How to invest in electric vehicles and batteries
Make the most of the supply chain shake-up in the automotive industry
In February 2020, the UK government announced it was bringing forward a ban on selling new petrol and diesel cars in the UK from 2040 to 2030.
Many European countries are introducing similar bans – and it’s good news for investors in electric vehicle (EV) technology.
According to figures compiled by NextGreenCar, there were 675,000 EVs registered in the UK by the end of October 2021, including hybrids.
A BloombergNEF report for Transportation and Environment said that, on average, battery electric vehicles would reach the same price (before incentives) as their petrol-powered counterparts between 2025 and 2027.
“Small vans reach price parity the earliest, in 2025, small cars are last in 2027, with medium and large sedans and SUVs hitting the parity point in 2026. In 2030, an average medium electric car is 18% cheaper than the equivalent petrol excluding taxes,” according to a May 2021 summary of the report.
Costs coming down
Costs are coming down because of financial incentives, growing customer demand, the expansion of the EV charging infrastructure, quicker charging times and increased competition.
Firms such as Tesla, BYD and Geely are positioned to benefit. All three are also expanding to the heavy truck market. In addition, some mainstream car manufacturers, such as VW, are fast catching up.
The mechanics of vehicles are changing, says Joe Stubbs, global brand director at global consultancy Interbrand, who calls electric vehicles “computers with wheels”.
“Traditionally, a car was a piece of hardware – a capital intensive piece of machinery,” says Stubbs. ”One factor that we believe is defining the next generation of auto manufacturing is the pivot from hardware production to software integration – and a significant part of the role of that software will be battery efficiency.”
‘Batteries the new oil’
“Batteries are the new oil, but in a good sense,” says Jonathan Shine, UK country manager at all-digital, all-electric car rental company UFODRIVE.
“They are on course to power not only vehicles, boats and even aeroplanes, but our entire energy system,” he adds. “It is likely that a significant proportion of batteries in vehicles will extend their utility beyond driving and provide storage for the electricity grid to store renewables and support peak electricity use”.
The speed of acceleration in the investment in, and development of, batteries in the past 10-15 years has been “breathtaking”, says Shine, “and shows no signs of slowing down”.
“Whilst production prices plummet, new technologies are emerging for dramatically improved weight reductions and faster charging times. It’s an exciting space that is likely to see a sudden, rapid shift to electric vehicles and renewables across the globe, akin to the ubiquity of smartphones and the internet”.
Investing in electric vehicles and batteries
The speed with which electric vehicles are being adopted globally is fundamentally changing the economics and dynamics of the automotive industry, says Steve Richmond, director of logistics systems at Jungheinrich UK.
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In addition to escalating demand for electric cars and vans with ever greater range and faster recharging options, the industry is also facing up to a need to address the underlying supply chain. With governments now setting targets regarding the sale of EVs, incentives to encourage consumers to swap from diesel and petrol are driving up the adoption of EVs.
As a result, he says battery technology is evolving fast, with vendors increasing their efforts to produce more prismatic lithium-ion batteries catering to this spike in demand from the automotive industry.
Implications of this shift in consumer commitment to EVs is being felt outside the automotive design area, according to Jungheinrich UK research, with 49% of logistics experts currently using diesel or liquefied petroleum gas (LPG) trucks thinking of replacing them with a battery-powered alternative. The logistics market is poised to explore the additional efficiency provided by battery innovation.
“It is consumer demand for EVs that has driven lithium-ion innovation,” says Richmond, “and it is that innovation that the automotive industry can now harness to drive greater logistics efficiency.
“For example, the introduction of better power management technology is reducing battery charging time and enabling opportunity charging, which is enabling more efficient operations. A forklift truck can now operate for an entire shift, avoiding the time wasted as operatives swap batteries”.
How to invest in electric cars
Tesla currently dominates the market in electric vehicles. CNBC reports that the electric-vehicle maker has a market value greater than that of the nine biggest automakers, including GM, Honda, Toyota, and Volkswagen.
China's Contemporary Amperex Technology (CATL) is currently the world's biggest EV battery maker. However, LG Chem – part of the giant South Korean conglomerate LG Group – supplies General Motors, Ford, Renault, Hyundai, Tesla, Volkswagen and Volvo, and is investing 3.3trn won ($2.8bn) in facilities near Tesla’s plant in Shanghai.
The long-term prospects for lithium are positive as the demand for electric-vehicle batteries inevitably rises. The number of lithium-ion battery ‘megafactories’ in the pipeline has reached 200, according to a Benchmark Mineral Intelligence report in May 2021, ‘Lithium ion battery megafactory assessment‘.
In 2021, 148 of the world’s 200 lithium-ion battery megafactories in the pipeline are located in China, whereas Europe and North America have only 21 and 11 megafactories in the pipeline.
The bringing forward of the petrol and diesel car ban in the UK will only require further dependence on quality batteries and charging infrastructure to power the UK's automotive industry.
As a result, says Shine:
The major innovators will be working day and night to build the systems of the future, creating huge opportunities for investors to be part of this new wave.
