The Electric Vehicle Market - What does the Future Hold?

The pandemic has highlighted some of the major problems that the world faces, one of which is climate change. One of the solutions to this problem is the adoption of Battery Electric Vehicles (BEVs) which have seen a dramatic increase since 2017. What is the future potential of this market, what is driving this change, and how attractive is it to investors?

BEV adoption has increased in America year on year from 1% in 2017 to 4% in 2020 with these numbers being even higher in the EU and China. According to Allied Market Research, the global electric vehicles market was valued at $162.34 billion in 2019 and is projected to reach $802.81 billion by 2027.

Companies such as GM are teaming up with smaller EV start-ups as they attempt to lay foundations in a market with great growth potential from which they can benefit.

So, what factors are driving this exponential growth?

As mentioned earlier, climate change is driving more consumers to purchase electric vehicles as they become more environmentally conscious. This is even more significant in the aftermath of the COVID-19 pandemic which has highlighted the need for change. Furthermore, stricter government regulation is causing growth of the EV market.

For example, in the UK, the Government has proposed to ban the sale of fuel cars by 2030. China has also done something similar, announcing that they are also planning to ban the sale of fuel vehicles.

The EU has seen a fast movement towards BEVs after heightening its focus on climate change, releasing its clean energy strategy which includes the electrification of end-use sectors (sectors that use electricity, gasoline and natural gas). Stimulus packages from the European Central Government have been provided to increase the adoption of BEVs, and also to aid the recovery of EU economies.

France and Spain are offering incentive schemes to consumers who buy EVs. In France, consumers receive €7,000 for an electric vehicle that costs up to €45,000 and in Spain, €550m has been allocated to buyers who replace a car (older than 10 years) with an electric vehicle.

With this huge forecast growth in the market for EVs, as well as the possibility of an increase in the profitability of companies that operate within this market, this is a market to keep a close eye on. China is of specific interest as it is the leader in EV production. Companies like NIO and Geely, who are Chinese EV manufacturers, have seen vast increases in their share prices since the pandemic began.

Additionally, the market for batteries is also one to watch. An increase in the number of EVs will cause an increase in the derived demand for batteries, thereby benefiting the battery sector. Tesla, the world’s largest battery producer, has also seen a drastic increase in its share price, going from $85 in March 2020, to $705 in January 2021.

The EV market has significant growth prospects and will be an interesting market to watch in 2021. With a greater focus on tackling climate change, as well as greater government support, the future does seem to be electric, and therefore, companies such as NIO, Geely or Tesla are likely to benefit.