Electric vehicles (EVs) are seen as an important component of the efforts to address climate change as they have the potential to improve air quality and promote sustainable transportation. As investors increasingly prioritize ESG considerations in their financial decisions, the positive environmental impact of these vehicles will make owning EV producing company securities even more attractive. The global market for EVs is rapidly growing, driven by factors such as government policies promoting clean energy, falling battery costs, and the increasing availability of charging infrastructure.
Here is an analysis of the present state of the EV market.
According to the EV market trends published by the International Energy Agency, China is currently the largest market for electric vehicles, followed by Europe and the United States with other countries such as Japan, Canada, and Norway close behind. The market size of EVs was approximately 3 million units in 2021 but this is expected to exceed 20 million units sales by 2030. Around 50% of the growth in EV sales in 2021 was primarily led by China, selling more EVs in 2021 (3.3 million) than the entire world in 2020. Europe showed continued growth of up to 65% (2.3 million) after 2020, and the United States sold around 630,000 EVs. The latest figures document this trend continuing and it is expected that 1 in 3 new cars sold in 2030 will be EVs.
The electric vehicle market is highly competitive, with many established automakers and new entrants vying for market share.
- Tesla was founded in 2003 and has since become a major player in the EV market, with a range of models including the Model S, Model X, Model 3, and Model Y. Tesla is known for its innovative designs, advanced technology, and commitment to sustainability.
- General Motors (GM) has made a significant investment in the EV market. The company’s flagship EV is the Chevrolet Bolt, which was first introduced in 2017. GM has also announced plans to launch a range of new EV models in the coming years, including an electric Hummer.
- Volkswagen (VW) has launched a range of electric vehicles under its ID brand, including the ID.3 and ID.4. VW has also announced plans to invest heavily in EV production and infrastructure in the coming years.
- Ford has recently launched a range of electric vehicles, including the Mustang Mach-E and the F-150 Lightning. Ford has also announced plans to invest heavily in EV production and infrastructure in the coming years.
- Nissan has been producing electric vehicles since 2010. The company’s flagship EV is the Nissan Leaf, which has been a popular choice among EV buyers. Nissan has also announced plans to discontinue the Leaf, replacing it with new EV models in the coming years, including an electric crossover SUV.
- There are many Chinese automakers involved in the EV market. Companies such as BYD, NIO, and Xpeng are among the largest Chinese EV manufacturers and are increasingly gaining market share in the global EV market.
Passenger cars are currently the most popular EV segment, accounting for over 90% of global electric vehicle sales. Not surprisingly, there is also growing interest in electric buses, trucks, and other commercial vehicles. China now accounts for 95% of new registrations of two and three-wheeler EVs and 90% of new electric bus and truck registrations worldwide. Half of China’s EV sales now comprise two and three-wheeler vehicles. Tesla is expected to release their version of an EV truck soon while other rivals are stepping up their production of electric trucks, including pickups, as well.
Battery technology is a critical component of electric vehicles, and advances in this technology are expected to help drive the growth of the EV market. The rapid increase in EV sales during the pandemic has tested the resilience of battery supply chains. The Russia-Ukraine War, coupled with hikes in prices of raw materials such as cobalt, lithium and nickel, have further exacerbated the challenge. The rising cost of raw materials could increase battery costs by about 15% over 2021. However, relative to the current oil prices, EVs would still have an overall competitive price advantage.
The Announced Pledges Scenario (APS) of the International Energy Agency is based on existing climate-focused policy pledges. Introduced in 2021, the APS, “…aims to show to what extent the announced ambitions and targets, including the most recent ones, are on the path to deliver emissions reductions required to achieve net zero emissions by 2050.” It presumes that EVs will represent more than 30% of the total vehicles sold globally across all modes put together (except two and three-wheelers). While this seems impressive, it is still considerably short of the 60% share needed by 2030 in order to reach net zero CO2 emissions by 2050.
The global market value of electricity for EV charging is projected to grow over 20-fold, reaching approximately USD 190 billion by 2030. This is only about a tenth of today’s non-renewable fuel market value. Nevertheless, the amount of public charging infrastructure that has been announced might still be insufficient to power the size of the EV market being targeted. The availability of charging infrastructure is a critical factor for the adoption of EVs. Governments and companies are investing heavily in the development of charging networks. The number of public chargers needs to reach over 15 million units in 2030 in order to provide consumers with adequate and convenient coverage. Fast charging stations, which can charge an electric vehicle in 30 minutes or less, are also becoming increasingly common.
Stated below are some of the recommendations of the International Energy Agency in the Executive Summary of its Global EV Outlook 2022, to speed up the uptake of EVs worldwide.
- Support for electric cars must be maintained and adapted by steadily decreasing and eventually fading out reliance on public subsidies. A feebate is, “…an incentive policy that encourages the continuous improvement to automobile fuel economy and greenhouse gas emissions by providing incentives for manufacturers to build more efficient vehicles and rewarding consumers who purchase more efficient vehicles.” Budget-neutral feebate programs to finance subsidies for purchase of low-emission vehicles can be a useful transition policy tool. In addition, stringent standards for vehicle efficiency and CO2 emissions should be adopted by all countries looking to speed-up the transition to electromobility.
- Policy-led deployment of heavy-duty EVs can help kickstart the transition in this sector. Electric trucks and buses are becoming more available and more popular across all applications.
- Emerging and developing economies should prioritize electrification of road transport. Two/three-wheelers and urban buses are the most cost competitive in this sector. Price signals and improved charging infrastructure availability can also help hasten electrification.
- Support must come from governments to deploy public EV charging infrastructure either through fiscal policies and support, or by mandating EV charging readiness for new buildings. This would likely ensure equitable access to all communities, so nobody is left behind in the transition.
- Power grid expansion and enhancements should include digital technologies that facilitate two-way communication and pricing between EVs and grids. This is needed to make sure that EVs can become a resource for grid stability rather than a challenge.
Because EVs produce significantly fewer greenhouse gas emissions than traditional gasoline-powered vehicles, their reduced carbon footprint is making them more attractive for environmentally conscious consumers and investors. Besides these major players in the EV industry mentioned above, there are many more companies involved in the design, manufacture, and sale of electric vehicles and the supporting infrastructure. The EV sector continues to grow, and it is a certainty that we will see many new entities entering the market in the months and years to come that will be worth considering for ESG oriented investors.
