I've been thinking about electric vehicles a lot this week. On Sunday I watched the exciting Formula E race from the Excel Centre in London. The next day I had to drop my (petrol) car off for a minor repair, and had an Uber ride home in an electric Nissan Leaf. The driver told me that he worked five days a week and his charging costs were a mere £50 a month.
Rarely can a technology have been so obviously The Future than the electric vehicle. The UK has taken the lead by banning sales of new petrol and diesel cars from 2030, the EU and California from 2035. While the market share of fully of partially electric cars remains small, it is growing fast.
The rapidly improving performance of electric vehicles seems well on the way to banishing fears like 'range anxiety', and while they remain more expensive than ICE equivalents these costs will surely come down as the market grows and the technology matures. The biggest obstacle to EV adoption at this stage is charging. Millions of people can't charge at home, and the public network remains sketchy and riven by multiple competing and incompatible standards.
The UK needs ten times more public chargers by 2030. It's been estimated that some forty million chargers are required across the US, EU and China. There's no way that the ambitious targets for the EV transition can be met without huge investment in charging, with a probable role for the state to escape a 'chicken and egg' situation of market failure.
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What are the opportunities here for the retail investor?
Obviously there are the vehicle manufacturers themselves. Tesla fits neither my budget or my appetite for risk, but the prospect of giant global investment in EVs has provoked a revival of interest in established manufacturers like VW, Ford, GM and Toyota:
When it comes to the supply chain that goes into vehicles it's notable that the ETFs contain a lot of chip firms like Samsung and Nvidia. The impact of the global semiconductor shortage underlines their importance to modern car manufacturers, but I think there's also an element here in which expectations for EVs per se are being combined with those for autonomous driving.
Engineering firms like Siemens, ABB and Schneider Electric are well-placed to benefit from a big investment in power networks and chargers. The market for actually operating the charge networks is still quite fragmented and features a lot of young, small companies:
A number of these have recently gone public in the US via SPACs - ChargePoint, Blink, EVgo. At present the shares are volatile and hard to value, but I'd guess that many of these may end up being acquired and in my view are worth an affordable punt. In Europe utility firms are entering the market this way, and even oil majors like Shell and BP. Buying into them on the back of their plans to negotiate the low carbon future would certainly be a brave and counter-intuitive play.
