The Cutting Edge

Fisker-Karma EV

The hot new ticket for the investment community is electric vehicles, from mass-market hybrids like the Toyota Prius to plug-ins hybrids (PHEVs) like the Volt to pure electric vehicles (EVs) like the Tesla Roadsters.

In 2007, about 500,000 HEVs were sold worldwide. PHEVs entry into the market in 2010 is projected to increase the total light electric vehicle to three million units by 2012. That means there is green to made in the green car field. Whenever investments are tallied, Middle East money flows. The same has now occurred for electric vehicle market.

Recently, an affiliate of the Qatar Investment Authority (QIA), a state-owned and funded sovereign wealth fund, led a $65 million financing round for Fisker Automotive Inc., a producer of plug-in electric hybrids. QIA, the $60-billion investment arm of the Qatari government, previously concentrated in real estate holdings but is now wielding some of its wealth in EVs. Ironically, Qatari wealth comes from petroleum, the very commodity EVs are designed to circumvent. Fisker appears to be QIA’s first investment in automobiles.

A prototype of Fisker’s sleek $80,000 plug-in, was introduced at the Detroit’s January Auto Show. But no reference to its new Mideast source was made in the generic press release announcing the new funding. "This shows once again that Fisker Automotive has a solid business plan and a globally experienced automotive team with very strong investors behind the company,” said a generic announcement press release from Fisker. With oil wealth in hand, the company was confident enough to announce that sales will begin in the fourth quarter of 2009 which could make it the first leading company to market a plug-in—a full year ahead of the GM Volt.

QIA is hardly the only petrodollar in the field. Al Yousuf, LLC., a Middle East investment house and trading group based in Dubai, has since last March financed two alternative vehicles companies, the Ontario-based Phoenix Motorcars and Zap Inc., an electric car company, in Santa Barbara, CA. Yousuf, in anticipation of the key role Lithium batteries will play in the electric car industry, also invested in the Nevada-based lithium ion battery maker Altair Nanotechnologies Inc. Altair had a contract to supply 47 battery packs to Phoenix Motorcars for demo vehicles. In May, following its $5.5 million investment in Zap, Al Yousuf’s was named chairman of the electric car company. He had also become a member of the board of directors of Phoenix Motorcars in March.

Indeed, batteries have become a key pivot point in the EV investment market. In 2007, HEVs were sold along with $484 million worth of batteries. Nickel metal hydride (NiMH) batteries enjoyed a 99 percent market share of EV batteries. Plug-in hybrid electric PHEVs and pure EVs will join the growing electric vehicle market in 2010. According to projections by Lux Research's Alternative Power and Energy Storage Intelligence Service, the entire EV battery market will reach $3.8 billion by 2012. Li-ion will account for 46 percent of all EV batteries, Luz predicted.

But Ying Wu, senior analyst for Lux sees risk in battery investment. Li-ion batteries for electric vehicles won't hit the market in a big way for three more years, said Wu, adding that the need to hold out until the market reaches its potential means “many companies will come to grief.”

Jesse Cogan is a New York based writer.