TRUESHARES

TRUESHARES

The Rise of Electric Transportation

In the previous Investment Insight research piece, we discussed the rise of renewable energies in the power industry decarbonization transition and the increasing demand for solar installation for housing. In this piece, we take a deep look at another major industry transition toward carbon neutral economy: the accelerated electrification in transportation industry and the investment implications for that space.

The sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that. Thomas Edison purportedly said this to Henry Ford in 1931. Ironically, nearly nine decades later, Tesla, the global leader of electric vehicles (EV), has reached a market capitalization level multiple times that of Ford’s. And it is just about to be admitted to the ubiquitous S&P 500 Index on December 21.

In this post, we examine the EV’s key role in the global transition to carbon-neutral economy, the state of the global EV industry, supportive policies, challenges and opportunities that lie ahead.

The State of the Global EV Landscape

Compared to over 100 years history of fossil fuel-based vehicles, broad adoption of commercially available EVs started about 10 years ago. Yet, the growth has been explosive in last few years, growing over from 17,000 EV on the road in 2010 to 7.2 million EV stock by 2019.3 Most major auto makers around the world have introduced or are working on their EV models. In 2019, about 2.2 million EVs were sold worldwide. Tesla took 17% share, while China’s BYD took about 10%. The chart below lists the top 10 makers, with many new entrants to the field.

Accelerated Global Growth in EV

Although EV still represents a small fraction of the auto markets today, many expect accelerated growth to continue due to policies for climate goals and improving public health, technology breakthroughs, consumer demands. In the International Energy Agency’s Global EV Outlook 2020 report, two projections for EV stocks were given. Under the current stated polices, the global EV stock could reach 140 million in 2030. Under the Sustainable Development scenario (based on the EV30@30 Campaign initiated by China, UK and nine other members, targeting 30% EV market share by 2030), the estimate is 245 million, more than 30 times above 2019’s level.3

Chart 3: EV Stock Projections Under Two Scenarios4

EV Infrastructure Expansion Supports EV Growth

EV’s growth and adoption depends on the parallel growth of EV charging infrastructure. It is encouraging to see that global infrastructure growth has kept up with the EV pace in general, reaching 7.3 million charging points, most of which are privately owned.3 However, the trend is becoming divergent across markets. The U.S. has a bigger share of private chargers at home for convenience but less public fast charging due to lack of public spending on EV infrastructure so far. Biden’s plan should begin to change that and encourage EV growth.

China is leading public infrastructure buildout efforts of high-speed chargers, due to dense urban population and the government support of fiscal spending on public infrastructure. In 2019, China added nearly a quarter million chargers, making over 515,000 chargers available to the public, an 88% increase from the previous year.3 Furthermore, some Chinese EV makers even tout the plan to swap fully charged batteries as an alternative to complement charging at stations.

Chart 4: Global Share of EV Chargers: Private vs Public – 20197

EV Transition: Challenges and Opportunities

The auto industry serves as a major economic pillar and source of employment for many countries, including that of the four largest economies and auto makers: U.S., China, Japan, and Germany. The transition from fossil fuel- to electric-powered vehicles means both creation of new jobs and the disappearance of old ones, especially impacting traditional auto makers and their supply chains. It takes vision, political wills, and public budget for governments to incentivize and facilitate such a massive transition.

This evolution will also require continued technical breakthroughs. So far, the cost of batteries has come down drastically, while battery life has gone up, making EV even more accessible. However, the electrification of heavy trucks, electrification of ground operations in the airline industry and at shipping ports are still in an early stage, presenting more new opportunities for companies to seize moving forward.

The benefit of carbon reduction from EV depends on the energy source mix for electricity. The acceleration in power grid shifts to renewable energy sources are uneven across countries. We do see promising signs of large-scale power sector transition as we discussed in the previous Investment Insight series, The Rise of Renewable Energy.

The plan for disposal of end-of-life batteries affects the overall sustainability of EV. In 2019, China mandated producer responsibility for recycling. In a similar vein, the European Union (EU) and the state of California are studying legislation to reuse and recycle end-of-life batteries.

Finally, it is an enormous task to curb carbon emission from all types of transportation. High-speed rails, electric public transit and car-pooling via shared rides must be part of the larger solution to reduce the need for personal driving. We believe this requires strong public spending and evolving government policies to incentivize private enterprises rather than hinder the progress.

We are at the start of an accelerated long journey to electrify transportation industry globally. Consumers are embracing it. Policies support it. The climate needs it. As a result, we believe that the massive transformation in the transportation industry presents long-term investment opportunities for investors.

References

1. https://www.goodreads.com/quotes/69333-we-are-like-tenant-farmers-chopping-down-the-fence-around

2. Source: US Sources of Green House Gas Emission, 2018, US EPA. https://www.epa.gov/ghgemissions/sources-greenhouse-gasemissions.

3. Source: IEA (2020), “EV Global Outlook 2020: Enter the decade of electric drive?”, https://www.iea.org/reports/global-evoutlook-2020. All rights reserved.

