Investor Tom King is a great believer in the electric car story, figuring that electric vehicles will account for more than 50 per cent of total world vehicle sales in a little over 20 years. But his exposure to the sector is not through Tesla.
King, who is chief investment officer of Nanuk Asset Management, says he has a lot of exposure to the global auto industry and most of it focused on electric cars.
Nanuk is a sustainable investor, investing in companies associated with the themes of clean energy, energy efficiency, industrial efficiency, waste management, pollution control, food and agriculture, advanced and sustainable materials, water and healthcare technology.
King says the world economy is entering a “sustainability revolution” and that the electric vehicle market is part of that change.
Some of Nanuk’s auto industry investments include TE Connectivity, a company that makes connectors that go into electric vehicles; Valeo, a French company that makes powertrains and other systems for electric vehicles; and NFI Group, A US manufacturer of electric buses.
“These companies operate in parts of the industry’s value chain that are often overlooked. We are a fundamental investor, looking for value and this is where we are finding it,” King says.
Nanuk has no holding in Tesla – in fact it is short the stock. It believes there are governance and shareholder alignment issues at Tesla that need to be resolved, some concerns about its financials (including a high debt level) and unattractive valuation metrics.
In comparison, the bus maker NFI has a relatively modest price-earnings multiple and is producing an attractive dividend yield. The company is benefiting from a move by US municipalities to replace their existing bus fleets with electric vehicles.
It is a similar story with Valeo and TE Connectivity. King says both are well managed component suppliers selling into a growing market.
He says the cost of an electric car, compared with a petrol car, has been estimated to reach parity by 2025 and from that point on electric cars will become progressively cheaper.
Electric cars account for only about three per cent of total world car sales at the moment but, with a large number of car makers now committed to electric vehicle programs, that share could be as high as 30 per cent by 2030.
Nanuk has 70 stocks in its New World Fund – all of them meeting the group’s responsible, sustainable and ESG criteria.