One of the problems with American culture is that we don’t fix anything until it’s beyond repair…levees, the housing, bubble, debt, healthcare, social security, you name it. Unfortunately this also applies to the ongoing energy crisis.

While a potential cellulosic industry (ethanol made from cellulose, the most organic compound on Earth) could break out in the future, it won’t put a dent into $135-plus barrel prices until years from now. America’s dependency and current shortages has forced itself to find an alternative. Improvise would be a more appropriate word. We will see some new and exciting technologies in the following years…

No, it won’t be flying cars, hydrogen cells, or teleporting atom machines…although those would be a fun… Instead, we’re talking about simple energy and cost efficient cars.

The recent closings of four GM truck plants and $4-plus per gallon gasoline prices are a tall tale sign our SUV days are over. The fact that soccer moms can’t even get $10,000 when trading in their Chevy Suburbans proves that times have changed. Hybrid and smart cars are starting to emerge…

We are now heading toward two feasible automobile options that both fit under cost and energy efficiency categories…electric and air.

Building a Better Hybrid

When we think of hybrids, we think of unattractive cars mired with technical problems, short battery lives, and difficult and costly to fix. However there’s a new generation of hybrids that may change its reputation…

Several automakers have already implemented plans to commercial produce lithium-ion battery powered cars. These vehicles are far different than the standard nickel metal hydride-based battery used in today’s current hybrids. General Motors (GM: NYSE) plans to release, the first lithium ion hybrid to U.S. markets in 2010, the Chevy Volt, followed by Toyota, Mitsubishi and Subaru.

In a nutshell, the new lithium ion batteries will last much longer and provide up to 20 times the power than nickel based, allowing cars to travel up to 40 miles on a single eight-hour charge. Need to travel more than 40 miles? No worries, a dual gas engine will cut on, getting you to where you need to be.

Pending on how much your local electricity supplier charges, it would cost you around $2.50 to fully charge a lithium ion hybrid. Also, even if the electricity supplier is burning fossil fuels to produce the needed charge, they’re still releasing less carbon emissions than regular gas powered cars.

A Breath of Fresh Technology

The latest car technology to hit the world’s markets involves an air compression engine. An almost unimaginable idea, this engine uses air compression tanks to push the pistols instead of the explosion of gasoline/air mixtures in a traditional internal combustion engine.

The car’s appearance is small and not that attractive, but at $2.00 to fill a tank good enough for a 125 mile trip, it might be worth it. Like hybrids, they also have a duel gas engine for speeds over 60kph. A high-pressure air pump could fill up the car in 3 minutes while a built-in air pump could refill the tanks in four hours using a simple household outlet. The internal pumps will also refill its tanks while running on gas — making it a somewhat renewable energy product.

Indian carmaker Tata Motors (TTM: NYSE) and French-based Zero Pollution Motors are the first companies to commercially produce this technology. Deals have been made in more than a dozen countries. The Mexican government signed a deal to buy 40,000 of these for taxis in Mexico City.

Air compression cars won’t hit U.S. markets. At least not for now… They’re simply too small and lightweight to pass U.S. crash tests. But this technology has potential — not to mention the fact that it’s easy on the environment.

Hybrid sales were estimated to increase by 11% for 2008. Yet sales are down 1.9% compared to last year through the month of June. However, total car sales are down 10.1% due to a choppy economy and high fuel prices. And even though demand has waned a bit, carmakers still have not been able to meet America’s demand for hybrids…

Simply put, 2008 hybrid sales would be higher if it weren’t for inventory shortages. Toyota, which controls 80% of the U.S. hybrid industry, is claiming a one days inventory supply of their Prius when normal suggested inventory should be around 60 days worth. Dealerships across the country are reporting six-month waitlists for the car. Honda’s Civic and Ford’s Escape are having similar reports as well.

It’s no question that hybrids will be a success. In a recent poll conducted by Edmonds, 35% say they are currently shopping for fuel-efficient cars while over 50% say they will shop for another vehicle if gas reaches $5 per gallon. With only 0.388 sold per 1000 people, there’s plenty of room for growth. A 10% tax break on a hybrid is a nice incentive as well.

The largest factor to the shortage is battery supplies due to poor planning and limited resources. The battery packs, which are the most expensive part of hybrids, could be a huge gainer in the markets.

General Motor’s recently announced lithium ion contracts with both German-based Continental AG (OTC:CTTAY) and Compact Power Inc, a subsidiary to LG Chem of Korea. With numerous other major automakers racing to get lithium battery hybrids out, lithium ion providers will be in demand.  These companies would be worth keeping an eye on in the near future…

With amount of money companies and governments are putting into these projects, it’s likely we could see a promising industry to boom in the future. Hopefully, it will sustain not only the economy, but the environment as well.

Regards,

Mark Louie
July 11, 2008

Investing in Fuel Efficient Cars was originally featured in the Penny Sleuth.