Perceptions on : Higher U.S. Auto Sales , Investors and Smooth earnings.

A recent article that called my attention have taken my perception of the steps predicted on one of Michael Melvin papers when evaluating currency investment, for which benchmarks lay on Momentum, PPP and Carry, but I'm not sure that avid investors follow this principles in order to minimize investment draw downs. I opt to think that most likely the common initial move is very similar to average investors: splitting rationale into "which industry" to invest in and then "which company".

Both decisions would be defined by different perceptions. Market/industry dynamics, Biz cycles and Average ROI would have to present a "Smooth Earnings" outlook to tempt the investor to tag along the wagon. When the issue is which company to Run-On with, there is several variables and individual characteristics that will come to effect to define either which procedure to use when selecting. but either ways cash flows, growth earnings, short and long term staged predictions, etc.

This analysis when short-viewed within auto industry, specifically U.S. sales market latest report for February, leaves an interesting space for forecasts and mixed decisions for some investors and industry players when predicting where to focus and establish growth strategies.

Table sorted by year-to-date sales

_________________________Feb.________Feb.____percent
_________________________2011________2010____change
General Motors Co.††_______207,028________141,535_46%
Ford Motor Co.†___________156,232________142,006_10%
Toyota Motor Sales_________141,846________100,027_42%
American Honda Motor Co.____98,059_________80,671_22%
Chrysler Group______________95,102_________84,449_13%
Nissan North America_________92,370_________70,189_32%
Hyundai-Kia________________76,339_________58,056_32%
VW Group Of America________29,315_________24,427_20%
Subaru___________________21,683_________18,098_20%
BMW Group_______________19,963_________18,013_11%
Daimler AG________________16,665_________15,834_5%
Mazda___________________19,387_________17,054_14%
Mitsubishi__________________6,893__________4,019_72%
Volvo Cars N.A.______________4,795__________ - ___ -
Jaguar Land Rover N.A._________3,247__________2,793_16%
Porsche____________________2,019__________1,531_32%
Suzuki_____________________1,643__________1,375_20%
Saab Cars N.A.________________546__________ - ___ -
Maserati_____________________159____________104_53%
Other_______________________244____________241__1%
U.S. LIGHT VEHICLE TOTAL___993,535_____780,422_27%

From: http://www.autonews.com/apps/pbcs.dll/article?AID=/20110301/RETAIL01/110309973/1448

Revealing some expected and unexpected share market winners such as Nissan (up 70 percent), GM (64 percent), and Ford (58 percent). After that it's Hyundai-Kia (up 45 percent), Honda (37 percent), Toyota (29 percent) and Chrysler (13 percent), compared with sales market share of previous years.

More details: http://www.autonews.com/apps/pbcs.dll/article?AID=/20110301/RETAIL01/110309973/1448#ixzz1FQO6f000

Smart meter, utility bills and other energy related issues...

Smart Meters are a convenient way to monitor utility bills, allowing consumers to observe and calculate consumption rates and use objective methods to cut household utility costs.

They come equipped with a radio to send data from a meter to a utility on regular intervals; it can act as part of a mesh network, sending collected data from a neighborhood to a central point, by transmitting quick bursts several times an hour averaging about a minute and a half transmission per hour, providing quick outages information and gauging demand occurrence.

In some western countries the public blame the smart meter for higher bills because of the performance fact, the dispositive stays full-time plugged, but the culprit is actually the rate strategy currently in place based on tiers.

Tiered rates are like the alternative minimum tax—it. There are unintended risks linking smart meters with the issues of rate design and other utilities. In short breaking down the tier rates concept, for example under the US current rates design is, "the more energy you use the higher the unit cost for that energy", and rates range from 12 cents to 50 cents per kWh. Baseline Rates start at 12 cents per kWh but the baseline quantities are set based on the average use for residential customers in an area, they can vary by geographic location, or baseline territory, also vary between summer or winter and based on home's heating sources.

