Investing In The Electric Vehicles Theme

Electric vehicles (EVs) are gaining penetration at a rapid rate. China leads the way in terms of the absolute number of vehicles with about 22 million EVs on the road, and Norway leads the way in percentage terms with 29% of all vehicles being electric. In 2023, 93% of new cars sold in Norway were electric, with 85% being battery electric and 8% plug-in hybrids.

So what does this rapid growth imply for investment opportunities. Before making an investment in electric vehicles it is important to understand the entire ecosystem that surrounds the production and sale of electric vehicles. Some of the ways that an investor could gain exposure to the electric vehicle theme include investments in:

• Established or start-up passenger electric vehicle only manufacturers
• Legacy companies pivoting towards manufacturing EVs
• Commercial EV vehicle manufacturers
• EV charging infrastructure providers
• Component providers
• Raw materials

For investors limited to the ASX the only significant way to gain exposure is via raw materials. However for those investors who can access global markets there are many other opportunities.

Predictions

When it comes to the art of prediction, forecasters tend to overestimate change in the short term, but underestimate it in the long term. Predictions as to how the market for EVs will unfold are numerous and varied. For example:

• In 2016, OPEC were predicting EVs would make up only 1% of all vehicles by 2040. That marker was passed in 2019.

• Clean-energy research group BloombergNEF, forecast in 2021 that global sales of EVs would rise to 8.5 million by 2025. They were 13.8 million in 2023.

• The International Energy Agency forecasts that the EV global vehicle fleet will reach 145 million by 2030. Currently 40 million.

• Infrastructure Australia forecast that Electric vehicles will account for 70% to 100% of new vehicle sales by 2040 in Australia and make up 30% of the total vehicle fleet.

The electric vehicle ecosystem

The most obvious way to invest in the electric vehicle ecosystem would be to invest in one of the passenger vehicle companies dedicated to EVs. However there are many other ways that an investor can access the trend towards the electrification of motor vehicles. In order for electric vehicles to become mainstream there is a whole ecosystem that needs to fall into place. It starts with the sourcing…

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