Electric vehicles: opportunities for a sector in transition

20 May 2022 by National Bank Investments

A car charging with an electric terminal.

The Paris Agreement, adopted in 2015 and ratified by 194 countries, laid the groundwork for the movement towards zero greenhouse gas emissions targets, which is gaining momentum around the world, both for businesses and governments. The daunting challenge of meeting the targets of this commitment requires a concerted effort on the part of the public and private sectors and civil society.

Road transportation: champion of greenhouse gas emissions

At the heart of possible solutions for the decarbonization of the global economy, transport plays a pivotal role. Indeed, this sector alone accounts for about a quarter of the world’s total annual greenhouse gas (GHG) emissions. Road transport occupies the first position, far ahead of aviation, rail or maritime transport.¹

Despite increasing climate commitments, there has been an upward trend in GHG emissions from the transportation sector for several years. Forecasts show that without a massive transition, they will continue to increase.²

Emergence of a buoyant market

In this context, it is not surprising that alternative technologies to combustion engines have accelerated their entry into the market in recent years.

With the arrival of these new technologies, supported by considerable consumer enthusiasm, exponential growth of the electric vehicle market has begun. Far from running out of steam, sales are expected to increase from 1.7 million vehicles in 2020 to 26 million in 2030,³ despite a slowdown in 2020 due to the pandemic.

The financial policies and incentives put in place by the governments of many countries are certainly not unrelated to this enthusiasm. By supporting the transition to low-emission vehicles, polluting nations are empowering themselves to meet their climate commitments.

Positive growth outlook

With the constant improvement in the performance and reliability of electric vehicles, in addition to the new players in the market, we can imagine that the conditions are right to initiate a major change in the vehicle fleet on a global scale.

This booming sector is also seeing opportunities for many suppliers to position themselves in the industry. When you talk about electric vehicles, you also need to talk about batteries, charging stations, as well as all the components used in the manufacture of these vehicles.

Not surprisingly, the responsible investment market has a keen interest in the electric vehicle sector and its ecosystem, as it helps achieve critical environmental objectives to combat climate change, in addition to offering attractive economic opportunities.

For the views of three of our portfolio managers' perspectives on the electric vehicle and value chain market outlook, see our quarterly publication Responsible Investment Roundtable.

¹Source: Shiying, W., Mengpin, G., Everything You Need to Know About the Fastest-Growing Source of Global Emissions: Transport, October 16, 2019, https://www.wri.org/insights/everything-you-need-know-about-fastest-growing-source-global-emissions-transport

²Source: IEA (2021), Tracking Transport 2021, IEA, Paris, https://www.iea.org/reports/tracking-transport-2021

³Source: BloombergNEF (2020), Electric Vehicle Outlook 2020, https://about.bnef.com/electric-vehicle-outlook-2020/

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