The PG&E website is a useful source of rate information and the tiered rate design structure to understand electricity bill charges in the U.S.; but North American general consumers still feel the burden, even knowing that smart meters do not cause higher utility bills, but acknowledging that they are part of the "last mile", thanks to the current tier rates system.

Smart meters are being considered for large scale installation in most developed countries, as a tool to implement a more energy consumption efficiency and market discipline of utility rates. As an example from the DistribuTech Utility conference in San Diego is expected several announcements for packages of home energy management systems which will include network thermostat, energy displays, and Internet gateways for brokering communications between consumers and utilities, this items can provide information such as during critical peak period, where utilities are struggling to meet energy demand, consumers can get alert that the price for electricity has gone up, allowing them to log into a automated system using a web application and adjust thermostat's and/or turn of some items remotely.

Other contributions have been acknowledged such as the licensing of the Pacific Northwest National Laboratory Smart Charger Controller by Zap Electric Vehicle, which targets directly the 2nd biggest driver of Greenhouse gas emissions, product first launched for the American market demand where cars CO2 emissions are higher than Europe's, Japan's,China's and India combined.

The smart charger enables car owners to tap into lower electricity rates and help utilities minimize strain on the grid. It connects to a smart grid through wireless technology, in which other automakers and startups are readying and shaping up their technology. (www.gigaom.com/cleantech/13-3l3ctric-car-smart-charging-players-to-watch/) The platform can be installed in a smart power cord, in a charging station or in a vehicle.(gigaom.com/cleantech/zap-licenses-national-labs-smart-charger/)

For generations power plants construction costs have defined utility rates, the combination of inflation and nuclear power plant construction cost escalation changed the game driving up average costs and thus rates. Leaving coal plants as the cheapest, but the levels of carbon dioxide emission are higher than alternatives, as a result now China builds them at a rate of 2 coal plants per week, U.S. consumes 1 billion tons of coal each year, and coal represents the 52% of all U.S. energy.

Concern about global warming heightened in the last decades, utilities are faced with changes in power plant technology, equipment and emissions limits; fact that have produced policy bias against coal, but despite this still not much support for new clear nuclear power plants have been achieved to cover baseload needs. Concerns about renewable energy reliability to meet grid needs given its intermittence and the limited availability in many cases due to lack of transmissions to bring the wind and solar energy to load centers.

China, recognized as one of the top pollutant through carbon dioxide emissions from coal plants, is now investing on "clean coal", going on a buying and production spree of the latest innovative procedures for carbon capture and storage. Fact mentioned on the article" The Dragon in search for Clean Energy". While as a practical drive the U.S. is becoming more dependent on natural gas to meet it's needs as the default fuel.(www.eia.doe.gov/fuelelectric.html)

From: UNIDO week at Expo 2010 focuses on turning urban life green

“Green Industry for a better life” is the theme of the display of the United Nations Industrial Development Organization (UNIDO) at the Expo 2010 that opened in Shanghai today.

Set up as part of the Expo’s UN Pavilion, UNIDO showcases the organization’s Greening Industry concept.

During the next week, UNIDO will organize events to discuss the best approaches towards a more prosperous, harmonious and environmental-friendly urban future, investment promotion, technology transfer, as well as strengthening worldwide cooperation and partnerships.

“Shanghai has made outstanding achievements in the last years in developing high-tech applications in industries, especially in reforming traditional industries and adjusting industrial structure through high and new technologies. Shanghai’s successful practice in transforming from the traditional economy to the innovative economy has set a good model for cities in developing countries,” said UNIDO Director-General, Kandeh K. Yumkella.

He added that in the last decades, rapid urbanization has been witnessed all over the world but developing countries face many problems, including urban poverty, unemployment and social inequity, as well as pollution part of which originates from emissions from transportation and industrial production activities.

During a side event today, UNIDO also signed an agreement on a joint project with the Shanghai Municipal Economic and Information Commission, the Government of the city’s Yangpu District, and the China International Centre for Economic and Technical Exchanges (CICETE).

