Burgeoning EV market will create more opportunities for investors: Private banks

Consumers are also taking to EVs as ranges increase, batteries become more efficient and charging stations spring up. PHOTO: REUTERS

SINGAPORE - The fast-growing electric vehicle (EV) market will present more opportunities for investors as countries accelerate the move towards more sustainable economies, according to private banks.

They also noted that Asia, especially China, will continue to drive this shift in 2022 as it forges ahead in reducing carbon emissions and rolling out green technology.

Mr Desmond Kuek, head of sustainable finance for Asia-Pacific at Swiss bank UBS, expects that 25 per cent of new cars will be electrified by 2025, with the share possibly hitting 60 per cent to 70 per cent by 2030.

"Asia is home to China, the world's largest auto market, and some of the biggest automakers. It also has the most expansive supply chain of parts, chips and raw materials," said Mr Kuek.

"We see investment opportunities across the entire value chain."

There is also room for further growth in China's EV sales, which are expected to hit 18 million units in 2030, up from about 1.8 million last year, he noted.

"This extraordinary growth has been fuelled by vast amounts of public and private investment that leave China home to some of the most innovative players across the global supply chain," he added.

Consumers are also taking to EVs as ranges increase, batteries become more efficient and charging stations spring up.

Mr Kuek noted that China, the world's second-largest economy, plans to be carbon-neutral by 2060. 

"Central to achieving this goal is the vision to completely replace vehicles powered by internal combustion engines with new energy vehicles by 2035.

"This will require a huge investment into building up the necessary charging infrastructure nationwide and in convincing drivers to embrace the new technology," he said.

Citi Global Wealth Investments said China, like many other countries, has experienced power shortages recently.

"This is a side effect of the country's effort to reduce its dependency on carbon fuels. In the near term, higher prices from such shortages lead to more fossil fuel burning," it noted.

However, the shortages are also likely to speed up efforts to expand the production and use of green energy, an area where China has a competitive advantage, it added.

Citi Private Bank global investment strategist Malcolm Spittler pointed to the rapid growth of China's middle class and the country having two of the five largest global EV makers - SAIC Motor and BYD - which also produce more affordable EVs.

"As the EV market matures, we anticipate EVs to be consistently less expensive not just in total cost terms but also in upfront purchase price than a comparable internal combustion engine vehicle," he told The Straits Times.

"This will likely make them a big player in emerging markets with cost-sensitive consumers."

Mr Spittler said that Europe has had one of the fastest uptakes of EVs.

"Volatile energy prices in Europe this winter and the current Russia-Ukraine showdown, with its threats to disrupt oil supplies, may increase the appeal of an even more rapid shift towards EVs," he added.

He noted that the United States has also seen larger EVs such as pickup trucks being announced and tentatively brought to market.

"This is an exciting market for both its ability to transform some of the most polluting vehicles on the road to electric power, and to increase the predictability and lower the downtime in energy and repair costs for truck fleet operators," he said.

HSBC Global Private Banking noted that the world's population is forecast to expand by two billion over the next 30 years, which will put increased stress on transport systems and the climate unless new technologies are adopted.

Industries that will benefit include EV manufacturers and their suppliers, and hydrogen and fuel cell industries as well as semiconductors and sensors.

It noted that an EV requires over eight times more semiconductors compared with its petrol engine equivalent. 

"This rapidly evolving area provides much potential for investors," it said.

Automation and artificial intelligence, biotechnology, and physical and digital security are other likely winners of the transformation, it added.

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