When the COVID-19 pandemic drastically restricted mobility worldwide last year, few industry analysts predicted strong growth for electric vehicles. Yet it turned out to be a banner year. Even while overall car sales fell 15%, automakers sold 3 million electric vehicles in 2020, a 40+% increase over the previous year.1
A combination of trends converged to drive this dramatic growth: lower-cost batteries that can hold a charge longer, more charging stations, supportive government policies, and improvements in autonomous driving technology. Traditional auto manufacturers were also determined to expand their electric vehicle fleets to compete with industry leader Tesla.
With an industry projected compound annual growth rate of over 20% from 2019 to 2027, Jennison Associates’ Global Equity team believes the electric vehicle boom is just beginning and will evolve into an engine for larger disruptions in the transportation industry.2
Thomas Davis, CFA, global equity portfolio manager at Jennison Associates, notes, “Electric vehicles, electric batteries, and smarter semiconductor chips with artificial intelligence that enable parallel thinking are interesting ways to play the theme right now. But once the proper infrastructure is built and autonomous driving capabilities have improved, we expect disruptive mobility trends such as ride sharing, robo-taxis, and in-car monetization services to shift into overdrive.”
What's driving growth?
Policies to reduce carbon footprints
To avoid the most devasting impacts of climate change, governments worldwide are rolling out infrastructure plans to reduce their carbon footprints. Broader adoption of electric vehicles hinges upon availability of more public charging stations and more power generation from cleaner sources. Innovations in battery storage and recharging efficiency, along with lower production costs, are also essential for widespread electric vehicle adoption.
- Financial Incentives & Restriction Exemptions: To entice consumers to buy cleaner-energy electric vehicles, governments have been offering rebates, discounts, and/or income tax credits to reduce the total cost—in some cases by roughly $10,000 per vehicle.5
- Tighter Emission Standards: Regulators are forcing automakers to accelerate their electric vehicle launch plans by aggressively tightening emission standards. While China and Europe are currently leading the electrification race, the U.S. is expected to make major investments in clean energy to help achieve net-zero emissions by 2050.
EV Expansion to Enhance Autonomy and Mobility
The global automotive industry is expected to grow into a $9 trillion market by 2030, although it will look starkly different from today, with a slew of new electric vehicles set to upend the status quo.6
- Global EV Fleet Expansion: Jennison’s equity research analyst for industrial and consumer sectors, Owuraka Koney, CFA, notes that “Tesla’s game-changing impact on mobility continues to strengthen.” While the company could maintain its significant lead over newcomers if it continues to innovate and adapt faster than its rivals, the competition isn’t backing down. Almost every automaker is expanding its lineup to include electric vehicles. By 2030, the global electric vehicle fleet size is expected to grow 14-fold to 116 million units.2
- Enhanced Self-Driving Technology: As autonomous driving technologies evolve, the global autonomous car market is expected to reach $60 billion by 2030, a 10-fold increase over 2018, with 800,000 robo cars projected to be on the road.7
- The Mobility Services Opportunity: With a compound annual growth rate of 18%, the global mobility services market (which excludes carpools, chauffeur services, ride-sharing agencies, ferries, and public transport) is expected to balloon to $1.4 trillion by 2025.7 As artificial intelligence and autonomous vehicles make mobility more convenient, mobility-as-a-service (MaaS) is expected to become a $9.2 trillion market by 2030.2
Investing in the Industry
The transformation of the global auto industry will have vast implications for economies, societies, and investors. Adoption of electric vehicles and mobility services likely will be chaotic and confusing for investors. Capitalizing on the disruptive mobility opportunities in the NEXT—or new exceptional technologies—economy will require the vision to identify big secular themes and the ability to pick the future winners early. Active managers with intimate industry knowledge and the expertise to forecast the magnitude and duration of a company’s growth can help position investors to succeed.
1 Source: Statista as of January 2021.
2 Source: Statista as of March 2021.
3 Source: Statista as of December 2020.
4 Source: Jennison Associates as of June 2021.
5 Source: Statista as of October 2020.
6 Source: Statista as of September 2020.
7 Source: Statista as of March 2020.
8 Source: Statista as of March 2020.
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