EV Adoption: Inevitable

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【Summary】The mass adoption of electric vehicles (EVs) is on the rise, especially in China. China has emerged as a global leader in EV manufacturing and consumption, with over 60% of global EVs sold in 2022 being made in China. The EV market in China is expected to continue growing, with an estimated 30% EV penetration currently and the expectation that half of all new autos sold in China will be EVs in the next five years.

FutureCar Staff Oct 11, 2023 4:22 PM PT

Electric vehicles (EVs) are gaining traction as the future of transportation, but there is still progress to be made. Wendy Chen, investment manager disruptive growth at GAM Investments, joins Valerio Baselli to discuss the current state of the Chinese e-mobility industry and the investment opportunities it presents.

China has emerged as a global leader in the electric vehicle market, both in terms of manufacturing and consumption. In 2022, over 60% of global EVs sold were made in mainland China, with year-on-year growth exceeding 100%. The EV penetration in China is currently around 30%, but it is expected that half of the new autos sold every year in China will be electric vehicles within the next five years.

China's EV market is highly competitive, with over 94 brands and 300 EV models available, ranging in price from $7,000 to $100,000. Domestic carmakers dominate the market, accounting for over 80% of EVs sold in China. The market can be likened to a racetrack with multiple world-class racers competing.

Chinese companies are also making their mark in the global EV market, including Europe. The European Commission has launched an investigation into whether to impose tariffs on Chinese electric cars to protect European producers. However, Chen believes that this process may delay adoption but not prevent it, as Chinese EVs are competitive and offer a variety of products with a well-established supply chain.

While the adoption of EVs has grown rapidly, there are still concerns among consumers, particularly in Europe, regarding battery autonomy, electricity demand, and safety. However, battery technology has advanced significantly, offering long-duration, reliable energy storage systems and high energy density. The key challenge now is making these technologies affordable for mass-produced EV models.

In terms of global adoption, EVs accounted for only 14% of new auto sales in 2022, compared to one-third in China. In the best-case scenario with uninterrupted globalization, Chen estimates a 50% EV penetration globally over the next decade. However, in a more de-globalized scenario, the penetration may be around 25% to 30%.

For investors looking to capitalize on the e-mobility trend, Chen suggests considering companies with sustainable cash flow and profitability and adequate software advancements. Winners in the EV market will need to be brainy, offering digital solutions and affordability.

Overall, the electric vehicle industry is on the rise, with China leading the way in manufacturing and consumption. As battery technology continues to improve and adoption increases, the future looks promising for electric mobility.