The agreement signalled the establishment of the Shanghai International High-Tech Innovation Development Base which will promote high-tech applications for industries, mobilize the support of international organizations, enterprises, and funding from financial organizations. The Base will also cooperate with universities, research institutes and enterprises, work on research and development, and support knowledge and management centres.

Shanghai’s Yangpu District has been successful in adjusting the industry structure and improving economic and social development. It promotes the innovation capacity and competitiveness of the city, and has formed a knowledge innovation zone with unique features. CICETE is dedicated to the bilateral economic and technical exchanges and international cooperation. It has implemented projects with UN specialized agencies and has promoted the harmonious development of economy and society, contributing to the realization of the Millennium Development Goals.

See: http://www.unido.org/index.php?id=7881&tx_ttnews[tt_news]=476&cHash=f9eaa29cd8ee85397c8e894ab21bbfaa

New Rabbit Year full of pleasent surprises.

While ZAP and Jonway define mutual advantages on the announced JV early 2010, further steps have been ongoing to convert it into an acquisition. The opportunities for the management team to work smarter just to assure a successful acquisition are wide.

Both companies proving to be able to build a solid ground to tackle the electric fleets market, while adding complementary product lines with innovative technical skills for new customers, leveraging existing infrastructure.

A blog published on "http://www.ontoplist.com", titled "Serious EV competitor is on the rise", presents a very interesting flash-forward on how this current stage of the acquisition is a pivotal point for any and every EV industry supporter.

I guess the New Rabbit Year will bring very interesting results.

California: EV Designer for the World.

Global Dealings: How to Make M&A Work in Emerging Markets? Ten Prov...

Global Dealings: How to Make M&A Work in Emerging Markets? Ten Prov...: "Global companies seeking a foothold in fast-growing countries such as Turkey, China, Russia and Brazil have pushed deal-making in emergi..."

Growth perception of the EV industry: ZAP

This article on the Wall Street Jornal always puffs my expectation. It enfises on how low-speed electric vehicles frenzy is catching on (http://online.wsj.com/article/SB121746229279198963.html?mod=googlenews_wsj), and how orders at ZAP, the California maker of small electric cars, have exploded to about 50 a day.

The cars aren't for long-distance travel. The Xebra on the picture from 2008 could average about 25 miles on one charge, which is technically a motorcycle and goes up to 40 mph. But by now there is an extended list of vehicles from this same company that double and triples the range with most of their new products such as ZAPTruckZAPVAN, both with a predicted range of 40miles per charge and much more room and utility.  and

The other innovative update making the headlines is the sports vehicle defined as Alias, which comes in a new 3-wheeled style already impressing the elites on advanced automotive vehicle elite circles thanks to the amazing performance at the Progressive Insurance Automotive X PRIZE, where it scored 121.8MPGe, details are all around the X Prize on this roadster capabilities.

The victorious partnership with Jonway Automobile is already forecast for a solid groundbreaking platform with the Powertrain conversions of the first and second generations of the A380, added to their portfolio as an 100% electricSUV, which opens a interesting new window to cover consumers preferences.

Pike Research seems to predict a demand for Plug-in hybrid electric vehicles, forecasting that by 2015, a total of 1.7 million PHEVs will be on the road worldwide. The United States leading the pack, followed closely by China.

That is why ZAP's signed agreement with Shanghai Government for the Green City Project will bring a solid platform to provide not only the EV charging infrastructure, battery swap-out stations and maintenance support centers but also the culture and usage of electric vehicles for its public transportation in Yanpu, home to 1.24 million of people.

Interview to Steve Schneider CEO of ZAP Jonway by Verdexchange.com

from: http://www.verdexchange.org/node/277

VerdeX: ZAP has received some very significant news from the Chinese Government: an approval that could position your company as a pacific rim leader in the Electric Vehicle marketplace. 

