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How to invest in electric vehicles and batteries

By Hazel Davis

Make the most of the supply chain shake up in the automotive industry

Earlier in February the UK Government announced it was bringing forward a proposed ban on selling new petrol, diesel or hybrid cars in the UK from 2040 to 2035. This is good news for the electric vehicle market, which, according to Woozle Research, rose from 500,000 sales in 2015 to more than 2 million in 2018.

“The global market for battery-powered electric vehicles [BEVs] will reach an inflection point in 2024 when it’s predicted that it will be as cost-effective to own an electric vehicle as cars with an internal combustion engine version,” says Carl Diebitsch, equity analyst at Woozle, which helps hedge funds and private equity firms make smart investments in the tech, media, and telecom sectors.

Electric vehicles investment is on the rise. Woozle predicts that the annual number of electric passenger vehicles sold globally will rise to 12 million units by 2024 and 22 million by 2030. Its analysis suggests that by 2030 at least 20 per cent of all the passenger vehicles sold in the world will be electric. These changes are driven by global environmental policy initiatives to improve fuel economy and emission standards. But, Diebitsch adds, “Financial incentives, growing customer demand, the expansion of electric vehicle charging infrastructure, falling charging times and increased manufacturing competition are all lowering the cost of BEVs and driving the accelerating growth trajectory in our estimates.”

Woozle’s recent investment report into the global electric vehicle market predicts that firms such as Tesla, BYD, and Geely are likely to benefit the most from this growth, providing electric car investment opportunities.

The mechanics of vehicles are changing, says Joe Stubbs, global brand director at global consultancy Interbrand: “Traditionally, a car was a piece of hardware – a capital intensive piece of machinery. 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. Electronic vehicles are fundamentally different to the internal combustion engine vehicles we drive today – they’re essentially computers with wheels, rather than composite machinery.”

“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 airplanes, but our entire energy system. 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, batteries and the impact on the supply chain

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. “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’s recent research, with 49 per cent of logistics experts currently using diesel or 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 holds the market in electric vehicles. Bloomberg reports that the electric-vehicle maker has a market value greater than that of General Motors Co., Fiat Chrysler Automobiles NV and Volkswagen AG combined. China's Contemporary Amperex Technology (CATL) is currently the world's biggest EV battery maker. However, South Korean firm LG CHEM LTD supplies General Motors, Ford, Renault, Hyundai, Tesla, Volkswagen and Volvo and is said to be investing 3.3tn 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 115, according to Benchmark Minerals’ Lithium ion Battery Megafactory December 2019 Assessment. This is a major increase from December 2018’s 63. China is now home to 88 of the 115 according to Benchmark. By 2029, Benchmark predicts that Germany will be home to most of Europe’s battery megafactories, with Hungary second.

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.”

FURTHER READING: Tesla delivers first electric cars produced on its Chinese plant

FURTHER READING: UK new car sales lowest in three years

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