Season 4, Post 22: The very long road ahead for electric vehicles
“We have not yet scratched the surface” on electric vehicle (EV) adoption. This was the view put to us by the Finance Director of one NASDAQ-listed business whom we met on our recent US trip (albeit the opinion of someone who clearly has a vested interest in increased take-up). The good news is that we may be close to a global tipping point for EV adoption..
Consumer interest in EVs has certainly reached record levels. For the first time, over 50% of respondents globally in EY’s annual Mobility Consumer Index (released last week) said they are “looking to buy” an EV. For context, this figure has risen by 22 percentage points over the last two years. The high cost of car ownership and rising gas prices (a perennial complaint across America that your author heard in the last fortnight) may have something to do with it. Government policies may also be playing a role. The EU has said it plans to ban conventional gas-powered vehicles by 2030, while China is putting in place policy to ensure that at least 40% of vehicles sold by this date are electric. President Biden has a 50% target for the same year.
Despite such positive policy moves, global consumer willingness to purchase electric vehicles currently varies markedly. Drivers in Italy, China and South Korea were the keenest to acquire an EV (with 73%, 69% and 63% of respondents in favour), while those in the US (just 29%) and Australia (38%) exhibited greatest reluctance, per the EY survey. Perhaps some of the American aversion is simply the fact that the US is still at a very early stage of EV adoption, with fewer than 5% of new car sales comprising EV purchases at present. Headline vehicle purchase prices (rather than range anxiety) seem to be the main reason why not many consumers are yet willing to make the leap, although few probably realise that lifetime ownership costs can be much lower.
Even if EV adoption looks set to grow (from a low base), don’t expect to see autonomous vehicles on the streets any time soon. You author was disappointed to learn when visiting Phoenix on his US trip that Google’s Waymo trial was still not operating either from the airport or downtown but was restricted just to a 50-mile radius around nearby Chandler and Tempe. Another executive with whom we met gave an end-of-decade timeline for initial autonomous adoption, noting that although the technology would likely work before then, consumers were still not yet ready for a fully driverless experience
31 May 2022
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Alex Gunz, Fund Manager
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