by Peak Energy Strategist Research Team
The Chevrolet Volt with its lithium ion battery pack seemed like such a great idea before it officially hit the U.S. market late last year.
Back then, before anybody could prove otherwise, Chevrolet claimed its newest creation was a new breed of transportation altogether…
It wasn’t a hybrid or a plug-in hybrid, the company said. It was an “extended-range electric vehicle,” which sounds so much cooler.
The most fuel-efficient compact car sold in the United States according to the Environmental Protection Agency (EPA), it boasted the ability to travel 25 to 50 miles on nothing but pure, battery-generated power. Market analysts went nuts ranting and raving about the genius of General Motors (NYSE: GM) for dreaming it up.
With that kind of hype surrounding it, the Volt seemed to have it all, from its eco-friendly engine to its sleek and sassy chassy. People could not only save the planet from the ravages of carbon emissions but they could do it in style.
Or so the automotive media claimed. Cross their hearts and hope to die.
But real life is very rarely as great as the stuff dreams are made of, unfortunately. And in the Chevrolet Volt’s case, the reality was and still is far, far from everybody’s conjured fantasy.
As a whole, consumers seemed to recognize that right from the get-go. Despite the Obama administration offering significant stimulus to anybody who would buy up the car, sales lagged significantly behind the hype.
General Motors enthusiastically promoted its 2011 sales target of 10,000 plug-in hybrid Chevy Volt sedans, but by September, only 3,895 were claimed. Even in an amazing economy and with no negative news surrounding the product, the company had little chance of selling an additional 6,000 units in the final quarter.
Then the Chevrolet Volt firestorm erupted, a PR department’s worst nightmare. One of the car’s test crash cases resulted in its battery pack erupting into flame. When the story eventually made it to the media, they added fuel to the situation by quite possibly making a mountain out of a molehill.
The result was that, for several weeks, the “Chevy Volt fires” were featured prominently on most business news sites.
Naturally, after that, hopes fell even further that the General Motors vehicle could stage any kind of a comeback at all. And while the car somehow pulled through December with a solid 1,500 sales – its best month since late 2010, when it first hit dealership showrooms – altogether, Chevrolet only managed to peddle 7,671 of the vehicles for the year… over 2,000 short of its goal.
Worse yet, General Motors had to announce in early March that it was temporarily suspending production of the Volt entirely.
“Even with sales up in February over January, we are still seeking to align our production with demand,” GM spokesman Chris Lee informed the public along with the announcement.
Translation: They’ll be temporarily laying off 1,300 employees until April 23, when they plan to restart manufacturing the car again.
Despite the positive spin any PR specialist worth his salt is supposed to deliver, the truth is that January and February sales were decisively miserable. With a 2012 target of 45,000 sales, it only managed to offload 1,626 for the first two months of the year.
That’s less than a quarter of what it needed to achieve over the eight week period.
The Chevy Volt Isn’t Alone
As bad green investments go, the Chevrolet Volt is hardly alone. According to the pro-Nissan Leaf publication, Consumer News, that electric vehicle “came at a price” too, even though it didn’t guzzle gas.
Last year, staff writer Liza Barth reported that the “Leaf has some flaws, including limited range and long charging times and the high-pitched noise at highway speeds that irritated some testers.” And that’s not to mention her seemingly constant anxiety that it would leave her stranded on the highway during her daily commutes.
Even more damning, the general tone of the article came across as desperate to find some good – any good! – in the Leaf. Yet Barth’s numerous concerns easily trumped her positive expectations and intentions throughout her commentary.
With that kind of review, it’s no wonder consumers aren’t necessarily clamoring for the alternative energy vehicles. Of course, the severe lack of charging stations across the country – or the world – doesn’t help either.
Then there are such high profile, green energy failures as Solyndra, Beacon Power Corp., Evergreen Solar Inc., SpectraWatt and Mountain Plaza Inc. Like Chevrolet and Nissan, all five received financial support in the form of tax-breaks and federal loans from the U.S. government.
Yet they still failed dramatically.
Even investors who spread their money across the sector through ETFs find that “many are struggling to gain AUM (Assets under Management) and performance success. On top of that, some may not succeed as new technologies come and go,” as The Street’s Dave Fry noted late last year.
The Reality of Many Green Investments
Despite all of that, a general internet search for green investments will yield nothing but articles touting amazing opportunities to make money in eco-friendly businesses. Try doing a search for green investments that have gone south and, more than likely, you’ll get more of the same: reports that make the green industry sparkle like gold.
