Electric vehicles: Are we about to see a breakthrough?

Electric vehicles: Are we about to see a breakthrough?

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Seventeen years from now at the latest, electric cars sales will outnumber the sales of cars with internal combustion engines. Read here how electric cars will finally achieve a breakthrough, what the latest status of battery technology is, and which related investment opportunities could arise.

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A glance at the traffic on the streets is all it takes to see that electric vehicles have become part of our day-to-day lives. Our experts forecast that in 17 years at the latest, more electric vehicles will be sold each year than cars with internal combustion engines. A definitive breakthrough and accelerated shift to electromobility will not only come from improved battery technology or a growing network of charging stations, but will also be driven by government regulations to reduce CO2 emissions.

A look at Germany highlights the important role played by governments in the turning point of electromobility. Anyone buying an electric car receives a buyer’s premium of up to EUR 10,000. It’s therefore hardly surprising that almost 10% of all cars registered in Germany last year were electric-powered. Contrast that with 2019, when that figure was still below 2%.

Norway, a model

Looking further north, 53.3% of all new vehicles bought in Norway in 2019 were electric. However, the paradigm shift on the road took place much earlier, as the Norwegian government started offering incentives to promote electromobility in the early 1990s. Among other elements of its incentive program, no VAT is charged on newly sold electric vehicles; nor do drivers have to pay the annual vehicle tax. Spread across the whole country, a network of 10,000 quick-charging stations is available to the public. Norway expects that all cars in the country will be zero-emission by 2025.

Just how “green” are e-cars anyway?

It is wrong, however, to believe that e-cars are per se emission-free. Manufacturing electric cars continues to produce more CO2 emissions than making diesel cars. Although the production of e-cars will indeed be “greener” by 2030, it will remain CO2 intensive compared to diesel car manufacture. Over the entire lifetime of the car, however, electric vehicles are far more environmentally friendly than diesel vehicles: in Germany, for instance, by 2030, every electric car is likely to produce less than a third of the emissions that its diesel counterpart produces – with these reduced emissions occurring every year of its twelve-year lifespan.

Crux of the matter: the battery

Except in Norway, far more cars with combustion engines are still being sold than electric vehicles, primarily due to the higher sticker price of e-cars. In countries where the government offers financial incentives to buy electric cars, however, their share of the market tends to be higher. The biggest sticking point in terms of cost is the battery. Given the current state of technology, e-car batteries cannot be cost-effectively mass produced. That’s why Tesla has announced its intention to cut the cost of its batteries by 56% over the next eight years.

Of course, in addition to costs, many other aspects play a role, too, such as the range, safety, charging time, and service life of the batteries. This is where conventional lithium batteries quickly reach their limits. All eyes are therefore on a game changer that can address the disadvantages of the lithium battery: the so-called solid-state battery, which offers a higher loading capacity and faster charging time. And, with lower production costs and a longer lifespan, these batteries should enable the mass production of electric cars in the next few years.

Metal on the upswing

The increasing penetration of zero-emission cars into the mobility market means that a turning point on the commodities market will also be reached, as global demand for crude oil is expected to peak in the 2030s. As a large part of our crude oil consumption is still attributable to vehicular use, the more electric cars are on the road, the less crude oil will be consumed.

At the same time, the boom in electric vehicles is generating greater demand for metals. In particular, the cathode metals used in the production of car batteries are seeing an upward trend, mainly involving nickel, lithium, and cobalt. Copper, used for wiring, will also see an upswing. Delivery bottlenecks for these metals, if any, are short-term in nature. In addition, the recycling of car batteries can make a big difference here.

Making electromobility investable

The electric car boom could also offer interesting investment opportunities. This is why Vontobel has issued a tracker certificate on the Vontobel Electric Vehicles Equity Index. The index selects companies that are thematically related to the topic of electromobility, offering promising solutions. The selection not only includes actual producers of electric vehicles and batteries, but also companies that manufacture components or are active in providing the infrastructure needed for electric mobility.

27/11/2022 12:35:52


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