Electric Vehicles: Updated Industry Forecast
Contents
Introduction
The return of electric
Market forces
Facts and Figures
Investment Opportunities and Market Segments
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Electric Vehicles
Are regulations and investments enough to green the vehicle industry?
While the film industry’s prediction that we’d all be flying cars by 2020 didn’t quite pan out, we are nevertheless witnessing a monumental shift in the transportation sector.
Electric vehicles have been in production since the late 19th century, representing one-third of all cars on the road in 1900. While sales continued to grow over the next decade, the electric vehicle industry suddenly experienced a drastic decline and became quite unpopular shortly thereafter.
While many giants in the car industry such as Ferdinand Porsche, Henry Ford, and distinguished inventor, Thomas Edison, believed electric cars had immense potential and invested in research on more efficient batteries and technologies, the exciting development of electric vehicles soon gave way to the more affordable mass-produced gasoline-powered car: Ford’s Model T. People's desire to drive longer distances eventually took out the electric car almost entirely by 1935.
Today, electric cars make up 1% of the global car stock. Even though that figure might seem insignificant, the electric car market has actually experienced a significant decade of growth. In 2020, electric car sales reached a record high of 3 million, growing 40% from the previous year.
In order to reach the 2050 Net Zero Emissions Scenario, estimates indicate that there should be around 300 million electric vehicles operating in 2030, making up 60% of total car sales.
Data indicates significant growth in several markets. On the other hand, increasing the number of electric vehicles on the road also gives way to multiple challenges, such as inadequate charging infrastructure and overloading power grids that are reliant on the burning of fossil fuels to generate electricity.
Market Trends: Facts, Figures, Forces
Market Facts
Driven by investments and legislation, zero emission vehicles (ZEVs) — including vehicles fueled by renewable energy — are on the rise.
California stands as the leading US state in electric vehicle circulation. Currently, there are over 1 million plug-in cars in the state, and Governor Newsom has set a $10 billion zero-emission vehicles package to focus on the affordability, accessibility, and infrastructure of ZEVs.
Norway is the first country worldwide to phase out gasoline-powered vehicles for the year 2025. In the final months of 2020, two-thirds of the country’s car purchases were electric vehicles; and in 2021, less than 5% of cars sold were gasoline powered.
China currently holds the lead in electric car deployment. In 2019, almost half of the total electric cars in the world and 99% of electric buses were in China. However, electric vehicles only make up roughly 1% of the total car stock in the country.
Market Figures
As the market for electric cars keeps expanding, so too are other related markets, such as those for renewable energy and battery storage.
BCG estimated that if trends continue as they are after the electric vehicle market growth of 2020, we could expect the European market to be valued at around €33 billion ($33.5 billion) by 2030.
A Mckinsey forecast indicates that battery sales will grow by 20% every year until 2030, totatiling at least $360 billion worldwide; this figure could even reach $410 billion by 2030 if the industry more readily employs renewable technologies.
Tesla’s global battery electric vehicle’s market share was 14% in 2021; however, the company has been experiencing a decline as more and more automobile giants join the electric vehicle market. Tesla’s market share is projected to drop to 11% in 2025 as Ford and GM continue to release a wide variety of electric vehicles.
14% of EVs sold in 2021 were Tesla
Market Forces
Overflowing cities are calling for changes in urban mobility. One of the main forces mapping a road toward an electric vehicle-dominant future is the rapid race in reaching net zero scenarios. Governments have begun to impose regulations such as stringent emission targets, gasoline car phase-out programs, and urban mobility programs that call for a drastic change in the automobile industry.
The Biden administration has introduced a target for electric vehicle sales to reach 50% of the country’s car stock by 2030.
The EU has set ambitious urban plans to reduce greenhouse gas emissions by 55% by 2030.
Growing concern over the state of the environment is driving consumers to opt for an electric vehicle. A Forbes Wheels survey shows that 45% of consumers considering purchasing an electric vehicle would do so in order to protect the environment. In addition, incentives are turning this environmentally conscious purchase decision into a source of income:
In the US, there is a Federal Tax Credit for electric and hydrogen-powered vehicles ranging from $2,500–$7,500, depending on the battery capacity.
In California, powering an electric car is roughly half the cost of what it is to power a gasoline car.
Investment Opportunities
Investment in renewable energy and electrified transport rose to new records in 2021, as electric vehicle sales surged. Companies, governments, and even households invested $273 billion on electric vehicles and associated infrastructure. The current conflict in Ukraine has pushed investors toward energy storage technologies. Now more than ever, countries are having to invest in renewable energy sources as a means of replacing imported oil and gas from Russia.
Climate change, renewable energy, and electric vehicles have never been as prominent and mainstream as they are today: Of the nine auto ads featured during Super Bowl LVI, seven included plug-in vehicles. Recent innovations in development are dramatically improving electric vehicle ranges and charging times, reducing costs and turning electric cars into viable alternatives to gasoline-based vehicles.
