V2U Research

EV background

EV technology has a long history in the US, however, the substantial adoption and market growth in the U.S. have primarily occurred in the last decade, driven by technological advancements and a shifting regulatory and consumer landscape. It is interesting that the first electric vehicle (EV) was developed in the 19th and early 20th centuries. However, they were soon overtaken by the combustion engine vehicles due to limitations in battery technology, range, and infrastructure. France and England were the first countries to develop EVs in the late 1800. It was not until 1895 that Americans started to devote attention to EVs. In 1897, the first commercial application was established with a fleet of New York City taxis. By 1935, EVs had almost disappeared. From 1935 till the 1960s, it was a dead year for EV development and personal transportation use.

Over the last decade, the demand for electric vehicles has increased gradually due to technological advancement, environmental concerns, and regulatory pressures globally. Countries around the world have implemented stricter emissions regulations and fuel economy standards. These policies have incentivized automakers to develop and market electric vehicles. Other factors that boosted the demand for EVs are the incentives and support being offered to buyers, the government investment in public and private charging infrastructure has made it easier for EV owners to charge their vehicles, reducing range anxiety and making EVs more practical for everyday use. Also, increased model availability, decreasing cost of producing these vehicles, and rising public awareness towards global warming are some of the reasons driving EV demand lately.

Why this sector is under discussion?

Based on the growth potential so far in the last 10 years and in the coming period, this industry has become quite popular amongst investors. There are several factors why this industry is gaining market attention. Some of them are as follows.

1. Market Growth Potential

As pointed out above, the EV industry is experiencing rapid growth due to increasing consumer adoption and a broader range of vehicles available. This segment is expected to grow further as governments push for decarbonization and as technology continues to improve.

Besides, the global transition from internal combustion engine vehicles to EVs is a significant shift in the automotive industry. This shift in the trend in the automotive industry is seen by investors as a long-term trend with substantial market potential.

2. 2. Technological Innovation

EVs are at the forefront of a technological revolution in the automotive sector, encompassing advancements in battery technology, autonomous driving, and smart vehicle features. Companies leading these innovations, such as Tesla, Rivian, and traditional automakers investing heavily in EVs, are attracting investor interest.

Further, the growth of EVs is also driving investment in related sectors, such as battery manufacturing, charging infrastructure, and renewable energy. Companies involved in these areas are seen as key players in the future energy landscape.

3. Environmental, Social, and Governance (ESG) Factors

While making any investment decisions in present times, most investors are increasingly prioritizing ESG factors as well. EVs are seen as a critical factor in reducing greenhouse gas emissions and combatting climate change, making them an attractive investment for those looking to support sustainable and socially responsible businesses.

Also, governments worldwide have started implementing stricter emissions regulations and offer incentives for clean energy technologies. As a result, many companies in this space are well-positioned to benefit from the changing trends in the automotive industry. This regulatory environment supports long-term growth prospects for EV manufacturers and related industries.

4. Strategic Partnerships and Mergers & Acquisitions

With the rapid growth in the EV space, mergers and acquisitions, strategic partnerships, joint ventures, and investments are becoming common. We are seeing many traditional automakers partnering with tech companies, battery manufacturers, and startups to accelerate their EV development. These collaborations can create new investment opportunities and synergies. The sector has also seen mergers and acquisitions, as companies seek to enhance their capabilities and market presence. These activities can provide attractive opportunities for investors.

5. Innovation Beyond Vehicles

Another key interest area attracting investors lately is the integration of EVs with advanced technologies like autonomous driving and connected car services. The convergence of technologies presents opportunities for new business models and services. At the same time, EVs along with their batteries are seen as potential components of broader energy systems, including energy storage and grid integration. This is also expected to open new markets as well as revenue sources beyond traditional automotive sales.

Factors that could impact EV prospects

While the overall trends toward electrification seem to be strong, there still exist challenges that can influence the trajectory of the EV market.

1. Need for a resilient supply chain: As the demand for EVs is increasing, any reason causing supply chain constraint can have a significant impact on EV production, cost, delay in product launches, increase in the price of EVs for customers or there could be a delay in the availability of these vehicles in the market.

Besides, the prolonged supply chain constraint could negatively impact investor sentiment and companies in this business might experience a fall in their share prices.

2. Accessible charging infrastructure:

Another key factor that can impact EV adoption is the lack of adequate charging infrastructure to charge EVs quickly at home, offices or a public network of fast chargers. Because of the availability of less charging infrastructure, potential buyers may be hesitant to invest in an EV if they are uncertain about their ability to charge it conveniently. Also, in places with well-developed charging networks may see higher EV adoption rates, while areas with limited infrastructure lag behind. This can create disparities in EV adoption across different regions and limit the overall growth of the EV market.

It was also impacting business and fleet adoption. Delivery companies and public transportation providers may be reluctant to transition to EVs without reliable and widespread charging infrastructure. The lack of charging options can hinder the operational feasibility of electric fleets.

3. Increase in raw material cost can hurt EV adoption:

One of the reasons that boosted EV adoption was the increase in energy prices. However, the rising price of Lithium, which is a key component in the battery used in the EVs can impact the prices of electric vehicles and will impede EV adoption. While experts believe the projected EV market share to be around 24%. However, the increase in the raw material price discourages vehicle buyers from buying EVs. Thus, this could impact the projection by these experts.

EV Outlook in USA

The outlook of electric vehicles is positive in the USA. It is expected that the EV share of light vehicle sales in North America will reach around 11% in 2024, increasing to 15% in 2025 and around 41% by 2030. Battery electric vehicles are expected to account for 78% of the EV market share in 2024 and will increase to ~83% in 2025 and around 93.5% by 2030.

The projected sales growth in the US is attributable to the high disposable income of the US citizens to afford EVs. EV manufacturers are also investing heavily in EV technology and introducing new models with new features and performance. Thus, making these vehicles more appealing to these customers. Besides, the government’s focus on clean energy has created a favorable environment for the EV industry in the US.

Bottom-line:

The US is a stable economy with a strong customer base who has the potential to afford EVs and are also willing to adopt new technologies. Thus, making the environment for EVs positive.