The electric vehicle trend is taking the world by storm. In this article, we set out to explain the key drivers of the electric vehicle market and invite readers to see how Crea8 can help you invest in it.
Looking ahead, analysts expect exponential growth in the electric vehicles market in the coming years, with a very significant inflexion point around 2025-2030. According to data from the Carbon Tracker Initiative, electric vehicles are expected to represent 8-15% of global car sales by 2025, and 35-55% by 2040 (Sussams and Leaton 2017).
For driverless technology, on the other hand, McKinsey estimates that, by 2030, fully autonomous cars could represent up to 15% of passenger vehicles sold worldwide. This could rise to 80% by 2040, depending on factors such as regulatory challenges, consumer acceptance and safety records (Kaas and Mohr 2016).
A few of the large car manufacturers such as Volvo and Mercedes currently have vehicles with some form of automation but require the driver to be present in the car. Over the next few years though, more automation will be introduced such that there will not be a need for a human being in the driver’s seat.
Roughly half of the global oil production goes to road vehicles, and 22% of the world’s annual greenhouse gas emissions come from oil-powered transportation – mainly cars, trucks, and buses.
Consumers are becoming more aware of the greenhouse gasses emitted by the internal combustion engine and hence have switched to less polluting transportation. Governments are also incentivising citizens to purchase electric vehicles through tax breaks.
Some countries are taking bold steps to cut emissions from road vehicles. Norway, for example, announced 100% EVs in 2025 Meanwhile Germany targets to have 7 – 10 million EVs on the road by 2030 (Nicholas and Wappelhorst, 2020); and India aims for 30% of new vehicle sales to be EVs by 2030 (Sahay 2020). The US state of California, France and UK are also targeting to 0 internal combustion engine vehicles sold by 2040.
Some governments are providing incentives to their citizens to switch from internal combustion engine vehicles to electric vehicles. The Canadian government is offering a rebate of up to CAD5,000 to buyers of electric vehicles while the German government is providing up to EUR9,000 subsidy for electric vehicle cars that cost less than EUR40,000.
From 2010 to 2016, battery pack prices fell roughly 80% from ~$1,000/kWh to ~$227/kWh. Current projections suggest the potential for pack prices to fall below $100/kWh by 2030. Lower costs for battery packs could potentially bring base versions of the Chevy Bolt below $30,000, and base versions of the Tesla Model 3 below $40,000 after the $7,500 federal tax subsidy is applied (Hertzke and Wu 2019).
While early adopters of EVs were focused on high-tech features and sustainability, research shows that many potential buyers now cite a wider set of perceived benefits. Exemplifying this shift, acceleration and driving performance are now among the top benefits that many potential buyers now cite when considering EVs. The benefit of instant torque from e-motors was not a part of the consumer conversation for early EV models (Hertzke and Wu 2019).
An obvious way would be to invest in the companies that are building these electric vehicles and self- driving vehicles. Leaders in this space include the likes of GM, Mercedes and BMW.
Next would be the companies producing lithium-ion batteries that power electric vehicles such as Panasonic and the makers of the sensors, software, and computing hardware required to make vehicles self-driving such as Nvidia, Qualcomm and Microchip Technology.
Through Crea8’s ‘Global Electric Vehicles and Driving Technology’ theme, you get to invest in companies that are leading the way for this trend, including the likes of Tesla, GM and Nvidia.
The convergence of Electric Vehicle and Driving Technology trends into the “Global Electric Vehicles and Driving Technology” theme gives you access to a long-term investment theme that can outperform the market and is also diversified.
Through Crea8’s Factor Based Thematic Investing Service, you get the opportunity to invest in this trend.
Hertzke, Patrick, and Ting Wu. 2019. “Expanding Electric-Vehicle Adoption Despite Early Growing Pains”. Mckinsey.Com. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/expanding-electric-vehicle-adoption-despite-early-growing-pains.
Sussams, Luke, and James Leaton. 2017. “The Disruptive Power Of Low-Carbon Technology”. Carbontracker.Org. http://carbontracker.org/wp-content/uploads/2017/02/Expect-the-Unexpected_CTI_Imperial.pdf.
Kaas, Hans-Werner, and Detlev Mohr. 2016. “Automotive Revolution – Perspective Towards 2030”. Mckinsey.Com. https://www.mckinsey.com/~/media/mckinsey/industries/automotive%20and%20assembly/our%20insights/disruptive%20trends%20that%20will%20transform%20the%20auto%20industry/auto%202030%20report%20jan%202016.pdf
Nicholas, M. and Wappelhorst, S., 2020. REGIONAL CHARGING INFRASTRUCTURE REQUIREMENTS IN GERMANY THROUGH 2030. [online] theicct.org. Available at: <https://theicct.org/sites/default/files/publications/germany-charging-infrastructure-20201021.pdf> [Accessed 10 December 2020].
Sahay, Richa. 2020. “How Can India Transition To Electric Vehicles? Here’s A Roadmap”. Weforum.Org. https://www.weforum.org/agenda/2019/10/how-can-india-transition-to-electric-vehicles-heres-a-roadmap/.