Accelerating Ahead: Growth of EVs and Charging Infrastructure

Most electric car sales have been concentrated in three major markets: China, Europe, and the United States. China leads with an impressive 60% share of global electric car sales in 2022, with more than half of the world's electric cars currently on Chinese roads. Europe and the United States, ranking as the second and third largest markets respectively, also experienced substantial growth, with sales increasing by 15% (Europe) and a remarkable 55% (United States) in 2022.

The push towards electrification is significantly expanding the array of electric car models accessible in the market. In 2022, the count of available electric car options reached 500, a notable increase from under 450 in 2021, and more than a twofold rise compared to the 2018-2019 figures. Like previous years, China leads the market with an extensive portfolio of nearly 300 different models, doubling the count from 2018-2019. This number remains nearly twice the number available in Norway, the Netherlands, Germany, Sweden, France, and the United Kingdom, all of which now offer around 150 models each. 

According to the IEA, global electric car sales are projected to surpass 60 million units, constituting nearly 65% of the global vehicle market. This surge in electric car sales is expected to see an average annual growth rate of around 25% from 2023 to 2030, according to their forecasts. 

Domestic Policy Goals

Governments worldwide are actively implementing policies to achieve energy independence and reduce reliance on unsustainable foreign fossil fuel sources. These measures aim to encourage the adoption of renewable energy sources and stimulate the global EV market. 

In addition, these policies also focus on nurturing domestic industries to enhance their competitiveness in the EV sector in the coming years. For example, the EU's Net Zero Industry Act sets an ambitious target, aiming for nearly 90% of annual battery demand to be supplied by domestic battery manufacturers. Similarly, the U.S. Inflation Reduction Act places significant emphasis on strengthening domestic supply chains for EVs, batteries, and critical minerals. 

Since the passage of the Inflation Reduction Act in August 2022, there has been a notable increase in investments by major EV and battery manufacturers. These investments now total at least USD $52B in North American EV supply chains, as of March 2023, reflecting a strong commitment to bolstering domestic production and sustainability. 

Stringent emission standards for automobiles are serving as a catalyst for automakers to diversify their EV offerings. For instance, the EU has introduced a relaxation in the CO2 emission targets for automakers, provided their share of zero or low-emitting vehicles, such as electric cars, increases. Furthermore, several countries are incentivizing the adoption of EVs through financial perks, including tax credits, rebates, and the waiver of registration fees. 

Automakers are actively unveiling strategies to accelerate the electrification of their new cars and trucks. Most major companies have ambitious plans to introduce numerous new EV models over the coming decade. They are also setting EV sales targets and committing to eventually phasing out the production of fuel-powered vehicles. To attain these electrification objectives, automakers are earmarking substantial investments, amounting to billions of dollars over the next decade, primarily dedicated to research and development and the establishment of new manufacturing facilities, particularly for battery production. 

The global market for EV batteries is undergoing a notable transformation. Historically, the primary demand for EV batteries stemmed from private car and SUV manufacturers. However, there is now fresh demand, driven by public transit and shared mobility companies. The EU Federation for Transport and Environment is foreseeing a complete electrification of buses in the EU by 2027. Cities worldwide are increasingly prioritizing environmentally friendly public transportation and shared mobility solutions. For instance, India is actively encouraging the adoption of electric buses in its public transport networks, with ambitious plans to deploy 50,000 electric buses nationwide within the next five years. Market projections suggest that the Global Electric Bus Market could reach a substantial value of $121.2B by 2030. 

In 2022, there was a remarkable surge in electromobility across emerging and developing economies, with noteworthy growth observed in countries like India, Thailand, and Indonesia. In 2022, electric car sales in India and Indonesia more than tripled, despite starting from a relatively low base, and they more than doubled in Thailand. This growth led to electric cars accounting for 3% of total vehicle sales in Thailand, and 1.5% in India and Indonesia. The combination of effective policies and private sector investment is poised to further increase these percentages in the future. In India, the government's substantial USD $3.2B incentive program, which has attracted investments totaling USD $8.3B, is expected to significantly boost battery manufacturing and the rollout of EVs in the coming years. 

The most vibrant segment in the realm of electric mobility is the market for two or three-wheel vehicles, which significantly outnumber traditional cars. For instance, in 2022, over half of India's three-wheeler registrations were electric, showcasing their surging popularity. In many developing economies, two or three-wheelers provide an affordable and accessible means of transportation, underscoring the importance of their electrification in promoting sustainable development. 

Looking forward, anticipate a rapid proliferation of EV models as major automakers continue to expand their EV portfolios and new players make inroads into these markets.

Numerous factors are propelling consumers toward embracing EVs. Recent surveys, such as the 2021 YouGov poll and the 2021 CarMax survey, consistently highlight environmental conservations as a top motivator for considering EVs. Many car owners see EVs as a significant stride in curbing harmful emissions, aligning with their commitment to environmental responsibility.

The expanding variety of available EV models is also a compelling factor. With a broader range of EV options expected to hit the market in 2024, consumers, especially those inclined towards larger vehicles like SUVs and pickup trucks, are increasingly drawn to the EV landscape. Furthermore, significant technological advancements have quelled previous concerns surrounding EVs. Research from the EPA indicates that between 2011 and 2021, the maximum range of EVs increased by an impressive 330%, effectively alleviating the once-dreaded "range anxiety." This development has captured the interest of consumers who frequently embark on long journeys and were previously hesitant about adopting EVs. 

