Yesterday in the Pursuit of Happiness, we pointed out that there’s no incentive to earn more when you can double your income with taxpayer funded benefits.
And what goes for the welfare state goes for business too.
This week the Financial Times reported:
‘A123 Systems, a manufacturer of batteries for electric cars that was awarded a $249m grant by the US government, has failed to make a payment due on some of its loan notes and warned that it may be forced to seek bankruptcy protection.’
It’s hard to find an industry or company that doesn’t benefit in some way from government handouts. But where possible we try to stay clear of those companies and industries.
Some investors have a moral objection to tobacco and beer companies, we have a moral objection to rent-seeking companies (although we will set our morals to one side if the risk and reward is worthwhile).
But getting back to the FT article, governments have thrown billions of dollars at the alternative energy industry. But government support doesn’t guarantee success. Why? Well, quoting from the Queensland lawyer mentioned in today’s other Money Morning article: it allows the firms to achieve ‘wealth without the inconvenience of work’.
However, it’s important not to tar the industry or idea with the same brush just because one company goes bust or defaults on bond or loan repayments.
In this case we’re talking about the electric car market. To be honest, we’re in no hurry to upgrade to an electric car. For the simple reason that we don’t want to wait six hours for a short trip to the shops while the batteries recharge.
Or what if you’re driving your electric car down the freeway and you need a bit more juice to get you to your destination? Right now, you’ll be lucky if you can find a recharge point.
According to the Sydney Morning Herald, ‘Founded in 2008, ChargePoint has 57 plug-in points accessible to the public in Australian cities.’
That’s not what you’d call an extensive network. But could that change? It could if a new development by Korean entrepreneurs becomes commercially successful.
According to our old pal, Dr Alex Cowie, these four Koreans have got ’20+ hour charge times for electric vehicles down to less than one minute’.
Now, we’re not saying this is all the work of the free market. As we said above, it’s hard to find any industry that doesn’t get a government handout.
But if you look at the bigger picture, any technology that can cut recharge times from hours to just seconds could be a game-changer for the clean-car industry.
With or without government handouts, this is an industry we’d be happy to back.
PS. You can’t invest directly in this Korean technology, but Dr Alex Cowie has found a back-door way to potentially profit from the industry. To find out more, click here to watch this special feature from the Doc…
From the Port Phillip Publishing Library
Special Report: How to Make Money from the End of the Mining Boom
Daily Reckoning: South Africa’s Rivers of Gold
Money Morning: The Stock Market is Up, What’s Next?
Pursuit of Happiness: Why it’s OK to Smoke, Drink and Play Frisbee
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Written by Kris Sayce
Kris Sayce is Editor in Chief of Australia’s biggest circulation daily financial email — Money Morning. (You can subscribe to Money Morning for free here).
Kris is also editor of Australian Small-Cap Investigator, his small-cap stock research service, where he provides detailed analysis on some the brightest, smallest listed companies on the ASX.
If you’re already a subscriber to these publications, or want to follow his financial world view more closely, then we recommend you join Kris on Google+. It’s where he shares investment insight, commentary and ideas that he can’t always fit into his regular Money Morning essays.