Electric and Driverless Vehicles (pt.2)

by Michael Keane

Electric and Driverless Cars  Part 2

Electric Vehicles

In a previous post, a couple of large issues that the transportation industry was outlined. In this article, the focus will be on how the energy, insurance and governmental taxing agencies will handle the growing use of electric vehicles. Will energy companies be able to pivot off of its reliance on vehicle gasoline for profit? Will insurance companies be able to handle the likely decreased premiums due to vehicles no longer needing protection against gas related incidents? Will taxing authorities be able to pivot off of the taxes received from gas?

Energy companies are in a very precarious position. They are finding that there is a glut of fossil fuel energy while at the same time a lessening of demand for it. A big and growing culprit of this is the expansion of the electric vehicle. With non-fossil sources of fuel Companies like Tesla, GM, BMW, and others have put in large resources to build out these vehicles. as alternative fueling grows, so does demand for the vehicles. This increased demand is bringing costs down into an area where the masses are able to participate.  

One possible rock to lean on during this time is the time period just as the automobile was becoming more and more popular. Energy companies faced a similar threat to their business as electric lights replaced oil in homes. The question becomes what is the switch they need to make. The larger companies should be able to absorb some of the trouble. But overall, margins are going to get squeezed.

In terms of insurance, there is one item that I can think of that should lessen premiums. That item is the removal of gas and oil (extremely flammable) from the vehicles. In an article by InsideEV’s (link here), information shows a large improvement when it comes to safety when comparing EV’s with standard vehicles. This could bring down the price of premiums.  One possible solution in the short term is to raise other parts of the monthly premium as the vehicles are generally more expensive and can be more of a steal target because of the newness of the segment.

Taxing authorities should already be figuring out solutions to this issue. The more electric vehicles that are registered in the state, the less revenue they will receive from taxes on gasoline. For example, in my home of Chicago, taxes on a gallon of gas are around $0.30 per gallon. I sure hope they are working on a plan that replaces this revenue. Because with more and more EV’s hitting Illinois roads, revenue is increasingly getting smaller and smaller. But there are alternatives like a flat annual tax on EV’s or an increase in taxes for electricity not generated by NFES. Also, promotion of these vehicles will increase the favorabel environmental effects which should offset some of the financial loss. There aren’t too many administrations who end of badly for making their area cleaner and healthier for their constituents. If you have or plan to buy and EV, reach out to your local office holders and remind them of the benefits for the area.

There are more than a few issues facing the oil, insurance, and taxing authority agencies when it comes to handling the increase of EV’s on the road. But there are ways to continue profitability and success while embracing the change. It is very important not to have blinders on or have your figurative head in the sand at this moment. Acknowledge what is, and plan and act however needed.  

Electric and Driverless Vehicles

Electric and Driverless Cars

By Michael Keane

There has been a large progressive move within the car industry in the last decade when it comes to power and ease of transporting. Both of these issues will have a major effect on energy (oil especially), insurance, and local governments  This series of articles will focus on the effects of the moves on these particular industries. It is very important that these industries get ahead of the situation to avoid trouble.

This blog post is the first in a series to cover this topic. It will briefly cover the topics and possible solutions with later posts going into more detail on each topic and solutions to that particular topic. Awareness of the issues at this point is paramount for all involved (industries, customers, etc.) so that nobody can claim ignorance for when a tipping point regarding organizational survival comes upon them. Per disclosure, KeaneVCC has clients who have investments in the car industry, software industry, communications industry, and a bond portfolio that includes local governmental municipal bonds.

At this point, the move to electric vehicles is rolling along well. This past month, Tesla introduced the Model 3. The company has reported that there have already been over 400,000 orders for the car, which indicates a new level of scalability. Nissan, GM, BMW, Toyota, Ford and others are also currently in the market with vehicles.  The prices of electric vehicles are showing up at affordable levels. Competition is growing in the industry and seems to be creating a ceiling on prices. The loss of gas revenue should be a clear red flag for the oil companies. Are they going to sit back with their heads in the sand or will they understand that progressive industries adapt? Government taxing authorities should also take notice as to what the effect will be for them.

To expand on the manner, the movement towards driverless cars is increasing. Leaders in the car, software, and and other industries are committing large amount of resources to this effort. At this point, driverless vehicles have racked up over 1 million miles in planned trips with varied levels of success. Ancillary industries are watching and planning carefully on the progress. Industries that should be paying particular attention are Insurance and local governments. Revenues for both will be affected heavily if driverless cars are adopted.  

**As always, this blog is to be read as opinion. Please do your due diligence before acting on any information read here.**

Wounded Warrior Lesson For Non-Profits

by Michael Keane

Recently, there were executives from The Wounded Warrior Project that were fired due to fiscal irresponsibility on expenses. A New York Times article link is here.  This issue is not new and continues to pop up in the non-profit area. One main reason why this type of thing happens is that the organizational non profit side of the mission sometimes gets clouded by the personal mission of wealth. When the two clash within an individual or organization, a mess is generally a result. Wounded Warrior has been caught up in that idea.

It takes a special skill to manage your personal wealth ambitions when the business you are in exists in the non-profit arena. There are some wonderful resources that can help you find what non-profit companies are spending on their salaries and expenses. There are also non-profits that handle the situation in a wonderful manner.

One  example is Movember. If you look at their overhead expenses, it is clear that the executives of this company bring the mission mindset to their own personal wealth ambition. Per a story in the Independent Record (link here), wages and earnings were $900,000+ on $23,000,000 in 2013. You will see that the CEO has a salary of $280,000+ for 2012. Another example mentioned in the story is the American Lung Association's CEO pay of $300,000 on $54,000,000 in revenue. When you look at Wounded Warrior Projects pay, you see nothing out of the ordinary. It's CEO makes $300,000+, which is fairly in line with its contemporaries.

But this scandal has brought to light some comments from the company that could show an opportunity for improvement. In a story written by Ryan Schuette from IVN (link here), a comment by the company saying that their salaries are comparative with the private sector is what stands out. This could show where the motivation of the executives existed when they made the mistake of spending the amounts that they did. Non-profits have many reasons for comparing themselves to the private sector. But pay and wages should not be one of them. This can create confusion at the individual level and the greed of private sector processes will show itself and catch the non-profit in trouble, like the way Wounded Warrior Project has shown. When you run a non-profit, you have to have a solid understanding of where the traps of private sector thought processes exist for your business. In the Wounded Warrior case, that did not happen.

It is disappointing that the executives at Wounded Warrior Project haven't fully discerned this. But it is also a great opportunity to improve and become better focused and successful. Being what the mission of the organization is, there is little doubt that improvement will come. This is just a bump in the road for Wounded Warrior.

Per disclosure, the author is a Marine Corps veteran. He is also a regular charity contributor to Movember.