As the world intensifies its efforts to achieve net-zero emissions, the decarbonisation of the transport sector is a crucial component. Currently responsible for 23% of global energy-related CO2 emissions, the transport sector must reduce emissions by more than 3% annually, or 25% in total, to 2030 to be on track to meet the 2050 net-zero targets.
To mark World EV Day on 9th September 2024, Robyn MacHugh, associate director at Gravis Capital Management, takes a look at the role electric vehicles have to play in the transition, and the range of investment opportunities available.
1. Investing in new electric vehicles: a growing market with untapped potential
One of the obvious ways to capitalise on the electric vehicle (EV) revolution is via the cars themselves. The market for EVs is rapidly expanding, driven by increasing consumer demand and supportive government regulations.
In the UK, where the transport sector is the largest contributor to greenhouse gas emissions, progress has already been made in reducing emissions from road transport. The number of plug-in vehicles on UK roads has surged from just 1,650 in 2010 to an impressive 1.73 million by the first quarter of 2024. Despite this rapid growth, however, EVs still account for only 4% of the total car market, and the sale of new EVs in 2024 has slowed after years of remarkable growth, with cost still being the biggest deterrent to households. The substantial room for further expansion in this market presents a good opportunity.
While passenger vehicles have led the charge, the commercial sector is also beginning to embrace electrification. Light goods vehicles (LGVs) are seeing a notable increase in EV adoption, with over 60,000 registered in the UK. Additionally, there are approximately 3,000 electric buses and coaches, 2,500 heavy goods vehicles (HGVs), and 14,000 electric motorbikes on UK roads. These figures highlight the diverse range of opportunities within the EV market.
2. The second-hand EV market: a booming sector
The second-hand EV market in the UK is experiencing a remarkable boom. As nine out of ten new cars are purchased through lease agreements lasting three to four years, the supply of second-hand EVs is rapidly increasing. Unlike the new EV market, however, where high costs continue to deter some buyers, the second-hand market is becoming more competitive, with used EVs now often the same price or cheaper than traditional petrol vehicles. This affordability is crucial for accelerating EV adoption.
EV fleets will also play a key role in accelerating EV adoption, as the high turnover of vehicles will help supply the second-hand market. The government is committed to working with large
fleet operators to meet their EV and charging needs, recognising their importance in the transition and the effort they have made to date.
3. Investing in EV charging infrastructure: a critical component
The success of the EV revolution hinges not only on the adoption of vehicles but also on the accessibility of charging infrastructure. The UK’s charging network has grown fivefold, with private investment playing a significant role. However, with only c. 60,000 public chargers available, the infrastructure still falls short of supporting the government’s target of 300,000 public chargers by 2030.
Public charging is a critical area for investment, particularly as over 40% of UK vehicle owners lack access to off-street parking and rely on public chargers. The undersupply of public infrastructure presents a clear investment opportunity, especially as the market for EVs continues to grow.
Looking ahead: a bright future for EV investments
The EV sector is still in its early stages, with advances in technologies and innovative developments constantly emerging.
However, government support remains a critical factor. Various schemes, such as the Local EV Infrastructure Fund (LEVI) and the Rapid Charge Fund (RCF), are designed to accelerate the deployment of charging infrastructure and support the transition to EVs. The Spring Budget of 2024 fell short of providing adequate new support, but the new Labour government has pledged to restore the phase-out date for new petrol and diesel cars to 2030, accelerate the rollout of public charge points, and standardise EV information – including the state of battery health.
These policies, alongside investments in domestic battery manufacturing, aim to solidify the UK’s position in the global EV market. We await to hear more in the Autumn Budget in October.
