Although the electric vehicle market is minuscule when compared to the global automotive industry, growth in the electric vehicle market continues to strengthen. In fact, as reported by the International Energy Agency (IEA), sales of electric cars topped 2.1 million globally in 2019, meaning a 40 per cent year-on-year increase. As at 2019, electric cars accounted for 2.6 per cent of global car sales, even though they only represented around one per cent of global car stock.
As advancements continue to be made in both technology and battery/charging chemistry, electric vehicles are expected to expand significantly. Such advancements will also enable the electrification of commercial vehicles including trucks and buses. In recent years, the electric-vehicle rollout in major vehicle markets has been further strengthened by governments’ ambitious policies worldwide, coupled with direct subsidies to promote clean energy.
This shift by governments to green energy has started. Beyond the already implemented carbon-neutral targets (carbon-neutral energy is a system which have no net greenhouses gas emissions), nations are now also setting targets to ban the sale of diesel and petrol cars. Recently, the United Kingdom announced that it plans to end the sale of new fossil fuel cars and vans from 2030. Norway, which has been long recognised as world leader in the adoption of electric vehicles set its target to 2025. Denmark has also set its target to 2030. The European Union has set a legally binding 2050 net zero emissions target. The consensus is that around 2030 to 2040 most nations would ban the sale of fossil fuel vehicles. In fact, as at June 2020, 17 countries have announced 100 per cent zero-emission vehicle targets or the phase-out of internal combustion engine vehicles through 2050.
COVID-19 has undoubtedly impacted the automotive industry, with practically all major car producers halting production lines for some period. It is therefore difficult to assess the extent of the impact this pandemic will have on the electric vehicle market. Nonetheless, many cities in Europe have utilised the unprecedented lockdowns to implement new policies to promote a cleaner environment. This has been further confirmed by Government’s actions, whereby recent economic recovery packages are stimulating clean transport. In view of these developments, it is safe to say that the pandemic has accelerated the electric-car shift.
Based on car sales data during January to April 2020, the IEA expects the passenger car market to contract by 15 per cent over 2019, while electric sales for passenger and commercial light-duty vehicles will remain broadly at 2019 levels. Consequently, it estimates that electric car sales will account for about three per cent of global car sales in 2020.
The electric vehicle market continues to be dominated by China. As at June 2020, it had 2.3 million electric vehicles in use, which represent circa 45 per cent of the global stock. On the other hand, Europe had 1.2 million units, while the US had 1.1 million.
Undoubtedly, 2020 has been a banner year for those companies that have a competitive advantage in the electric vehicle market over traditional automotive manufactures. Tesla’s market cap has increased by more than $500 billion in 2020, meaning a growth of over 635 per cent. It is interesting to note that, Tesla is now worth as much as the combined market cap of the nine largest global car companies. This is significant when considering that this company expects to sell at least half a million electric vehicles this year, which makes up less than 1 per cent of the expected total vehicles sales.
Other stocks which are directly involved in the electric vehicle market have also increased beyond expectations during this year, which amongst other include Nio Inc (YTD: +1069 per cent), Blink Charging Co (YTD: 1,395 per cent) and Workhorse Group Inc (YTD: 612 per cent).
Naturally, established car manufacturers are quickly responding to this accelerated electric-car shift. For instance, Ford has recently released its all-electric March-E Mustang. The latter joins a list of expected electric vehicle cars from other large manufactures including, Mercedes-Benz, Subaru, Toyota, Hyundai, Volvo and General Motors.
It is evident that electric powered vehicles will dominate the future automotive industry. Therefore, it will be interesting to see if companies which have a competitive advantage in the electric vehicle market will dominate the new generation of the automotive industry or if established manufactures can deploy their capital and match their counterparts.
Disclaimer: This article was issued by Rowen Bonello, research analyst at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.