Share Prices & Company Research


10 August 2021

The Rise of the EVs

For years the automotive sector was dominated by a handful of companies. Firms such as Volkswagen (VW), Daimler, Ford and Toyota had been enjoying strength and unparalleled brand awareness in their home markets and across the globe with their history and reputation helping to entrench their market positioning. However, as is the case with many markets dominated by a small number of companies, they lacked the motivation to innovate and were content with incremental improvements to their already successful products. More recently, a shift in consumer priorities and a more general focus on environmental issues has created a plethora of new electric vehicle (EV) companies, forcing significant change within the industry.
This increase in popularity of alternative fuels and renewable energy has caused a monumental shift within the industry, with established carmakers forced to shift their entire strategy in order to rotate towards EVs. VW, the largest car maker globally by number of units sold, recently announced that it is to invest €73bn, nearly half of its €150bn investment budget, into digital and electric vehicle technologies, a marked turnaround for such a titan of the auto industry.
While changing consumer tastes and pressure from governments has helped to force change at the car companies, nothing quite like competition has the ability to force corporate hands. The 21st century has witnessed an increase in the dominance of technology in human lives and a new wave of tech companies. The auto industry, while slow to adopt this technology, has seen a large number of new companies cropping up globally in order to meet rising demand from consumers and those with a particular focus on integrated technology and an acute focus on the customer have succeeded. Tesla, perhaps the most high-profile example, has been able to do this perfectly, rewarding shareholders in the process by creating an agile business model that produces elegant looking cars with self-driving capabilities and large touch screen displays, innovations that incumbent firms have snubbed until now.


While the EV market is currently small relative to traditional combustion engines, it is growing at a rapid pace and is quickly taking market share from petrol and diesel engine cars. In fact, as of June 2021, battery and plug-in hybrid EV sales accounted for 17.2% of all car registrations in the UK, up from just 3.1% in 2019, bringing the total new passenger plug in registrations so far this year to 132,000.
The popularity of EVs has grown so much so that the UK’s best-selling car during the month of June this year was the Tesla Model 3, selling nearly 5,500 units, over 800 more than its closest competitor. While EVs still have a way to go in total yearly sales, with none in the top ten best-selling year-to-date, recent data suggests consumers are registering new battery and plug-in hybrids at a rapid pace.
The UK and other major European markets have started to follow in the footsteps of nations such as The Netherlands and Norway, key markets initially for EV companies. A mixture of consumer interest surrounding environmental issues and governmental incentives has helped the two countries become some of the largest markets for EV companies, despite their relatively small population sizes. In 2020, 54.3% of all cars sold in Norway were electric, with the country now accounting for more than 10% of Europe’s total EV sales, impressive for a country of just over five million people.
However, while Europe’s EV growth is striking, it is China that offers new companies the largest market, owning approximately 44% of all electric vehicles and grown 36% from 2016 to 2020. Early adoption of this trend has helped many non-Chinese firms capitalise on the growth in the region, with Shanghai now housing two Tesla factories, helping the company appeal to local consumers. The Asian superpower now accounts for 20% of the California-based firm’s sales and more than doubled its local revenue in 2020.
It’s not just car companies that have taken notice of the impressive potential EVs offer, though. Investors have been keen to pour cash into those companies committed to rotating towards the electric future. While Tesla’s meteoric share price rise since late 2019 offers a clear indicator of investor confidence in the company’s strategy and demand, incumbents that have committed to an EV future have also provided strong investments, especially in recent years. VW and Volvo have both committed large sums of money and resources towards building large EV portfolios and capitalising on the growth opportunities that electric technology offers. Shareholders have been both encouraged and rewarded in recent years as the additional growth and improved profitability prospects push shares higher after years of sluggish growth and a lack of innovation.
We would expect this outperformance to continue, at least into the short/medium term as companies that are better positioned for the inevitable EV rotation are quick to carve out market share, leaving the laggards behind. The introduction of pureplay EV companies, like Tesla and Nio, into the auto sector should help to catalyse both further growth and promote innovation, with investment into self-driving capabilities and other alternative fuel sources such as hydrogen, providing exciting opportunities amongst rapid change in the industry.
This article was taken from Summer 2021 1875. To subscribe to our investment publications, please visit
Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
The Rise of the EVs
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