Saudi Arabia’s ‘vision’ for 2030 is to be oil free. Well maybe not ‘free’, but at least not dependent on it. Sounds ambitious. After all, for the last 70 years they’ve been crucial to the great century of oil.
Looks like they’re in for a tough slog.
Russia’s in a pickle too. With the current price of crude, the country can’t balance its budget. In May last year ING Bank NV said Russia needed the price of oil at US$80 to balance the budget.
Looks a tough slog for them too.
With two of the world’s oil superpowers in dire straits, it’s a sign of a turning tide. And that tide is strongly away from oil. Our oil dependent world is changing. A new power is emerging. Well, to be more accurate…many new powers are emerging.
But if oil won’t meet our energy needs in the future, then what will?
Here’s a clue it’s not just lithium
Of course the answer is ‘green’ energy. Renewable energy like solar, wind and wave power. More green energy comes online every year. It’s a huge shift away from old, ‘dirty’ energy.
But when it comes to the huge catalyst pushing green energy, look no further than the car industry. Almost every car company in the world is developing electric vehicles (EVs).
This has seen incredible interest in lithium stocks. A little bit of real demand, plus a lot of hype, equals lithium mania.
You see most EVs use Lithium Ion (Li-on) batteries for power. Like Tesla’s Model S car. This is the poster boy for Li-on technology. It has around 7,104 Li-on batteries in it.
For some the Li-on battery is the future of car power.
But here’s some news not everyone is going to like. Li-on isn’t the be all and end all you might expect. Sure current EVs use Li-on. Mostly because it’s the lightest form of electric power that’s cost effective.
Here’s a fact about Li-on that makes it not so great for cars. Li-on loses power over time. Every cycle, every charge and discharge, reduces the future power output. Every Tesla Li-on battery will lose its capacity over time.
Can you imagine spending over $100,000 on a car knowing that within a year it could be 5% less powerful?
This diminishing return is one reason why Lexus has avoided li-on batteries. Let’s not forget Lexus (under Toyota) has been using hybrid power for decades. Yet in 2013, Lexus Executive Vice President, Mark Templin said,
‘Lithium ion doesn’t bring enough positive return. You have to leapfrog the current technology to get to the next generation of battery technology.’
Lexus isn’t the only car maker to be a bit coy on the use of li-on. Of course parent company Toyota hasn’t been into Li-on. They do now offer it in the new Prius. But only because it’s 16kg lighter than the nickel-metal hydride alternative.
Toyota is investing heavily in hydrogen fuel cell technology. So they’re maybe a little biased.
But bias is commonplace in the car industry. Just ask Tesla.
This week Tesla co-founder, Marc Tarpenning said hydrogen fuel cell technology was a ‘scam’. Elon Musk said hydrogen was ‘mind-boggling stupid’.
But running a solely Li-on car company, I guess you wouldn’t be pro-hydrogen, would you?
I think it’s best to get the view of a company that isn’t so biased. One that uses multiple power technologies.
In February this year General Motors made a name change. ‘GM Powertrain’ was to be ‘GM Global Propulsion Systems’. The change is significant. Significant as GM’s has huge global market share.
In 2015 GM sold 9.958 million vehicles. That represents around 11.2% of the market.
Compare that to Tesla.
In 2015 Tesla sold 50,580 cars. That’s about 0.05% market share.
GM made a US$9.6 billion profit last year. Tesla made a US$888 million loss.
GM carries a US$47 billion market cap. Tesla’s is US$31.2 billion.
This year Tesla might sell 80,000 or more. In 2017 maybe the same. And if the Model 3 comes to market in 2017/18, they might even ramp up to 500,000. That would be impressive. But it’s still 9,458,000 less than what GM already does.
The best bet is to hedge your bets
So what’s GM’s take on the shift to Li-on? Let’s just say GM’s taking a broader approach.
Mark Reuss is the EVP of Global Product Development at GM. Speaking about the name change he said,
‘Global Propulsion Systems better conveys what we are developing and offering to our customers: an incredibly broad, diverse lineup – ranging from high-tech 3-cylinder gasoline engines to fuel cells, V8 diesel engines to battery electric systems, and 6-, 7-, 8-, 9- and 10-speed to continuously variable transmissions.’
The GM media release also said they have 8,600 people that, ‘design, develop and engineer all propulsion related products and controls for GM worldwide.’ Also, ‘GM Global Propulsion Systems is also known for its experience with hydrogen fuel cells.’
Oh and by the way, GM is the first car company to offer a low cost (sub-$30,000) EV to market with a range greater than 200 miles (321km). GM doesn’t get the headlines of Tesla. But I’m confident they know their stuff. Perhaps even more than Tesla.
And their view is a world of multiple power sources for their cars. This is a clear signal that the power options in all our futures will be varied. It’s certainly not going to be an oil dominated world. It certainly not going to be a lithium-ion dominated world.
It’s a world of hydrogen, lithium, aluminium, wind, solar, wave, even some oil still. The power revolution isn’t about one dominant source of energy. It’s a dozen different ones. They’re all viable. They will soon all be economical. And they will all power the world.
The new world power is varied. It’s changing global politics. Changing global markets. And for the smart money, it’s changing the wealth of investors.
But just like smart money, don’t bet the house on just one. Diversify. Be smart. Wake up to the fact that there is no one single answer.