM’s motives, perhaps it is more useful to focus on the car companies who are producing efficient, working, zero-emmissions vehicles that require no gasoline, oil, or internal explosions to operate:

Telsa Motors

Elon Musk, cofounder of leading online payment processor Paypal, has spearheaded the development and productions of the Tesla Roadster

Driving Range: 221 miles
0 – 60 mpg in under 4 seconds
To Speed: 125 mph
Energy cost: $0.02 per mile (about 10 times cheaper than a gasoline car)
Retail Price: $110,000
Full charge: about 3 hours

This isn’t a “we hope to offer it in the future” car. It’s already been produced. Over 600 have been sold or reserved, and there are an additional 400 on the waiting list. The roadster is a car that will hang with Ferraris and other exotic, high performance sports cars.

More importantly, Tesla plans to introduce a $60,000 luxury sedan in 2009, and a $30,000 model soon thereafter.

EV’s Longer car life

If you think $110k or $60k for an electric vehicle is expensive, think again. While the typical lease or loan term for a [internal combustion engine] car is 48 months or less, an EV can expect to have less wear and tear. An electric car has no oil, gasoline, or internal explosions… so the maintenance is extremely predictable: rotate the tires every 10k miles and replace the batteries every 100k miles. With such a simpler, cleaner, and more efficient method of operation, you can expect an electric car to last much longer. This isn’t based on pure speculation. Major production electric vehicles have been running without problems for over a decade. While many car manufacturers suspiciously halted production and repossessed most EVs, there are still many Toyota Rav4 EVs on the road with scarce operational or maintenance problems.

EV ownership vs. ICE vehicle ownership

To compare Tesla’s WhiteStar to its closest competitor, the BMW 5 series…

The Tesla is about 40% cheaper to own and operate. This is based on the assumption that the buyer of the Tesla can feasibly be offered a 120 month lease term because of its cleaner, simpler, longer lasting mechanical operation. Herein lies the…

Investment Opportunity

While most mortgages are originated by large banks and financial institutions, many investors have made out quite well investing in private mortgages. I believe the same opportunity lies in private EV lease financing. You (alone or with a group of investors) can finance the lease for buyers of EVs. Private mortgages often are created and held for loans that large financial institutions don’t want to mess with. A 120 month car lease is probably not going to be offered by large leasing companies any time soon, but such a lease may be feasible with EVs.

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