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 Reports and Commentary from the Investment World

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ECOtality

 [2011-04-30]

ECOtality (NASDAQ:ECTY)

Ecotality logoThe demand for electric vehicles is expected to grow at a rapid pace, supported by the public's growing concern regarding greenhouse emissions and the effects these emissions have on climate change. The manifestation of which so far this year is seen in the huge floods and cyclones in Australia and massive tornadoes in the southern USA.

Front-runners in this industry are going to do well in the short term, but the long-term spoils are going to be shared by one or two companies whose standards and products get adopted on a national and perhaps international scale. This is usually the case with most new mass technologies. There is a lot of disruption and consolidation at the beginning, then the winners begin to emerge. ECOtality is one of these early players. Its hard to say at this point whether ECOtality will be one of the ultimate long-term winners, but they certainly look to be heading in that direction.

For electric vehicles to become more mainstream, mass infrastructure for these vehicles will have to be built. This is precisely where there is a really big investment opportunity. San Francisco-based Ecotality builds this infrastructure for electric vehicles in the U.S. and China. Riding high on a $114.8 million recovery act grant from the US Department of Energy, Ecotality plans to set up 15,000 commercial charging stations.

The company has been around for a while, but it is only recently that conditions in the electric vehicle market and the political intent to fund the industry by way of grants has started to align. Revenue growth at the company has also got to the stage where this company looks interesting from an investment perspective. There has been a string of very positive announcements come out since January 2011:

  1. In January the company secured a $10 Million Investment from ABB and the Blink Electric Vehicles Home Charging Station received FCC approval, Sprint Command Centrer connected ECOtality's Blink Network and the Blink Network was integrated with Cisco's Home Energy Management Solution.

  2. In February the company won $2.87 Million Bay area contracts and expanded the EV project to the San Francisco Bay area. ECOtality commenced the Blink Residential Charging Station installations in Oregon, Arizona and Washington

  3. In March Fred Meyer Stores partnered with ECOtality to install Blink EV Charging Stations and Blink Residential Charging Stations were installed in Tucson.

  4. In April ECOtality was able to utilize ABB's sales distribution channel and the mobile applications for Smartphones via Apple and Google android devices were launched. Blink Electric Vehicle Chargers were also installed at Macy's Department Stores.

ECOtality develops and markets a number of clean energy solutions, including electric vehicle infrastructures, energy storage technologies, solar products and fuel cells. But it is the company's electric vehicle charging infrastructure project – the EV Project – that's of real interest at this point in time.Charging stations need to be easily accessible to electric vehicle drivers. Perhaps the best method is to use popular devices like smartphones and the internet to be seen. This idea is definitely in Ecotality's perspective, having recently launched its own mobile app, named Blink Network, that helps people locate charging stations. This app will run on Apple and Google Android-enabled devices.

The EV Project was designed to deploy charging infrastructure in major cities in six states and the District of Columbia. Deployments began last year in 18 major cities.This project is the largest deployment of electric vehicles and charge infrastructure in history. It was thanks to the $99.8 million grant from the DOE that ECOtality was able to launch it. When completed, ECOtality will have deployed approximately 15,000 chargers. From a commercial perspective, its encouraging to see the likes of Nissan, Chevrolet, Best Buy, Portland General Electrical, Cisco, Tucson Electric Power, Qualcomm and ABB all come on board. With ABB as a strategic partner, ECOtality now has the clout it needs to effectively compete in a field that will likely be dominated by GE and Siemens. ECOtality and ABB entered into a North American manufacturing agreement that establishes a collaborative and strategic supplier relationship between the two companies. Blink charging stations represent ECOtality's wow factor. These are technologically advanced systems designed for both residential and commercial applications. They even boast a fast charging system that can provide a full charge in less than 30 minutes. They are also hooked up to a network that can allow the user to schedule and start charges remotely using the web or Smart Phone.

Risks still remain as the company is only in the early stages of development. But if you are looking for a way to play the electric vehicle charging market without investing into big caps like GE or Siemens, ECOtality could be an alternative choice. No doubt, there will be ups and downs along the way, but, longer term, ECOtality could end up being a serious player in this billion-dollar charging market. It may take a while to get there, but if you have the patience, picking some of the stock up at current levels may prove to be worth the wait.

Buy ECOtality (NASDAQ:ECTY) up to $4

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Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.