In his book, How to Prevent a Climate Disaster, Bill Gates outlines the five core activities that are responsible for greenhouse gas emissions.
Generating electricity accounts for around 27% of global emissions, manufacturing 31%, agriculture and livestock around 19%, and heating and cooling buildings around 7%.
That leaves 16% of global emissions being the result of transport.
No wonder, therefore, that many governments have seen electric vehicle (EV) adoption as central for the effort to reach net-zero. Almost 20 countries have now adopted plans to phase out petrol- and diesel-powered vehicles.
Among those with plans to ban the sale of conventional cars are South Korea, the UK, Spain, Taiwan, Portugal, Netherlands, Israel, India, Denmark, and Ireland. The United States of America is yet to develop an official policy for the ban of gasoline cars but some of its states have set a target.
As a result, the share of electrically powered vehicles is projected to increase from 3% today to close to 60% by 2040.
Sales growth figures are also strong. According to the latest Global EV Outlook 2022, the sale of EVs doubled in 2021 compared to the previous year, with total sales coming in at 6.6 million vehicles.
The report noted, “Back in 2012, just 120,000 electric cars were sold worldwide. In 2021, more than that many are sold each week.
Nearly 10% of global car sales were electric in 2021, four times the market share in 2019. This brought the total number of electric cars on the world’s roads to about 16.5 million, triple the amount in 2018.”
Sales in 2022 have continued to be strong, with 2 million sold in the first quarter, up 75% from the same period in 2021.
“Tip of the iceberg”
On the back of government targets, growth projections, and growing sales, companies in the electric vehicle industry have seen strong stock price growth in recent years.
Big names such as Tesla have seen their valuations surge to levels substantially higher than those of traditional car makers. This does of course also mean that a lot of the future growth expectations have already been factored into their stock prices.
However, EV manufacturers are only the tip of the iceberg of the electric vehicle revolution.
The adoption of personal car use in the early 20th century transformed economies. According to Adrian Wooldridge and Alan Greenspan in their book Capitalism in America, “one calculation in 1929 suggested that the auto economy had created over 4 million jobs that had not existed in 1900, or one-tenth of the overall workforce.”
Just as the adoption of personal vehicles created an entire ecosystem of supporting and ancillary businesses, so too will the mass adoption of electric vehicles.
One of the key growth areas of this ecosystem, we believe, is the infrastructure to keep electric vehicles charged.
In order to sustain 600 million electric vehicles on the road by 2040 today’s charging infrastructure needs to expand massively.
Whereas in China, the growth of EVs has gone hand in hand with the growth of public charging points, in Europe and North America the growth of charging points has not kept pace with EV sales.
To support the goal of having an EV stock of 26 million in 2030 in the US, roughly 2.4 million public charge points are needed.
Subsidizing infrastructure more cost effective
The US currently has around 46,000 public charging stations. Solactive, therefore, estimates a potential market of almost 2.3 million additional new public charge points.
Meanwhile, the European Union currently has less than 250,000 charging stations, and it needs at least 1 million public charging points by 2025, and 3 million by 2030 to achieve its emission target, according to experts.
Put another way, in order to meet the goals outlined in the European Green Deal announced in December 2019, the ECA estimates that the number of charging points in the EU will need to quadruple by 2025.
The potential growth of electric vehicle charging infrastructure, therefore, is huge. An added factor to this is that government EV policy is moving away from subsidizing purchases and towards spending on the needed infrastructure build outs.
According to research from the World Bank, subsidizing charging infrastructure is much more cost effective than subsidizing the purchase of EVs.
For $10,000-$13,000, a government can directly subsidize one consumer EV purchase. By spending the same amount on charging infrastructure, governments can induce purchase of up to 8 of EVs.
The Solactive EV Charging Infrastructure index captures the companies that are constructing the charging networks of tomorrow across the globe.
An example of one of the companies in this index is ChargePoint (NYSE: CHPT). The California-based company has the largest network of EV charging stations in the world.
Another is Wallbox (NYSE: WBX) an EV charging equipment manufacturer in Europe. Besides providing its well-known wall mounted chargers as home charging solutions, it also offers charging solutions that can be used for public fast charging stations.
HANetf recently listed the Electric Vehicle Charging Infrastructure UCITS ETF (ELEC).
Tom Bailey is head of research at HANetf.