The carmakers can take some reassurance from the strong demand for hybrids, which many analysts see as a way station on the road to all-electric vehicles. Sales of hybrids rose 33 percent last year to 700,000 worldwide, even as the overall market dived, according to SBI Energy, a market research firm in Rockville, Maryland. Japan accounted for half the hybrid sales and the United States for most of the rest.

Impetus for electrification is also coming from governments. The British government said Thursday it would offer motorists as much as £5,000, or $7,600, to buy "ultralow carbon" vehicles. The U.S. Department of Energy is loaning Nissan $1.4 billion to modify its plant in Smyrna, Tennessee, to produce the Leaf.

Eoin Treacy's view The electric car market still makes up a relatively small fragment of the global industry. According to this article from the BBC Chinese automobile sales for January alone were 735,000 units. This compares with the 700,000 hybrid cars sold globally last year. The combustion engine is not about to be displaced overnight but the market for hybrids is growing. Manufacturers are all bringing hybrid or full electric cars to market, governments are providing incentives, consumers are becoming more environmentally conscious and importantly technological advances are being made.

These figures highlight two themes: the growth of the Asian middle class is contributing to growth in demand for all types of automobiles across the region, not only in China. This is benefitting manufacturers most leveraged to global growth, particularly those offering reasonably prices models. The financial crisis has seen the demise of the General Motors business model which relied on financing rather than cars for profits and the remaining companies are probably stronger for it. For electric vehicles to be truly viable innovation in battery technology is a prerequisite and the number of companies in this sector providing leadership remains relatively small.

In the USA, Ford continues to rally vigorously and while overextended relative to the mean, defined by 200-day moving average; it remains in a consistent uptrend. A break of the progression of rising reaction lows would be required to question scope for some further upside.

In Japan, Nissan and Honda remain clear outperformers in absolute terms and relative to the wider market. They continue to plot consistent medium-term uptrends and the progressions of higher reaction lows would need to be taken out to question scope for further upside. (Also see Comment of the Day on July 28th).

In Korea, Hyundai has been consolidating below KRW120,000 since September in a steady reversion towards the MA. It is currently pressuring the highs and a sustained move back below KRW110,000 would be required to question scope for a successful upside break. Kia is accelerating higher and is approaching an area of potential resistance at KRW25,000 and the 2006 high. Some consolidation of recent powerful gains would not be unexpected but a sustained move back below KRW20,000 would be required to question the medium-term bullish outlook.

In China, Dongfeng Motor consolidated mostly below HK$12 from November in a steady mean reversion and broke emphatically upwards last week. A downward dynamic would now be needed to question scope for further upside.

In India, Tata Motors continues to consolidate below INR800 but a sustained move below INR600 would be required to question the consistency of the medium-term uptrend.

In Europe, Audi is the only car manufacturer outperforming its domestic market. It broke upwards from the short-term range on Friday and a downward dynamic would be required to check potential for some additional upside.

Some of the major automotive manufacturers are also actively involved in research and development of battery technology. There are also a number of privately held companies involved in the sector. Of the companies giving relatively undiluted exposure to the growth in battery demand, it is interesting to observe that the majority of such companies are based in countries with some of the better performing car manufacturers. This testimony given by Mary Ann Wright for Johnson Controls before the House Select Committee on Energy Independence and Global Warming on March 10th is enlightening on some of the reasons for the outperformance of Asian battery manufacturers relative to other regions.

In Korea, Samsung SDI encountered resistance in the region of KRW180,000 and the 2004 high from September. It pulled back rather sharply but found support in the region of the 200-day moving average and is currently rallying. A sustained move below the MA would now be required to question scope for further upside. LG Chem also hit a medium-term peak in September but held the majority of the gain and is now retesting the high. The benefit of the doubt can continue to be given to the upside in the absence of a sustained move below KRW200,000.
(Also see Comment of the Day on December 22nd) .

In China, BYD hit a medium-term peak below HK$90 in October and pulled back to the rising 200-day moving average. It has since rallied strongly and would need to take out the January low, near HK$53, on a sustained basis to question medium-term upside potential.

In Japan, Panasonic remains in a 15-month and counting base and needs to sustain a move above ¥1500 to indicate a return to medium-term demand dominance. GS Yuasa Corp hit an accelerated peak in June and remains in a consistent medium-term downtrend. A sustained move above ¥670 is now required to break the progression of lower rally highs and signal a return to demand dominance.

In the USA, Johnson Controls remains in a consistent medium-term step sequence uptrend. It broke upwards to another new recovery high yesterday and a sustained move back below $30 would be required to begin to question the consistency of the medium-term advance. Advanced Battery Technologies remains in a yearlong range and needs to sustain a move above $5 to indicate significant bullish interest has returned. Ener1 broke downwards from the 1-year range in January and needs to sustain a move back above $5 if the current congestion area is to prove to be anything other than a distribution with the medium-term downtrend. A123 Systems has pulled back to test the November low near $14. An upward dynamic is needed to indicate support is being found in this region.

In conclusion, while the development of large scale batteries capable of powering cars is still a relatively underdeveloped sector, companies in Korea and China have a lead. Their domestic car manufacturers are also benefitting and other companies and countries will need to pump significant capital into research and development if they are to compete successfully in this developing industry.