Enthusiasm

Can enthusiasm for electric vehicles spark global growth?

The expansion of the electric vehicle (EV) market has brought nuanced opportunities to create a new, cleaner and transformative energy carrier. Electric vehicle technology has already brought huge innovations to the energy market, and now it’s inspiring even more global growth. The demand for electric vehicles is expected to continue to increase.

Driven by government policies and innovation, consumer adoption of electric vehicles has grown. Rising oil prices, spurred by the Russian invasion of Ukraine, made electric vehicles suddenly attractive to many car consumers, accelerating their adoption globally.

Despite the perceived weakening of growth prospects, the global economy is currently stable. The forecast is that US GDP growth in 2022 will reach 1.3% YoY and growth in 2023 will slow to 0.2% YoY. The Eurozone GDP forecast is better for 2022, with a projection of 3.3% and 0.3% for 2023.

Yet low-carbon and renewable energy sources are rapidly becoming a key growth driver for the sector, and electric vehicles in particular are seen as a sustainable instrument to meet the growing global demand for electricity while reducing carbon emissions.

The US Inflation Reduction Act (IRA) includes $369 billion in investments in renewable energy and tax credits for electric vehicles, which should put automakers on a path to growth in the world. course of the next decade. The United States had dragged on for decades, committing but never following through on promises to address climate change needs – until now. If the United States is any indication, countries around the world are realizing they need to step up their efforts to meet their climate goals, with all-electric transportation an attractive target.

While internal combustion engine vehicle sales were down 8.5% year-over-year in the first half of 2022, electric vehicle sales managed to grow more than 60%, according to LMC. Automotive, led by BYD (“Build Your Dreams”) and Tesla. Relatively high oil prices are bringing electric vehicles closer to cost parity with internal combustion engine (ICE) vehicles, accelerating the adoption of electric vehicles globally.

Bloomberg New Energy Finance (BNEF), in its latest 2022 Electric Vehicle Outlook report, projected electric vehicle sales to reach 10.7 million in 2022 and 20.6 million by 2025. The report indicates an increase in electric vehicle sales due to a combination of policy support, improvements in battery technology, more charging infrastructure and compelling new models from car manufacturers. Electrification is also spreading to new segments of road transport, the report says, paving the way for huge changes to come.

It will take a Herculean effort, however, to replace 1.3 billion ICE cars with electric vehicles, the latter currently comprising just over 21 million cars on the road. China and Europe will account for almost 80% of electric vehicle sales by 2025, while the United States is expected to account for 15%.

The main gap in EV adoption is supply – demand for EVs is so strong that some models are effectively sold out and others have a long wait. This is where existing and new factories come in. Automakers, battery suppliers and semiconductor chip makers need to build and equip new factories.

Factories preparing for an all-electric future

The new US climate bill allocates nearly $400 billion over 10 years to encourage the transition to clean energy and the growth of factories. The need to focus on factories is clear. During Tesla’s latest earnings call, CEO Elon Musk admitted, “We don’t have a demand problem but a production problem.” Like Tesla, most electric vehicle makers are currently focused on scaling up operations and improving their supply chain management to meet demand.

The New York Times this week chronicled production at a Georgia plant, 3 football fields long, where SK Battery America employees are on the job 24/7. The Time called them “essential players in the early, high-stakes days of a global battle to build the engines of the future”. The article zoomed in on the new Ford F-150 Lightning, describing it as part of “a global win: manufacturing revitalized, money saved on gas and the potential to reduce share by 27% greenhouse gas emissions in the United States in the transportation sector. ”

Then there’s China’s EVE Energy, which will supply BMW with large cylindrical batteries for its electric cars in Europe, as the German automaker follows Tesla in adopting the new technology. EVE has signed contracts to be BMW’s main battery cell supplier in Europe for its new series of electric vehicles which are expected to hit the market from 2025.

Metals are an important component of EV batteries. Although metal prices have risen, new supply hitting the market will bring battery prices back to their previous downward trend, according to analysis by Looking for Alpha. As a result, many financial analysts predict positive global growth for the electric vehicle ecosystem.

The most common type of EV battery uses a combination of nickel, cobalt, and magnesium in lithium-ion battery cells. But many metals are present in the electric vehicle revolution, including graphite, silicon and tin in batteries; copper in charging stations; and aluminum and light steels in automobile bodies. The long-term outlook remains healthy for products like nickel and lithium that are used in electric vehicle batteries.

Again, at least 40% of the battery’s critical metals – lithium, nickel, cobalt and manganese – must come from the United States or a free trade agreement (FTA) partner to comply with the IRA. This percentage increases to 80% in 2026. This means more factories within US borders.

Final Thoughts – More Electric Vehicle Growth Across All Sectors

Many areas of impact on the global growth of electric vehicles are possible.

  • Commodity suppliers must open new mines and build refineries. Mining companies are already reacting to high prices by announcing expansions, which should lead to price stabilization over the next few years.
  • Charging companies are struggling to install stations fast enough. This is especially important for fleet owners, who represent more than 2.5 million vehicles on the road and claim more than $1.1 trillion in annual revenue.
  • Tesla is researching methods to eliminate multiple uses of battery cells, expanding its R&D to 4680 batteries, including for energy storage to improve range.
  • A managed profile of EV battery charging and discharging in conjunction with the national grid, known as the Vehicle-to-Grid (V2G) system, should be an important mechanism to reduce the impact of energy intermittency. renewable. Australia’s REVS project is an example of how commercially available electric vehicles and chargers can contribute to energy stability by transferring power back and forth across the grid.
  • Technological developments in the automotive industry are accelerating the development of automated driving. An interesting project is underway at Cornell University, where researchers have developed a way to help self-driving vehicles create “memories” of past experiences and use them in future navigation, especially in harsh weather conditions. unfavorable when the car cannot safely rely on its sensors.
  • Some researchers even say that the emergence of plastics in the development and acceptance of electric vehicles is going to be crucial, especially when considering efficiency and cost-effectiveness, because they give the necessary freedom to engineers for the design and the development of different parts and sizes. by replacing bulkier and denser materials.

With these and other areas of innovation on the rise, electric vehicles appear to be an important growth sector and a slowing mechanism for global growth, less susceptible to the vagaries of the global macroeconomy than other recent innovations.


 

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