Large electric vehicle makers are reporting a slowdown in sales in 2024. If you plan to invest in the electric vehicle market, find out the key facts of 2024 below.
The Current Trend in Global Electric Vehicle Market Environment in 2024
Nearly 269,000 electric vehicles were sold in the United States in the first three months of this year, according to Kelley Blue Book. That was a 2.6 percent increase from the same period last year, but a 7.3 decrease from the final quarter of 2023. And amid the quarter-to-quarter slowdown in the industry, Tesla’s market share has fallen from 62 percent at the start of 2023 to 51 percent now.
Tesla sales fell more than 13 percent compared with the first quarter last year, while most of its emerging competitors saw double or even triple-digit growth. Legacy car brands like Hyundai, Mercedes, and BMW have also increased their E.V. sales and chipped away at Tesla’s market share.
Meanwhile, Ford’s E.V. market share jumped to 7.4 percent from 4.2 percent in the past year, making it the second-largest electric vehicle brand in the United States. Ford, however, announced this month that it was slowing down its E.V. production plans in response to slowing demand.
The increased competition comes as President Biden has sought to promote the transition to E.V.s. Mr. Biden has set the ambitious goal of having E.V.s make up half of all cars sold in the country by 2030. Currently, they make up less than 20 percent of new vehicle registrations.
In May US President Joe Biden announced steep rises in tariffs on imports of Chinese EVs, batteries, and solar panels amid concerns that a flood of imports driven by overcapacity and subsidies would damage US producers. The EU is also expected to introduce new tariffs.
Chinese EV producers are reportedly rushing to ship vehicles to Brazil and Mexico amid speculation that they are planning to introduce high tariffs.
Chinese sales have been buoyed by sales to Russia where imports of EV’s from many other countries of origin have been stopped and grey market (smuggled) cars are attracting eye-watering premiums.
Moscow is littered with new Chinese EV’s that suffered battery problems in the cold winter. Charging a lithium-ion battery when its internal temperature is below 4 °C / 25 °F can cause long-term and permanent damage to the battery.
European Commission president Ursula von der Leyen has talked of global markets “being flooded with cheaper Chinese electric cars” and “huge state subsidies” keeping prices artificially low. Last September the EU Commission opened an investigation into whether to apply punitive tariffs on Chinese EV imports to the region. That the investigation is not universally popular among European carmakers illustrates the global nature of the car industry. VW and Mercedes-Benz manufacture in China at scale and have warned that any EU action against Chinese EV imports risks retaliation. (In the first four months of this year foreign marques, principally Japanese, German, and US automakers, accounted for 40% of Chinese car sales.)
How are various countries reacting to the potential changes in the electric vehicle market that may affect an investment strategy?
Given the political climate, it is hard to see Chinese automakers setting up shop in the US. However, manufacturing cars in Mexico for the US market would, under the US-Mexico-Canada Agreement, allow Chinese carmakers to avoid US tariffs (Mr Trump has already said he would introduce 200% tariffs on such cars and Bloomberg reports that the Biden administration is seeking ways to counter Mexican-made Chinese imports). Europe seems likely to be more receptive to Chinese inward investment. France’s finance minister has said that Chinese carmakers are welcome to open plants in France.
Earlier this year China’s BYD, the world’s biggest EV maker, announced it would build an assembly plant in Hungary.
Electric vehicles and China are remaking the auto industry. Governments are determined that they, at least as much as consumers, will shape the outcome of this contest.
How to Invest in the Electric Vehicle Sector?
One easy way individual investors can gain exposure to EVs is through exchange-traded funds (ETFs). This avoids the risks associated with trying to cherry-pick the winning individual companies by buying shares/stocks.
Essentially, an electric vehicle ETF holds a basket of publicly traded stocks in the industry. These companies can either directly manufacture electric vehicles, and automotive parts or provide services that support the evolution of electric cars.
This niche area of the ETF market remains relatively uncrowded, with only a handful of players in the space. Before investing, consider reviewing the fund’s prospectus to better understand the investment strategy, holdings, and fees.
Blackrock iShares and Global X come to mind as two popular providers.
What Are the Risks Associated with Investing in the Electric Vehicle Market?
According to the IEA, the growth and impact of the EV industry depend heavily on how successful policymakers are in developing a comprehensive framework that supports the industry.
Apart from EV adoption rates, the decarbonization of electricity generators and building a global charging network, for example, are fundamental. But, beyond those efforts, shifting to sustainable business practices, such as efficient waste management, will also be crucial for long-term success.
Another view might be that EV’s will quickly be phased out in favour of hydrogen. Take the analogy of CD’s in the music market. CD’s quickly killed the market for vinyl and cassettes due to their associated advantages but rapidly became obsolete upon the advent of MP3 and streaming technology. Could the environmental cost of car batteries and the charging of them contribute to a similar replacement in the not-too-distant future?
Ingenium Financial offers regulated financial advice that can include the formation of custom-made or bespoke portfolios in tax-efficient structures, which can include risk-adjusted investments in the electric vehicle sector. Get in touch.