Schneider: Today was a very significant day for ZAP. It’s something we have been working on for a long time. It was something that all the experts—political, media, and otherwise—said couldn’t be done, which is an American company having a controlling interest in a Chinese automobile manufacturing company. As of today, the Chinese government has approved the merger between ZAP and Jonway. It is really an acquisition. Today we officially own 51 percent of Jonway Automobile. We are following that up with another 49 percent acquisition. We are doing it in two stages because of the way we are paying for it. The significance wasn’t the payment, the significance was getting the Chinese government to approve the controlling interest, and we did it in what is a first in China.

VerdeX: How did ZAP actually win China’s approval to acquire control of Jonway? What about your merger was compelling?

Schneider: We believe this went forward because the Chinese government has mandated the reduction in carbon emissions by 40 percent by the year 2020, which is an extremely aggressive challenge, especially for an economy that is growing ten percent annually—the fastest growing economy in the world. Trying to reach that challenge was one of the main reasons why there was flexibility in this particular arrangement, where there otherwise would not have been. At the Beijing Auto Show, 106 electric vehicles were introduced. When I met with the global automotive forum, the Chinese Chamber of International Trade, and all the government officials, they stated that out of all those 106 manufacturers, only a handful would be in production to help meet this mandate. The Chinese government is aware that China still needs Western influence to bring a mature technology to market in China. ZAP has been working on electric vehicles longer than any company in history. ZAP has also owned the most famous brand in history, which is called the Detroit Electric, since the turn of the century. We have a 1906 Detroit Electric sitting in our show room. It is a wonderful piece of history, a wonderful story, and a wonderful car. ZAP has taken over where Detroit Electric left off.

We have been and still are the oldest manufacturer of electric. We have made a lot of mistakes along the way. My life story is very similar to the movie Tucker, and we have had everyone taking shots at us. A lot of powerful interests wanted to see us fail. That was one of the reasons we decided to pull out of the U.S., because the politics was completely different. There isn’t any politics in China—it is just: “Let’s get it done.” The mandates were such, and the red tape was such, to get it done.

ZAP Jonway CEO Steve Schneider

 

VerdeX: What is ZAP’s niche target market in China and the United States?

Schneider: The largest car market is the passenger car market. Every manufacturer that I am aware of builds mostly passenger vehicles. ZAP’s niche market is corporate, fleet, and government accounts. We are the only manufacturer producing a full size electric pick up, a full size electric SUV, which is what Jonway manufactures, and a full size electric van. We have several other utility vehicles as well. No one else is doing those three core vehicles at the moment. Although they are a smaller part of the market, it’s the market that is more mature for the technology available today.

Currently there is no practical infrastructure, and the consumer, it doesn’t matter where in the world, will have the same issues, which is known as range anxiety. The average consumer may drive 25 miles a day in their average driving practice, but every so often they might want to drive 100 or 200 miles. In that case, they cannot make today’s electric vehicle their primary vehicle. However in corporate fleets and government accounts, there is a pre-determined amount of mileage. We build vehicles to the spec of the agency that we are selling to. In the city of Hangzhou, for instance, the average taxi goes 200 km. We build the vehicle to spec, it gets back the station, they charge up, and they know what their route is going to be. It is very predictable, and there is no range anxiety. Today’s technology is extremely mature for that type of application.

We recently won a postal contract award; that is another application that is very predictable. Taxis and postal vans sit at an idle, producing terrible emissions, all day long. That is an ideal application for electric vehicles. As you sit, you aren’t using any power. Even though you might work all day long, you only go 25 or 30 miles. The U.S. Postal service has 156,000 of these long-life postal vans. They told us they want to convert 105,000 to electric.

We are one of five companies awarded the contract. We use Remy’s motor.

