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The Electrifying Future of Transportation

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Fully electrified vehicles will overtake fossil fuel-powered cars and trucks sooner than many people realize. Switching to electric vehicles, particularly those that rely more heavily on renewable energy sources for their electricity, will boost decarbonization efforts around the world. At the same time, those companies that lead the technological revolution to wean the transportation industry from fossil fuels are likely to be rewarded with outsized future earnings for their shareholders.

The Shift in Focus to Electrified Vehicles

Although the initial phase of hybrid and fully electric vehiclei adoption was slow, it is now quickly ramping up—in large part due to the rapidly falling cost of lithium batteries and wider adoption of decarbonization goals by state and global governments. Today, there is little doubt that increasing numbers of gas and diesel-fueled cars and trucks will be replaced by electric vehicles (EVs) as consumer demand continues to rise. Investments in EVs globally already exceed $90 billionii, and virtually all the major automotive manufacturers have announced plans to roll out many more models of hybrids and EVs. Some companies, including GM, Daimler, Jaguar Land Rover and Volvo, have announced plans to electrify their entire vehicle lineups.

More and Better Charging Technology

Hybrids are already benefiting from falling battery prices, but consumer demand for all-electric vehicles remains challenged by long charging times and concerns that charging stations may not be available when drivers need them. Two companies held by Parnassus are among those building out charging stations or conducting research to improve charging technology:

  • Sempra Energy®-owned utility San Diego Gas & Electric launched a pilot program in January to install 3,500 charging stations in support of California’s goal of placing 1.5 million zero-emission vehicles on the state’s roads by 2025. These charging stations will service heavy equipment, airport ground support equipment, fleet delivery vehicles, cars using park-and-ride lots and shuttles across the San Diego region.
  • Qualcomm® Technology has developed wireless charging station technology and is now working on dynamic electric vehicle charging, a system that can charge a vehicle as it drives over the charger. Qualcomm’s vision is a future where these chargers are embedded in roadways, creating virtually limitless ranges for EVs.
  • Sustainable Competitive Advantages

    The transformation of the transportation industry from fossil fuels to cleaner sources of power illustrates the interdependence of Principles and Performance®: If companies in this industry want to remain competitive, they need to embrace decarbonization targets. And those companies that develop the best technology for EVs and the infrastructure to support them are likely to also lead their peers in market share and earnings growth.

    iElectrified vehicles include both electric hybrids (typically electric and gasoline powered) and vehicles that are fully powered by electricity.

    ii https://www.reuters.com/article/us-autoshow-detroit-electric/global-carmakers-to-invest-at-least-90-billion-in-electric-vehicles-idUSKBN1F42NW

    As of 12/31/2017, Sempra Energy represented 2.7% of TNA of the Parnassus Mid Cap Fund and 2.3% of the TNA of the Parnassus Core Equity Fund. Qualcomm Inc. represented 4.3% of the TNA of the Parnassus Asia Fund and 10.2% of the TNA of the Parnassus Endeavor Fund.

    Mutual fund investing involves risk, and loss of principal is possible.