But in too many cases, it all turns out to be of the fool’s variety, costing investors their hard-earned money. And there’s a reason why.
Back in August, the New York Times quoted two different businessmen who shed very interesting light on the situation.
Sheeraz Haji, CEO of the Cleantech Group, a market research firm, explained consumers’ attitude toward green energy this way: “Companies and public policy officials really overestimated how much consumers care about energy efficiency. People care about their wallet and the comfort of their home…”
And Fred Lucero, project manager at Richmond BUILD, an institution that teaches green skills along with other more traditional programs, agrees that, “The demand’s just not there to take this to scale.”
For proof of that, take Coca-Cola’s marketing gaffe late last year. The company, which is widely known for its exceptional marketing skills, debuted its holiday line of Coke cans as it does every year. Only this time around, it directly aimed its efforts on the emotional message of saving polar bears and fighting global warming.
Unlike the polar bears though, the public didn’t bite. In fact, they did quite the opposite, throwing an overall hissy fit over the similarities between the holiday design and the strikingly similar diet coke cans.
Within weeks, Coca-Cola had to rethink – and ultimately recall – the plan, since consumers proved they hated the inconvenience of trying to decipher between two kinds of soda more than they loved battling the perceived perils of the planet.
That’s not to insult consumers either. It’s simply to lay out the facts.
Customers want the best product for the best value for what they see as the best reasons. And until they get just that from green companies, investors should use extra caution when choosing which of those stocks to buy into.
However, that doesn’t mean that all green or energy-based investments are foolhardy. It just means that it’s a tricky field to navigate on your own…
Ford Puts Its Fusion to the Test against Chevrolet’s Volt and Nissan’s Leaf
Ford Motor Company (NYSE: F) thinks it can do what its competitors just haven’t been able to yet, try as they desperately have. It’s taking a drive into the world of environmentally-conscious consumers with its newest model of the Ford Fusion.
None of the negative data from its competitors seems to disturb Ford Motor Company in this pursuit. Chief Executive Officer Alan Mulally and his team of automotive experts are busy even now working on their newest version of the ever-popular Ford Fusion for 2013.
It’s an EV… and they’re all but daring consumers not to love it.
Ford might seem late to the game when it comes to electric vehicles, considering all of the hype surrounding them for the past few years. But like the tortoise racing the hare, that perceived slowness might turn out to be their saving grace.
More often than not, when it comes to big purchases, consumers need some time to wrap their head around the idea of trying out something new. They need to be wooed into the purchase gently, convinced that their money is well spent on such a giant leap of faith.
That’s oftentimes partially because bigger purchases such as cars are usually more necessity than luxury, which means that they need to be practical. And let’s face it: right now electric cars are not all that practical. For one thing, there’s an appalling lack of plug-in stations on the road these days and, without those pit stops, EVs have a disturbingly limited battery life.
But the technology seems to keep improving as time goes on, as technology often does. And so, by holding out until 2013 while its competitors went all in last year, Ford might have saved itself a lot of grief.
It can use the time to fine-tune its craft, while simultaneously learning from Chevrolet and Nissan’s mistakes. So its finished product will probably be stronger, more practical and more attractive to consumers.
It will be interesting to see if Ford will end up showing its competitors how real business is done. Only time will tell, of course, but compared to the Chevrolet Volt and the Nissan Leaf, it doesn’t have much competition yet.
Taking Green into the Black
Various sectors of the green tech industry might very well be the norm a decade or two down the road.
From the beginning of the 20th century through the end and into the 21st, life as we know it has changed drastically. For example, over the space of a mere 30 years, people went from listening to their music on a mix of tapes and records, to just tapes to CDs to MP3 players.
CDs, the must-have item that all the cool kids were carrying back in 2000 are all but obsolete a decade later, as people get their music off of websites from online stores such as Apple’s iTunes or from specialized sites like Pandora or Grooveshark.
And there’s really no telling where we’ll go next, with new breakthroughs and inventions being made every single day.
So just because some forms of green technology haven’t take off just yet doesn’t mean that they won’t tomorrow or next year or in a few more. Because they might very well.
It’s simply that, as with most start-ups, it’s usually better to proceed with caution, following some basic rules to avoid unsightly losses:
It’s definitely possible to make money off of eco-friendly technology in the stock market. It just requires an extra bit of savvy to do so.