REMY's eGearDrive Motor at the ZAP Jonway stand during 2010 WEVS 25 in Shenzhen - China

The CEO of Remy and the engineers at Remy were very helpful in helping this happen. We worked very well together, bringing American technology. As much as I wanted to pull out of the United States, all of a sudden we are getting DOE funding, we are getting U.S. Postal contracts, we were finalists in the automotive X-Prize, and we are one of the few approved for the TSA list. Economic development agencies in almost every state have contacted us offering all kinds of benefits. As much as I wanted to get rid of all the politics and pull out completely, here I am back to where I started. Now I am doing two weeks a month in the United States and two weeks in China.

VerdeX: ZAP is headquartered in Santa Rosa, California. Elaborate on the origins of your operations in California and what the company’s ambition is in China and the United States.

Schneider: California is where we have our headquarters—in Santa Rosa. We have an 80,000-square-foot facility there. ZAP has been miscategorized as a sales and marketing company. What we really do is R&D, and that takes place up in Santa Rosa. We integrate better than most anyone in the world, and we do it on a very practical level. We build vehicles that are inexpensive, the Volkswagen Bug of electric vehicles—we are the car of the people. There are companies that are building vehicles for the rich and famous—that is not our mantra. We are doing mass numbers and we are building vehicles that common people can drive and use everyday, especially here in China. Ultimately we will bring that philosophy to the United States.

VerdeX: In our meetings today, we also visited Holley, a partner and collaborator with ZAP. Talk about that company and the potential for synergy.

ZAP Jonway CEO Steve Schneider, Holley Group Charger

Schneider: We visited a legal and financial joint venture—we invested together. Holley is the largest holley meter company in the world.

They have some of the most sophisticated technology in smart metering that is available, period. As you saw today, this is a major operation. We are basically a factory direct operation. There are no middlemen here. The nucleus of vehicle charging infrastructure is the smart meter. There is a little more electronics to go with it, but the smart meter is a sophisticated part of the charging station. When you think about how to get a piece of the pie, a charging station isn’t any more than a glorified extension of that. Bringing a power meter, revenue sharing, and getting everyone a part of that revenue, that is where the sophistication comes in. I don’t believe there is anyone in the world that can build a charging station with the technology that Holley has. Because of the lack of middlemen, there is lower cost.

The reason anyone comes to China is to get low cost manufacturing. Even when they do that, there are still several layers. This is factory direct on charging stations and factory direct on automobiles. In both cases there are no middlemen or brokers involved. We build charging stations for each market for the very lowest price and build an automobile also at the same level. We can put out a lot of products for the money. If you look at the cars today, they are very similar to a Toyota Rav4. And if you look at the finish and the creature comforts that most Americans are comfortable with, these vehicles have all of those things in retail for about $15,000. You couldn’t do that in the United States.

The joint venture is working on the technology for the charging station and technology transfer from ZAP U.S. to China, and the integration is taking place. The two technologies are smart meters that are the new charge stations and the powertrain that is the nucleus for all of the vehicles we will build. The powertrain is a fairly consistent thing; it stays the same. We modify the battery pack to meet the needs, whether it is a corporate fleet or government account, of the specs we receive. Some places have hills and we need to build a more powerful motor; some people need more range, so we give them more battery packs. We build them to spec and the engineering takes place here in Hangzhou.

VerdeX: You moved the locus of your efforts to China more than 10 years ago having been frustrated by the California and U.S. EV marketplace. Elaborate on the challenges and opportunities you have found in China.

Schneider: I have been criss-crossing China on the electric vehicle side for ten years. Now, I have a wonderful partner, Dr. Priscilla Lu, who had a lot of fantastic relationships. She is an engineer, and we, needing each other, have combined our resources together.

ZAP Jonway CEO Steve Schneider and Director and Chairwoman of ZAP Dr. Priscilla M. Lu

We absolutely needed each other to make this work. We needed the government relationships; we needed the corporate relationships; we needed the financial relationships; we needed all of it.

