Editor's letter

We're near the tipping point for electric cars

Demand for electric cars is soaring soared. And while the switchover will be expensive, we could be near a tipping point.

Look mum, no hands – autonomous cars are coming

January’s statistics on new car sales for the UK were pretty dire. New registrations fell by more than 7% on last year. There are lots of reasons for that – shifting rules on emissions, plus fewer people falling out of financing deals (and thus upgrading to new models), saw diesel sales fall by more than a third, while petrol car sales fell by near-10%. But there was one bright spot. Demand for partly or entirely electric vehicles soared. The number of new battery-powered electric vehicles hitting the roads trebled (from a low base), while sales of various hybrid types were up sharply too. 

Over in the US, shares in Tesla – king of the electric-car makers (for now) – went on an extraordinary run. The share price has doubled since the turn of the year. I can’t pretend to understand it and it’s clear the stock is in some sort of mania phase. But I won’t complain – it’s a big holding in one of our favourite investment trusts, Scottish Mortgage.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Oh, and there was a headline-grabbing story earlier in the week when the Financial Times reported that Japanese carmaker Nissan may “double down” on production at its Sunderland plant should we end up with a “no-deal” Brexit and tariffs by the end of the year. One contingency Nissan is apparently examining (though the car group denied the story) is to close its continental European plants and focus on grabbing UK market share. Nissan also makes Britain’s most popular electric car, the Leaf. A modified Leaf, we learn, has just completed the largest autonomous driving experiment seen on UK roads – the car drove itself 230 miles around British roads without a single accident.

Why am I telling you all this? Well, all of these stories land in a week that has seen Britain’s politicians bring forward a ban on all new cars with any form of internal combustion engine – including hybrids (those which have a battery and a petrol or diesel engine) – by 2035. Call me cynical, but that might be the sort of thing to make a big, politically crucial employer – one with a lead in electric-car development in the UK market, say – think twice about upping sticks, even if Brexit doesn’t go exactly the way it hopes. 

Advertisement
Advertisement - Article continues below

True, it’s easy to put two and two together and come up with five. But whatever the specifics of the Nissan story, it’s clear that a mix of factors – from political expediency to technology to genuine demand from consumers – is creating a tipping point for electric vehicles (hopefully ones that will eventually drive themselves).

It’ll be expensive, of course. Philip Johnston in The Daily Telegraph points out that a full switchover would mean a £28bn-sized hole in the budget every year simply through the loss of fuel duty. And that’s before you get to the investment in infrastructure required. But then again, we live in an era where government spending doesn’t matter. Perhaps this is how the UK embraces Modern Monetary Theory (MMT) – the notion that a government can spend what it likes until inflation takes off. 

What does this mean for investors? When it comes to bubbles, I prefer to invest in “anti-bubbles” – the assets that get neglected along the way, perhaps like oil major BP. But as a hedge against my own bearishness and a bet on the tech, I’ll also suggest our readers stick with their Scottish Mortgage holding.

Advertisement

Recommended

Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/economy/uk-economy/601079/how-the-coronavirus-pandemic-is-killing-cash
UK Economy

How the coronavirus pandemic is killing cash

Covid-19 is making a huge difference to the way we live, work and do business. One of its less obvious effects, says Merryn Somerset Webb, is to accel…
31 Mar 2020
Visit/investments/investment-strategy/601075/the-moneyweek-podcast-your-questions-answered
Investment strategy

The MoneyWeek Podcast - Your questions answered

Merryn and John tackle some of the questions sent in by readers - including what they expect to happen to house prices; how much are dividends likely …
30 Mar 2020

Most Popular

Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/economy/small-business/601073/furlough-what-does-it-mean-and-how-does-it-affect-me
Small business

Furlough: what does it mean and how does it affect me?

Many companies have “furloughed” employees after they have shut down because of the coronavirus. But what does furlough mean and how does the scheme w…
30 Mar 2020
Visit/investments/stockmarkets/601068/buy-stocks-for-the-long-term-but-buy-very-carefully
Stockmarkets

Buy stocks for the long term, but buy very carefully

After the wild ride of the last couple of weeks, equities are no longer expensive. But if you do decide to buy, be very, very careful indeed, says Mer…
30 Mar 2020