An Electrifying Opportunity Around the World

​This week we continue with the thematic of the future of mobility. We have previously written about the incredible government appetite for renewables from a policy perspective, EV being a key component of this. This also happens to be the reason why we here at TAMIM believe that this is a space that investors simply can’t afford to ignore. 

Author: Sid Ruttala

This all comes despite Covid putting somewhat of a damper on global EV sales with a decline of 25%. We can however contrast this with the rapidity and the velocity with which, in the calendar year preceding, it we saw incredible growth; global sales tipping over the critical two million mark. A growth of 9% from the previous year, which saw an even greater 65%. 

Despite Covid offering some headwinds to sales because of lockdowns and a downturn in consumer sentiment (less so here in Australia), we still remain bullish on the continued growth of the segment. Not least because of the below factoids:

1. 2025, 2026, 2027 - The years in which, Norway, Belgium and Austria respectively are introducing bans on non-electric vehicles with differences across sectors. For example, the scope for Belgium only extends to new company cars.
2. 2030 - The year in which the UK is proposing to ban outright the sale of fossil fuels based automobiles. India has gone further in targeting not only a ban of new vehicles but a ban outright. 
3. 2050 - The year at which the EU proposes to achieve a net-zero carbon target. With 2040 being the more aggressive base case in order to meet the targets set in the Paris Climate Agreement. 
4. With the US set to rejoin the Paris agreement, we see a marked incentive for that particular market to phase out fossil fuels based automobiles sooner than later (though we wouldn’t count on an outright ban stateside, maybe a tax on non-EV vehicle sales?). 
5. €5 billion - the amount of direct subsidies offered by Germany alone for auto-manufacturers to go renewable. We will continue to see more incentives within the bloc towards enabling and fast tracking the move towards EV, which remains a key pillar to achieve a net-zero carbon economy. 
6. The largest automotive market in the world, China, is currently undertaking a research timetable for an outright ban. 

The above are just some of the major catalysts for the rapid growth of EV sales, not because of a change in consumer sentiment but rather what will become a lack of choice. If the largest markets effectively outlaw the sales of the alternative then it stands to reason that you will sustain “organic” growth. If that still seems implausible, feel free to have a look at the chart below from JATO (a global supplier of automotive  business intelligence) of monthly car registrations across the EU by fuel type. Suffice it to say, banning or even the prospect of banning by the government does appear to have an impact on consumption.

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Source: JATO

​On the flip side, as automotive manufacturers continue to achieve economies of scale, we see the opportunity cost of not changing focus being too high to stomach and a gradual decline of petrol- and diesel-based automobiles will result. 

Not to mention that a significant amount of investment has already gone into R&D and advancing battery efficiency by both final manufacturers and OEMs (Original Equipment Manufacturers). Of this, Europe takes the lion’s share with close to €60 billion spent on E-Mobility. Potentially because of the aggressive targets in the Bloc from a regulatory perspective.

Source: European Federation for Transport and Environment

​China continues to catchup to the west though with the equivalent of €21 billion spent (7x that of Europe, mid 2017-18) and government policy acting as a key catalyst for growth of end sales, rapidly overtaking the US in 2016. Just look at how much was spent in 2019 compared to the previous year or so in both markets. The point is, we doubt that manufacturers would turn such an investment into a sunk cost… 

Source: Securing America’s Future Energy

​Regardless of what your thoughts are on the imminent viability of things like autonomous vehicles, the mobility space is undergoing an overhaul either way. Electric vehicles are here to stay. We at TAMIM plan to take advantage, do you?

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