It is so complicated to do what we did even without all of the challenges on the U.S. side, with the politics and the hidden agendas. Trying to figure out all of the nuances that a different culture has to offer was very challenging, and not speaking the language was even more challenging. Having a high-level partner involved that ensured my understanding and the understanding between the partners was essential, because communication can be so far off the train, and had been in many of our past deals. In this case, we minimized miscommunication. We maximized political support, and we had an awful lot of good luck with market timing. Currently, the Hangzhou government is offering RMB 123,000 for every vehicle we build in the ramp. That is an unbelievable amount of money. The federal government on the U.S. side doesn’t even come close. RMB 123,000 it makes a very great business space. I don’t see any end in sight, especially with the mandate of 40 percent carbon emission reductions. As you know, China is fairly well funded.

VerdeX: If we are able to talk a year from now about ZAP and the implementation of your business plans, what will the interview focus upon?

Schneider: First of all, it is too idealistic for everyone to jump into the electric vehicle business as a stand-alone business today—maybe ten years from now, but today, to survive as an electric vehicles business and bring enough revenues to pay your overhead is challenging, nearly impossible. The reality is that you have to partner up with something like Jonway.

Jonway comes to us completely debt free and profitable, right out of the gate. As a publicly traded company, we are going to be profitable right away and have tremendous revenues before we start selling one electric vehicle. ZAP is bringing all of the technology; Jonway is bringing the platform. They are an automobile manufacturer; we are a technology integrator. We needed each other, equally.

ZAP Jonway A380 SUV Taxi

Jonway knew that there was no way they were going to be the number one manufacturer in China with the number of car manufacturers already in existence. The only way they could be recognized as world leader was to increase technology. ZAP knew that there was no way we were going to get to the next level unless we had our own platform, which wouldn’t be taken away from us every time we had a level of success. As the new owner of Jonway, we now have a revenue-generating, 500-dealership distribution generating its own revenue, fully self sufficient, before we even have to worry about selling one single electric vehicle.

Now we have the comfort of doing it the right way. We don’t have to worry about rushing, about making agendas that are sometimes misconstrued because of panic about financial capability. We can do everything properly, focus on target markets, focus on politics, focus on incentives, hit only markets that are available right now, and deliver cars right now. We are not talking about two years in the future. We are not talking about a year in the future. We are talking about delivering vehicles tomorrow. That is what we can do with this merger.

VerdeX: Is 2011 likely to be the year alternative fuel vehicles seriously enter the market?

Schneider: Yes it is. Most of the manufacturers are targeting 2012. We at ZAP have a year jump on everyone.

VerdeX: Except you don’t have Jonway in California. What is the reality of ZAP coming back to the U.S. market without Jonway?

Schneider: Jonway is the largest exporter of motorcycles in China. Jonway is the largest importer of motorcycles to the United States. Electric motorcycles and ATVs can now be a very big part of revenue source and our technology development. It is the same technology. Some of the benefit that ZAP has had in its integration capabilities are that we have built tons of electric bikes, scooters, and ATVs. All of those components are the same components that are carried through in an automobile, just scaled up in power and design. If something works in a scooter, we scale it up to the next level and so on.

VerdeX: A year from now, what will be a home run for ZAP?

Schneider: The home run today was completing the merger. Jonway and ZAP are on the cover of Popular Mechanics for the Automotive X-Prize.

ZAP Jonway Alias at the Progressive X Prize Competition 2010

The White House is announcing that winner. There were initially a couple hundred vehicles entered, which is now down to four, and there were four categories. We just recently won the Most Wanted, the Most Practical, the Most Stylish, and we were number two in the Most Innovative.  We will bring that vehicle to market in the first quarter as part of this new merger, and now we have the manufacturing capability to bring it to market. We expect funding from the DOE, and we will start to build U.S. manufacturing. We are able to do that very easily with Jonway because we can start out with knock down kits, building all of our low-cost, expensive parts in China and assembling them in the U.S.

VerdeX: Is there a geographic requirement for the DOE grant?

Schneider: Just the United States. Site location is being jockeyed for right now.

VerdeX: Lastly, will you be at the VERDEXCHANGE Conference in January 2011?

Schneider: I will be sure to be there. There will be some good synergy there.•••