Ed Butowsky, managing partner of Chapwood Investment Management, joins Fox News to discuss consumers options of hybrid vs. electric cars.
Recently, General Electric has recently sparked the market by announcing that it is buying 25,000 electric cars. This recent order includes 12k Chevy Volts. But how are investors to react to such bold news?
Ed Butowsky believes that the market is ready for these types of automobiles. While General Electric is buying electric cars, Ed feels that the market is more favorable to true hybrid cars. Electric cars are not yet as mainstream as hybrid because of the cost of manufacturing and their current efficiency levels are not comparable.
How does an investor react to such news as it pertains to the auto market? Ed explains that from a long term perspective hybrid and electric cars are going to become more and more mainstream. Furthermore, what will drive the rate at which this occurs is the rising cost of oil. In todays manufacturing it costs on average about $4k more to convert a car to a hybrid model. With oil prices where they are, the true break even point for the hybrid market is about 4-5 years (based on 25% – 30% fuel efficiencies in hybrids today). As Ed points out, if oil prices continue to rise at current rates or faster the demand for electric and hybrid models will grow significantly.
With this technology readily available from most car manufacturers, is it foreshadowing of other companies to make similar investments as GE has made? Ed explains that investments like this are more a dollar and sense move more than anything else. This technology has become more mainstream then it was when the Chevy Volt was introduced at the Detroit Auto Show in 2007. Since then advances in fuel efficiencies, safety, pricing reduction have allowed these cars to bubble up to the surface and demand has grown since.
While everyone in their core may want to be eco-friendly the cost of doing so may deter them from paying the extra money right now to drive a hybrid or electric car. But as Ed points out, as oil prices continue to rise those same people will certainly look at the long term affect to their pocket books and how much they could be saving vs the cost of going hybrid. Ultimately the car manufacturers need to be communicating and educating the public better as to the benefits of hybrid and electric cars. As the message becomes clearer to consumers they will make a more informed decision which will certainly help sell more hybrid or electric cars.
Interesting Economic Car Facts:
- Chevy Volt unveiled at 2007 Detroit Auto Show
- Chevy Volt is electric-powered with gas engine assist
- GM received at $49.5 Billion bailout from US government
- US government holds a 61% common equity stack in GM
- In October, GM sold 183k+ automobiles in the US, thats up 3.5% year over year