The Adoption of Electric Vehicles is Gathering Momentum

Electric vehicles (EV) were invented in the late 19 th century with the first rechargeable EV manufactured in 1887 by William Morrison. Over 100 years later, EV producers are struggling to keep up with the soaring demand. In 2022, global EV revenues are anticipated to reach levels beyond $380 billion. Demand has been driven by the global effort to fight climate change. Consumers and companies are shifting to EV transportation to reduce their carbon emissions. EVs jumped to an 8.3% market share of new car sales in 2021, having gone up from 4.2% in 2020.

Not all promising structural shifts result in significant gains for shareholders backing these disruptive companies. Automobile manufacturers of traditional internal combustion engines operate in a highly competitive market which has typically capped shareholder returns. We expect EV manufacturers to face similar industry dynamics over time.

Structural shifts of this magnitude often provide opportunities to be found in an analysis of the supply chain. The combined weight of all EV batteries in circulation exceeds 2 million tons equating to roughly 300,000 fully grown male elephants. This figure is set to double over the next year which means a vast quantity of minerals will be required to power the EV adoption. Approximately 0.6 kilograms of rare earth elements are required to enhance the power output of an EV. While rare earths are in fact not that rare, securing the processed magnets of these elements is not easy. China supplies 85% of the rare earth magnets which are also used in the defence and renewable energy sectors. This is a possible opportunity to profit from the adoption of EVs which we will detail in next month’s insights newsletter.

Bibliography

Agency International Energy. (2021). Global EV Outlook 2021. International Energy Agency.

Hoekstra, K. (2022, April 11). When Was the First Electric Car Made? Retrieved from HistoryHit: https://www.historyhit.com/when-was-the-first-electric-car-made/

Shine, I. (2022, July 20). The world needs 2 billion electric vehicles to get to net zero. But is there enough lithium to make all the batteries? Retrieved from World Economic Forum : https://www.weforum.org/agenda/2022/07/electric-vehicles-world-enough-lithium-resources/#:~:text=Global%20EV%20purchases%20jumped%20to,from%2063.8%20million%20in%202020.

Statista. (2022, September). Electric Vehicles - Worldwide. Retrieved from Statista: https://www.statista.com/outlook/mmo/electric-vehicles/worldwide

Wilson, K. (17, August 2022). Worth the Watt: A Brief History of the Electric Car, 1830 to Present. Retrieved from Car and Driver: https://www.caranddriver.com/features/g15378765/worth-the-watt-a-brief-history-of-the-electric-car-1830-to-present/