4. Source: IEA (2020) EV Global Outlook 2020. Stated Policies Scenario: IEA, Global electric vehicle stock in the Stated Policies Scenario, 2019 and 2030, IEA, Paris https://www.iea.org/data-and-statistics/charts/global-electric-vehicle-stock-in-the-statedpolicies-scenario-2019-and-2030-2. Sustainable Development Scenario: IEA, Global electric vehicle stock in the Sustainable Development Scenario, 2019 and 2030, IEA, Paris. https://www.iea.org/data-and-statistics/charts/global-electric-vehicle-stock-inthe-sustainable-development-scenario-2019-and-2030. All rights reserved.

5. Source: Internal Revenue Service. https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d.

6. China Society of Automotive Engineers. http://en.sae-china.org/a3967.html. (Link may not be secure).

7. Source: IEA EV Global Outlook 2020 and Purview Investments. Private Chargers: IEA, Private electric vehicle slow chargers by country, 2019, IEA, Paris https://www.iea.org/data-and-statistics/charts/private-electric-vehicle-slow-chargers-by-country-2019. Public Fast Chargers: IEA, Publicly accessible electric vehicle fast chargers by country, 2019, IEA, Paris https://www.iea.org/dataand-statistics/charts/publicly-accessible-electric-vehicle-fast-chargers-by-country-2019. “Europe” category is comprised of United Kingdom, Germany, Norway and Netherlands for chart purposes. “Other” category may include additional European countries.

About the Author

Linda H Zhang, PhD, CEO of Purview Investments, a SEC registered investment firm specializing in climate resilience and ESG (environmental, social, governance) investing through ETF managed portfolios and ETF sub-advisory. Linda is the portfolio manager for low-carbon ESG ETF, TrueShare Active ESG Opportunities (ticker: ECOZ). Throughout her career, she served as a lead portfolio manager at leading institutional asset managers, including Blackrock, MFS and Charles Schwab’s subsidiary Windhaven. Linda is a frequent contributor to Bloomberg TV/News, WSJ, Financial Times. She speaks at industry conferences and has published her research at Journal of Investing, Journal of Index Investing, ETF.com, ETF Trends.com. Linda is also a senior advisor to a fintech firm SoFi, and co-founder and board member of Linda H. Zhang, PhD Women in ETFs. She lives with her family in Manhattan.

Recent Posts

    Request a meeting with our investment team

    433 W. Van Buren Street, 1100-E
    Chicago, IL 60607
    Email: info@true-shares.com
    Phone: 877.774.TRUE

    ©2024, TrueShares, ©2024 TrueMark Investments, LLC. (“TrueMark”).

    Before investing, carefully consider the TrueShares ETFs investment objectives, risks, charges and expenses. Specific information about TrueShares is contained in the prospectus and a summary prospectus, copies of which may be obtained by visiting www.www.true-shares.com. Read the prospectus carefully before you invest.

    An investment in TrueShares is subject to numerous risks, including possible loss of principal. The ETFs are subject to the following principal risks: Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk associated with ETFs; Equity Market Risk; Management Risk; Market Capitalization Risk (Large Cap; Mid Cap, Small Cap Stock); Market Risk; New Fund Risk.

    Individual investors should contact their financial advisor or broker dealer representative for more information on TrueShares ETFs.

    Investment Products and Services are: Not FDIC INSURED / May lose value / No bank guarantee

    All registered investment companies, including TrueShares, are obliged to distribute portfolio gains to shareholders at year-end regardless of performance. Trading in TrueShares ETFs will also generate tax consequences and transaction expenses. The information provided is not intended to be tax advice. Tax consequences of dividend distributions may vary by individual taxpayer.

    TrueShares ETFs are bought and sold through exchange trading at market price, not Net Asset Value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.

    ETF shares may be bought or sold throughout the day at their market price, not their NAV, on the exchange on which they are listed. Shares of ETFs are tradable on secondary markets and may trade either at a premium or a discount to their NAV on the secondary market.

    ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETF’s NAV. Brokerage commissions and ETF expenses will reduce returns.

    Fund Intelligence Mutual Fund Industry and ETF Award shortlists and winners are comprised of individuals and firms who have submitted entries or been nominated via the online submission process, as well as through recommendations from leading market participants. Fund Intelligence Mutual Fund Industry and ETF Award judges will use the submitted application material, as well as any uploaded supplemental information, to determine which firm, individual or product they believe to be the most suitable and deserving winners for each category. Fund Intelligence Mutual Fund Industry and ETF Award judges have the discretionary power to move nominations into alternative categories that they think may be more suitable. Fund Intelligence Mutual Fund Industry and ETF Awards were decided by an independent panel of 20 judges with expertise across the asset management space.

    TrueShares ETFs (the “Funds”) are registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 and are distributed by Foreside Fund Services, LLC, member FINRA.

    TrueMark Investments, LLC, not an affiliate of Foreside Fund Services, LLC., is the investment advisor to the Funds and receives a fee from the Funds for its services.

    TrueShares ETFs are offered only to United States residents, and information on this site is intended only for such persons. Nothing on this website should be considered a solicitation to buy nor an offer to sell shares of any fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.