2022 GMC Hummer EV.
GMC
Electric vehicle stocks have taken a hit in the past few weeks due to the departure from highly esteemed technology and growth names, but that doesn’t mean this is the end of the road for the EV boom, according to Mark Haefele, UBS chief investment officer Global wealth management.
Long-term technological and environmental changes suggest that the boom should continue, while it is recognized that volatility in individual companies’ stock prices suggests investors diversify their exposure. Still, the Haefele team said investors should consider the underlying data.
Elon Musk’s Tesla has sparked an incredible boom for electric vehicles in recent years. In 2020 alone, electric car sales rose 43% while total car sales fell 20%, according to data from EV-volumes.com released on Tuesday. The market has grown so much that Tesla is just one of dozens of competitors in the fast-growing industry today.
In fact, Tesla’s share of the U.S. EV market fell to 69% in February, from 81% the previous year, according to a report by Morgan Stanley.
It’s also getting busier as every major auto company in the US has announced they are entering the EV market.
General Motors recently pledged to invest $ 27 billion to roll out 30 EV models by 2025, and it unveiled new cars like an electric Hummer slated to hit the market in 2022. Ford released the Mustang Mach-E, which has gained market share from Tesla, and VW recently unveiled its plans to build six “giant factories” in Europe by 2030 to support the EV business.
In China, EV players like SAIC Motor Corporation are targeting the lower market with cars starting at just $ 4,465. In January alone, the company sold over 25,000 Hong Guang Minis.
Public transport is also being revised by EV companies. Proterra, a company that makes electric public buses and school buses, signed an IPO through SPAC Arc Light Clean Transition Corp. in January. signed by billionaire Chamath Palihapitiya.
Many analysts argue that the EV boom will continue. Wedbush’s Dan Ives said in a recent statement to clients that he believes “the EV party and transformation is just beginning as this industry faces a $ 5 trillion market opportunity over the next decade”.
Haefele and his team agree with Ives. Below are three reasons they see a long way to go for the EV boom.
- “Electric vehicles continue to rapidly gain market share. The sale of electric vehicles has rapidly gained market share. The different paths used by automakers were confirmed during the pandemic. While the entire automotive market shrank by 15% in 2020, global sales of electric vehicles rose by 43% and reached a market share of 4.2%. This trend is expected to continue, benefiting both EV-only manufacturers and traditional automakers who are the quickest to adapt to growing consumer preference for electric vehicles, “wrote Haefele and Co.
- “Vehicle electrification is still the next big issue in the automotive industry. Stricter emissions regulations mean that there is no alternative to switching from combustion to electric motors – be it battery electric vehicles (BEV), plug-in hybrid electric vehicles (PHEV) or fuel cell vehicles (FCV). This move towards electricity has also been welcomed by traditional automakers like Volkswagen, who have pledged over EUR 50 billion to invest in their EV strategy to catch up with Tesla, “wrote Haefele and Co.
- “The change in the automotive sector goes beyond powertrains. We are seeing parallel advances in technology in this sector as well as a shift in consumer preferences away from ownership. In terms of technology, advances are being made in areas such as autonomous driving, supported by the expansion of 5G networks. In terms of ownership, increasing mobile connectivity and changing preferences among younger age groups are leading to an increase in car sharing models. In the future, using a car does not automatically mean that you own one. Overall, we expect potential sales of around USD 400 billion by 2025 in connection with our “Smart Mobility” topic, of which electrification accounts for more than half. This corresponds to an eight to nine-fold increase compared to today’s value “, write Haefele and Co.
