Dan Roarty: Long-term investors have to be long-term visionaries. Our sustainable thematic approach is constantly looking for the themes and the sectors and the companies that are shaping and really transforming the world’s economic and sustainable future. During the current global health crisis, none of us feel very mobile. But sustainable mobility, which involves, how do we move people and things in a way that’s safer, more affordable and importantly, cleaner, is definitely one of those trends that’s going to shape the future.
So here with me today to talk about sustainable mobility, and electric vehicles more specifically, is Dave Wheeler, our research analyst, who covers materials, industrials and energy sectors. So, Dave, I think most of us are pretty familiar with electric vehicles, but why don’t you start by talking a little bit about the global automotive industry? How many cars are there out there? How many of them are electric vehicles? And how quickly is that changing?
Dave Wheeler: Electric vehicles are a niche product today, but that is going to change a lot over the next decade. Globally, the auto fleet is about 1.6 billion vehicles. Of that, only seven million are electric vehicles. So, half of one percent. But we think, by 2030, that seven million electric vehicles on the road is going to go to 200 million. And that electric vehicles as a product are going to go from a niche to a mainstream product and really disrupt the auto industry as we know it.
DR: What’s driving the long-term adoption of electric vehicles?
DW: There’s two key drivers of that. The first is, battery costs have come down dramatically over the last decade. And electric vehicles, which used to be priced at a premium to fossil-fueled cars or gasoline-powered cars, are now approaching price parity. The second factor is, consumer demand was to be held back by some issues regarding electric vehicles—specifically battery range, battery life-span, charging station availability. The industry has mobilized to address a lot of those issues, and consumer demand is really starting to pick up.
DR: Dave, what do you think the investment opportunity is with electric vehicles? What parts of the economy are going to benefit from this? And where do you see risk?
DW: The shift from internal combustion engines to electric vehicles is a massive growth opportunity. Last year, a little over two million electric vehicles were sold. But we think that’s going to grow to 25 to 30 million annually by the end of the decade. If you add it all up, that’s a five-trillion-dollar revenue opportunity. Who are going to be the beneficiaries of that? Electric vehicle manufacturers, auto-parts suppliers, battery-makers, and certain semiconductor companies, as well. Who are going to be the losers in that shift? I think the traditional automakers are probably in the crosshairs of this dynamic.
DR: There’s clearly a massive financial opportunity associated with electric vehicles, but there are also social implications as well. And in particular, environmental implications. How do EVs relate to the broader discussion of climate change?
DW: We as a society have to lower our carbon emissions in the coming years. Twenty percent of carbon emissions come from cars and trucks. And the shift that we are going to see, from fossil-fueled vehicles to electric vehicles, is going to help dramatically reduce carbon emissions and help in the fight against climate change.
DR: How has COVID impacted the trend towards electric vehicles?
DW: A number of countries have launched economic stimulus programs, and many of those include incentives for electric vehicles and electric vehicle infrastructure—charging infrastructure, specifically. France, Germany, China, have all launched programs. And we think many others are going to follow suit. And all of these should help accelerate the growth in demand for electric vehicles.
DR: OK, thanks, Dave. Do you have any final thoughts on electric vehicles or sustainable transportation?
DW: The electrification of transportation is going to cross a bunch of different products. We think there’s also great opportunities in converting buses, scooters, delivery vans. It could even go as far as airplanes. You know, many of the major manufacturers are doing R&D to see how they can incorporate either full electric or hybrid electric into their propulsion systems. Short range. Probably smaller aircraft is doable. For the bigger aircraft is probably to be things like hybrids, as opposed to pure electrics. But it’s absolutely being worked on. And it’s going to be fascinating.
DR: Thanks, Dave. I think electric vehicles are a great example of a product that has both large economic opportunity, but also social opportunity. And it’s exactly the sort of thing that we can include in our portfolios that will not only help us generate returns, but will also help us generate a better world.