Outlook is bright, but difficult to make a profit
When discussing future investment trends with people a while ago, we inevitably discussed the popular topic of electric vehicles. The term used in mainland China is new energy vehicles. I think this term is relatively broad and is very appropriate in China. In 2020, new energy vehicles in mainland China accounted for 1.75% of the total, an annual increase of 30%, of which pure electric vehicles accounted for 80% of new energy vehicles. Because China’s new energy vehicles include not only electric vehicles, but also any other vehicles that are not internal combustion engine (traditional) vehicles, such as hydrogen energy vehicles and biofuel vehicles, which have been developed globally for many years and use non-fossil fuels.
Why the outlook is bright
Let me talk about my conclusion first – the overall prospect of the electric vehicle industry is bright, but whether it can make a lot of money is another matter. The reasons are as follows:
Timetable to ban fuel vehicles has been determined
The time schedule for the ban on the sale of fuel vehicles and hybrid vehicles in major countries around the world is determined, as shown in the following table:
|2025||Nederland, Norway, Athens, Paris, Madrid, Mexico city|
|2030||UK, Sweden, Ireland, Ice Land, Denmark, Brussels, India, Washington State, Hawaii, Tokyo, Israel, Slovenia, Germany (Passed by the House of Lords)|
|2035||EU, China, Japan, South Korea, Canada, California, New Jersey, Massachusetts, Thailand, Clumbia|
|2040||France, Span, Indonesia, Taiwan, New York City, San Francisco, Egypt, Sri Lanka|
Worldwide Government policy support for green energy
This includes subsidies for various related industries, subsidies for car purchases, tax reductions and exemptions for manufacturers, and carbon rights trading. These government regulatory policies have had a tremendous impact on the two major industries of automobiles and energy in the past few years. To give a few examples:
- The pioneer of electric vehicles Tesla (ticker: TSLA) has been able to survive in a difficult environment in the past few years. The reason for the company’s turnaround is the sale of carbon rights trading. Interested readers can refer to the instructions in Chapter 4 of my book “The Rules of Super Growth Stocks Investing”.
- The Netherlands ruled that Royal Dutch Shell (ticker: SHEL), a major oil company, must increase emissions reductions and reduce carbon emissions by 45% in 2030. Shell has begun to reduce oil production in recent years and will achieve net zero carbon emissions by 2050. Shell has already decided on the executive bonus based on the amount of carbon reduction. A similar situation has happened to the oil giant Exxon Mobil (ticker: XOM). The traditional oil giants have suffered a sharp decline in market value in the past few years, and they are facing an existential crisis. Delisted from the Dow Jones Index in 2020.
- Russia is a traditional oil producer, and oil is also their main source of foreign exchange income. In 2021, a new oil strategy has been drawn up: “Before the end of the oil age, sell everything that can be sold.”
Electric vehicles are more like electronic devices
For this reason, the barriers to entry for electric vehicles are lowered; this is especially beneficial for electronic supply chain companies in East Asian countries and existing technology manufacturers. Generally speaking, a car needs at least 40 kinds of chips; each pure electric car uses two times more semiconductors than a traditional gasoline car.
We are in the beginning of Warring States period
Almost all traditional automakers have already formulated plans for active participation and mass production of electric vehicles: In 2018, Volkswagen (ticker: VWAGY), the world’s largest automaker, stated that the last internal combustion engine car was set at the factory. In 2026. On March 5, 2021, it announced its Accelerate strategy. It is estimated that by 2030, the company will complete 70% of the electric vehicle market share in Europe; in China and the United States, this figure is 50%. As soon as this news came out, the company’s stock price rose sharply for two days.
Stock price of EV companies have risen astonishingly
I mentioned in the first chapter of the book “The Rules of Super Growth Stocks Investing”: Take 2020 as an example, the share prices of Tesla and Chinese electric car maker NIO Automobile (ticker: NIO) will be in January 2020. In the whole year, they rose by 743% and 1,112% respectively, which is quite alarming (see Figure 1 below for details).
Figure are from Yahoo Finance
Current market share of electric vehicles
Wood Mackenzie said that global sales of electric vehicles in 2020 will grow by 38%. Marklines estimates that approximately 28,000 electric vehicles will be shipped worldwide. Investment bank Wedbush estimates that electric vehicle sales account for 3% of the total global car sales. China officially announced that the sales of new energy vehicles will reach 1.3 million in 2020, an annual increase of 8%.
The following table shows the domestic and global automobile market share of electric vehicles in major countries in the world in 2020:
|2020||EV market share in the country||EV market share in the world|
|China||1.75%||New energy vehicle production and sales volume ranked first in the world for 6 consecutive years|
China Automobile Association: In the next five years, the average annual growth rate of new energy vehicle sales in mainland China will be more than 40%. 2021 sales will increase to 2.4 million
|U.S.||1.8%||345,285 units of EV shipped|
|Germany||–||The 3rd largest EV market in the world|
According to ICCT’s statistics, the United States accounts for 18% of the total global electric vehicle production from 2010 to 2020, mainland China 44%, and Europe 25%. Bloomberg New Energy Finance (BNEF) predicts that by 2040, global sales of new electric vehicles will be 60 million, which will surpass traditional gasoline and diesel new vehicles; this forecast is consistent with the IEA. According to all the discussions in this article, the future of the electric vehicle industry is undoubtedly bright.
Electric vehicle industry supply chain
For the detailed industry chain of electric vehicles, I suggest you refer to my other blog article “How to screen potential qualifiers for electric vehicles? “
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