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/economy/people/600864/rishi-sunak-the-maharaja-of-the-yorkshire-dales
People

Rishi Sunak: the maharaja of the Yorkshire Dales

Rishi Sunak is taking the reins of the world’s fifth-largest economy at a crucial juncture. The unflashy but likeable youngster may be just the man fo…
20 Feb 2020
Visit/economy/uk-economy/600857/what-is-britains-new-economic-policy
UK Economy

What is Britain’s new economic policy?

At the moment, Britain doesn’t seem to have an economic policy. But radical-seeming announcements and the surprise ousting of the chancellor portend m…
20 Feb 2020
Visit/economy/uk-economy/600862/britains-economy-might-spring-a-surprise-on-the-doomsayers-this-year
UK Economy

Britain’s economy might spring a surprise on the doomsayers this year

The UK economy is looking pretty good – we’re more at risk of a boom than a bust, says John Stepek. Here’s why, and what it means for your portfolio.
20 Feb 2020

Most Popular

Visit/investments/property/house-prices/600840/the-biggest-risk-facing-the-uk-housing-market-right-now
House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020
Visit/currencies/600842/eur-usd-euro-slide-against-us-dollar
Currencies

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
Visit/economy/uk-economy/600862/britains-economy-might-spring-a-surprise-on-the-doomsayers-this-year
UK Economy

Britain’s economy might spring a surprise on the doomsayers this year

The UK economy is looking pretty good – we’re more at risk of a boom than a bust, says John Stepek. Here’s why, and what it means for your portfolio.
20 Feb 2020
Visit/517625/tr-european-growth-trust-why-investors-shouldnt-overlook-europe
Sponsored

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019