Back to the Future Promised Flying Cars! Where Are They?

Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

One of my favorite movies is Back to the Future II. Those familiar with the film, will be quite familiar with the preferred mode of transportation in the year 2015 – flying cars. Now, less than three years away, where are we on the progress of flying cars? Not too far. The concept relies on a huge shift in how people are used to getting from place to place. While flying cars offer a much more visually appealing “car of the future,” the future of the past (aka the present) still has a lot of exciting developments in the automobile industry.

The Car of the Present

Energy independence was one of the big topics in this year’s U.S. presidential election. A limited supply of oil means working towards viable alternative energy sources like biofuel, clean coal, solar, wind, and nuclear energy, while reducing our total energy consumption. The Obama administration has even mandated that fuel efficiency in automobiles rise to an average of 54.5 miles per gallon by 2025 in an effort to cut reliance on oil and reduce greenhouse gasses.

One alternative to gasoline is using electricity to fuel cars. The electric vehicle is gaining more traction in 2012, and the trend ought to continue into the future. General Motors (NYSE: GM) has increased sales of its Chevy Volt nearly 250% year-to-date to 20,828 units. The company reported relatively poor sales in November, but that was only because dealerships couldn’t keep the car in stock.

However, even this great growth is a disappointment to GM, other EV manufacturers, and the President, who once vowed to have 1 million electric hybrids on the road by 2015. According to LMC automotive just under 50,000 pure electric and electric-hybrids were sold in the first half of 2012 in the U.S., Europe, China, and other major markets – a miniscule 0.18% of total auto sales.

The Car of the Future

The two main deterrents for EV sales are driving range anxiety and a lack of charging stations. The slower than expected growth in EV sales and infrastructure led Toyota (NYSE: TM) to scrap production on its first entirely electric powered vehicle in September. However, the company is now developing a battery that will improve driving range while lowering costs. It uses magnesium ions instead of the more expensive lithium to keep costs low, while maintaining engine performance and extending its range.

But for drivers (and investors) looking for the ultimate in electric vehicles right now, they need look no further than one of the first to the market, Tesla Motors (NASDAQ: TSLA). Tesla is one of the few manufacturers that solely produces electric vehicles, and therefore has a distinct advantage in producing new EV technology. Aside from developing innovative technology, the company also has an eye for design. Its Model S won the Motor Trend 2013 Car of the Year. Mind you, not hybrid or electric car, the car of the year.

Tesla hasn’t yet produced a profit for investors, but I believe that trend ought to change in the near future. Revenues have climbed steadily since 2006, and gross margins improved right alongside. The company plans to produce 20,000 Model S’s in 2013, and already have 10,000 pre-orders. Tesla claims the break-even point is about 10,000 units, so at 20,000 it should have no problem turning a profit. The only thing holding it back may be supply chain constraints, such as those that hurt GM’s Volt sales last month.

As infrastructure is built out, driving range increases, vehicle costs come down, and gas prices continue to rise I expect sales of EVs to improve drastically. Tesla is at the forefront of the shift, and has great potential to grow sales and profits, even in the near future.

Shifting Gears

Electric vehicles aren’t the only up-and-coming technology in the automobile world. In recent years, Google (NASDAQ: GOOG) has been making waves with its driverless car. Developing the technology since 2005, the company has tested at least eight different vehicles traversing public streets accident free for a combined 300,000 miles.

So far, three states – Nevada, Florida, and California – have passed laws permitting driverless cars. Right now, it’s unclear how Google will use this technology, and if and when it will be commercially available. But the case is clear that driverless cars can help improve, not only road safety, but Google’s products as well. Google maps could have a fleet of driverless cars updating street view round the clock, and improve directions based on real-time feedback from driverless cars.

It will be awhile still before the law catches up with Google’s product. Google expects non-experimental driverless cars to hit the streets of California in the next five years, and Volvo expects to see them in Europe in ten. However, the potential for the company to license its technology to any auto manufacturer that wants it provides it with another avenue to generate revenues. Not to mention the likelihood Google would retain the right to the information the driverless system provides to improve its Maps product and target advertising better.

Back to the Future

While we won’t have flying cars in three years, I’m excited for the prospects of our future vehicles. Tesla and surprisingly Google lead the way in automobile innovation, and for any investor bullish on the prospects of EV sales and driverless cars these two are kings of the road.

adamlevy has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Tesla Motors. Motley Fool newsletter services recommend General Motors Company, Google, and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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