We're near the tipping point for electric cars

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.

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. 

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.