Moreover, the potential for cost savings amplifies the allure of EVs. Reports from 2020 suggest that EV owners could save approximately $4,700 on fuel costs over the initial seven years of ownership, a benefit further underscored by the rising fuel expenses in the United States. Additionally, many countries offer non-monetary incentives for EV adoption, such as free municipal parking and access to carpool lanes, adding an extra layer of appeal for prospective EV purchasers. 

Pollution levels are surging in numerous countries across the globe. Emissions from internal combustion engine tailpipes, such as carbon dioxide, nitrogen oxide, hydrocarbons, carbon monoxide, and sulfur dioxide, are contributing to respiratory disorders, heart problems, and mental health issues. EVs stand out as a crucial technology for the decarbonization of road transportation; a sector responsible for roughly one-sixth of global emissions. Remarkably, the carbon footprint of EVs remains approximately 30% lower than that of conventional vehicles, even when the electricity used is generated by coal-fired power stations. 

Accessible charging options away from home or at the workplace are vital to support the growth of EVs. These on-the-go charging solutions must offer the same level of convenience as refueling an internal combustion engine (ICE) vehicle does today. 

The global market value for electricity used in EV charging is anticipated to expand over 20-fold in the coming years, reaching approximately USD $190B by 2030—equating to about one-tenth of today's diesel and gasoline market value. According to PwC analysis, the number of charge points in the United States is expected to increase significantly, from around 4 million currently to 35 million by 2030. 

Cars and trucks are responsible for nearly one-fifth of America's greenhouse gas emissions (GHGs), and these emissions must be completely eliminated to achieve the federal target of net-zero emissions by 2050. Since 2016, on average, nearly half of US consumers have cited concerns about battery or charging issues as their primary reservations when considering EV purchases. The limited network of charging stations in the country is a likely deterrent for many potential buyers. In response, the Bipartisan Infrastructure Law (BIL) allocates $7.5B to develop the nation's EV-charging infrastructure. The goal is to install 500,000 publicly accessible chargers, compatible with all vehicle types and technologies, across the country by 2030. 

Additionally, there's a growing spirit of collaboration among EV manufacturers, who are working together to create a unified charging network that allows various vehicle brands to share charging stations. Given Tesla's current dominance in the U.S. EV charging infrastructure, seven automakers joined forces in July 2023 to establish a company dedicated to developing a shared EV charging network in the U.S. Their intention is to challenge Tesla's predominance and leverage subsidies provided by the Biden administration. This collaborative venture plans to deploy 30,000 chargers across North America, targeting major highways and urban centers. Such collaborations aim to enhance the overall EV ecosystem, making it more user-friendly and, in turn, boosting the adoption of EVs. 

Given these developments, the EV value chain offers a plethora of opportunities for private equity firms and corporate investors. The global EV market size was valued at USD $384.65B in 2022 and is expected to be worth USD $500.48B in 2023. The industry is projected to be valued at over USD $1.5T by 2030, recording a CAGR of 17.8% during the forecast period. 

Potential investors must appreciate the environmental implications of EV manufacturing and the intricacies of its supply chain. Crucial areas for consideration include anticipating regulatory shifts, grasping public sentiment, evaluating reputational risks, assessing scalability of emerging EV players against industry titans, and understanding differentiation in a market flooded with globally renowned brands. 

Moreover, while the current regulatory environment is bolstering demand for EVs, potential pitfalls, such as market saturation and elevated transaction prices, cannot be overlooked. Rigorous due diligence becomes paramount in such a landscape, ensuring investments are not made at inflated prices in a potentially overheated market. 

The escalating interest in EVs is not confined to the vehicles themselves. It has catalyzed growth potential across the entire EV value chain, encompassing segments like lithium supply, battery manufacturing, and the broader EV manufacturing process. Over the next 5 to 7 years, these segments are poised for growth, with projected CAGRs of 20.4% for lithium supply, 19.9% for battery manufacturing, and 13.7% for EV manufacturing. Various trends are influencing these value chain components, and investors must be aware of them. 

For instance, beyond the surge in EV demand, there's an increasing inclination towards energy storage solutions linked to renewable energy production. This trend is expected to significantly benefit lithium supply companies, a pivotal part of the EV value chain. As reported by the U.S. Energy Information Administration (EIA), both production and consumption of renewable energy reached record highs in 2021. Driven primarily by solar and wind energy, U.S. renewable energy consumption is predicted to approach approximately 22 quads by 2030. The U.S. Department of Energy forecasts that the annual energy storage market for stationary and transportation sectors will quadruple by 2030. 

Demand for EVs has grown markedly over the past decade thanks to heightened environmental concerns, greater availability of models, increased cost competitiveness with conventional gas vehicles, and improved vehicle ranges. These factors are expected to continue to drive increased adoption over the 2023–30 decade, with the wide availability of tax incentives and other government programs supporting this trend further. 

As the EV industry continues to evolve, it presents a myriad of investment opportunities essential for private equity firms and corporate investors to be equipped with comprehensive knowledge. Engaging management consultants to conduct thorough due diligence becomes crucial to navigate this dynamic and promising market. 

Stax has deep expertise within the EV industry, providing invaluable insights to both investors and businesses alike. Project-related experience includes comprehensive market analyses, identifying promising investment opportunities, and delivering data-driven insights. Having assisted clients exploring various subsegments within the EV sector, Stax has a profound understanding of the complete ecosystem and stands as the leading strategy consulting firm for comprehensive market outlooks and stability trends. 

To learn more about Stax and our expertise, visit www.stax.com or click here to contact us directly.

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