– We live in an age of disruptive technology. The world as we know it is
evolving at such a rapid pace that it’s hard to keep up. As that rate of
change accelerates, jobs will be lost and industries will face the same
fate as buggy makers when Henry Ford rolled out the first Model T. But new
opportunities will also be created, for workers and investors.
Consider the events that have occurred within the past 20 years.
* Robots have taken over from humans in a wide range of industries, from
car manufacturing to mining.
* Shopping malls are disappearing at an increasing rate, the victims of the
growing trend to online shopping.
* Tesla Inc., which manufactures only electric cars, has surpassed General
Motors and Ford in market value.
* Uber is in the process of destroying the traditional taxi industry.
* Cable companies are seeing their once dominant hold on television
transmission dissipate as more people cut the cord and rely on mobile
* Driverless cars are being tested in more cities, with predictions we may
see them available to consumers as early as 2020.
According to a recent report by Reuters, China is targeting that by 2025,
alternative fuels should power at least 20% of the 35 million cars sold
annually in the country. In India, a government think-tank has recommended
that all vehicles in the country be electrified by 2032. (In Ottawa the
federal government has announced the creation of an advisory group to look
into ways to increase the use of zero-emission cars in this country.)
“We will see a clear shift to electric cars. It’s driven by legislation, so
electric cars are coming, it’s not a niche anymore,” Wilco Stark, vice
president for strategy and product planning at German car maker Daimler,
told a Reuters correspondent at the Asia Oil & Gas Conference in Kuala
Lumpur earlier this month.
He predicted electric vehicles would account for 15%-20% of the
company’s sales by 2025 and at least an additional 10% of sales would be
If all this unfolds as predicted, it would have a huge impact on the world
demand for hydrocarbons, specifically gasoline. The world’s big oil
producers profess not to be concerned at this stage – but neither did
encyclopedia salespeople back in the early 1990s when the Internet was in
The oil companies may be whistling past the graveyard. India’s largest
carmaker, Tata Motors, which in the past has focused on diesel engines, has
escalated its commitment to electric and hybrid vehicles. A report on
moneycontrol.com says the company already has orders for 50 electric buses
and 25 hybrids, and this is probably just the tip of the iceberg.
In China, which is the world’s largest car manufacturer, both domestic and
foreign companies are ramping up their electric technology. China is
expected to emerge as the world leader in the switch from the internal
combustion engine as the government seeks ways to reduce the horrendous air
pollution that plagues many of the country’s cities.
Beijing Auto (BAIC) currently offers six all-electric passenger cars,
according to ChinaAutoWeb. They have driving ranges from 140 km to 260 km,
and reach top speeds of from 125 to 160 kilometres per hour. They aren’t
cheap – the least expensive is listed at 206,900 yuan (about $41,400), with
the most expensive going for 346,900 yuan (about $69,380). But the demand
How to position portfolios
Now, what about our reader’s question on how to position your portfolio to
take account of these changes? The answer is to consider allocating a
portion of your assets to companies that are on the leading edge of these
Amazon.com Inc. (NASDAQ: AMZN),
Alphabet Inc. (NASDAQ: GOOGL),
Apple Corp. (NASDAQ: AAPL), and
Tesla Inc. (NASDAQ: TSLA) are already on our Recommended Lists in my Building Wealth website.
Another stock you may wish to add is
Tata Motors Ltd. (NYSE: TTM), which trades on the New York Stock Exchange as an American Depository.
The price has fluctuated wildly over the past three years, touching a high
of over US$50 in early 2015 and then falling all the way to the US$20 range
in the winter of 2016. The recent price is US$29.44.
This is not a great growth story at first glance. Revenues have risen
steadily over the past five years, but the increases have been modest.
Profit actually fell over 20% in the 2016 fiscal year compared with the
2015 results. Return on equity has been steadily declining. The shares paid
a dividend of only US$0.015 in 2016.
So don’t expect an immediate killing on this one. If you buy, adopt a long
time horizon and be patient. If the trends that are developing in India’s
transportation sector take hold and accelerate, Tata will be a winner over
time. But for now, regard it as simply a bet on the future.
Gordon Pape is one of Canada’s best-known personal finance commentators and
investment experts. He is the publisher of
The Internet Wealth Builder and The Income Investornewsletters, which are available through the Building Wealth website.
For more information on subscriptions to Gordon Pape’s newsletters,
check the Building Wealth website.
Follow Gordon Pape on Twitter at
https://twitter.com/GPUpdates and on Facebook at
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© 2017 by The Fund Library. All rights reserved.
The foregoing is for general information purposes only and is the opinion
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