Important investment opportunities lie within the infrastructure that will be required to enable the phasing out of internal combustion engines. As a result of public charging stations not being as ubiquitous as, say, gas stations, homeowners will have to invest in home chargers and governments will have to invest in wide-scale charging infrastructure. The question is how fast this infrastructure can grow — and keep growing — in order to match the number of electric vehicles on the road. While the number of publicly accessible charging stations reached more than 41,000 in 2021, offering more than 100,000 places to charge, more is needed.
Another investment opportunity that is expected to explode over the next decade is software. It is estimated that, by the end of the decade, the automotive software market will have grown by approximately 250%. Software will be at the very center of new automobile designs — and will potentially be that “foot in the door” many investors are looking for to tap into this booming market.
Rising Tides
As electric vehicle sales increase, associated technologies will increase in value.
Impact
Myths surrounding the environmental friendliness of electric vehicles have created certain misconceptions about their emissions impact. Despite this, the electric vehicle is becoming more accessible and has a far less negative impact on the environment than gasoline-powered vehicles do.
While electric vehicles produce zero tailpipe emissions (direct emissions) compared with gasoline cars, other emissions are created from generating the electricity used to charge electric vehicles, be they renewables or fossil fuels. However, studies show that electric vehicles produce less greenhouse gas emissions than conventional gasoline cars do, even accounting for the manufacturing process.
An economic impact of the electric vehicle market reveals the potential for new value pools. The mobility industry, for instance, is headed in several promising new directions. Advanced connectivity solutions for electric vehicles, such as personalized contextual advertising based on driving routes, could create a considerable new subscription business, potentially generating up to $310 in revenue and $180 in cost savings per car per year by the end of this decade. In addition, this mobility will require new kinds of talent with digital skills, and to catch up, traditional players will have to reskill up to a quarter of their current workforce. This is just one example of the different kinds of economic revenue that will be generated from the expanding electric vehicle market.
Market Movers: Current and Future Heavy Hitters
Heavy Hitters
Tesla Inc. is a multinational American company headquartered in Austin, Texas. The company manufactures electric vehicles and battery storage technology used for solar grids and other services. Tesla’s American market share for electric vehicles totaled 75% in 2021, growing from 71% in 2020, and their revenues closed at $18.76 billion in the first quarter of 2022.
Ford Motor Company manufactures and sells both gasoline-powered and electric vehicles. The company closed 2021 with a total of $136 billion in revenue, and its electric vehicle portfolio has been giving Tesla, the leading manufacturer, significant competition.
Toyota Motor Corporation is a multinational Japanese corporation and one of the largest automobile manufacturers in the world. The company produces between 7 million and 10 million automobiles per year. Its electric vehicle portfolio continues to increase and includes hybrid, plug-in hybrid, fuel cell, and all-electric offerings.
General Motors is the largest automobile manufacturer in the United States. Its revenue totaled $127 billion in 2021. Its increasing production and distribution of electric vehicles has also helped reduce Tesla’s American market share.
Fast Followers
Superpedestrian is a company that develops electric and AI technologies for small vehicles. Their focus is on micro mobility in cities and safe transportation through electric scooters.
Companies such as Otonomo, nuTonomy and Nexar are developing software technologies that collect valuable data for drivers, passengers, and transportation systems. For example, nuTonomy develops software specifically for self-driving cars and autonomous robots.
Venture Capital/PE and Other Fund Investors
GM Ventures focuses on investments that seek a zero emission future, including technologies that can be used in GM vehicles, manufacturing, and business operations.
Alliance Ventures, also known as Renault-Nissan-Mitsubishi Alliance, is a venture capital fund that invests in technologies that aim to propel the automobile industry forward.
Toyota Ventures is an early stage focused venture capital firm based in San Francisco, California, that invests in AI, smart cities, fintech, energy, mobility, and more.
GGV Capital is a global venture capital firm that manages $9.2 billion and is one of the largest investors in electric vehicles.
IDG Capital is a leading private equity firm focusing on clean tech, media and telecommunications, clean energy, new forms of consumption, healthcare, and more.
Global electric passenger car stock, 2010-2020
Courtesy: International Energy Association
Final Thoughts
More and more countries are joining the race toward a net zero emissions future, including over 40 countries having pledged to phase out combustion engine vehicles by the year 2050. Electric vehicle sales grew 80% in 2021, and companies continue to substantially invest in electrification. However, the industry will also have to tackle multiple challenges, such as maintaining an electric grid with the capability to support a transition to electric mobilization. Infrastructure will also be key to incentivising consumers and making the electric vehicle alternative more accessible. The road ahead may be a long one, but the electric vehicles today are already paving the way toward a future of sustainable mobility.