Investing in the electric vehicle revolution

The electric vehicle (EV) revolution is rapidly changing the transportation industry, creating a wave of investment opportunities in all areas across the life-cycle of the EV. Such opportunities extend beyond car retailers to a complex ecosystem that includes new technologies, critical minerals and the infrastructure needed to keep EVs running.

Current types of EVs in the market

There are currently four types of EVs¹ and over 70 models available in the Australian market²:

1. Battery electric vehicles (BEVs): EVs solely powered by electricity that produce no tailpipe emissions.³ BEVs are also known as ‘plug-in’ EVs as they use an external electrical charging outlet to charge their battery.
2. Plug-in hybrid electric vehicles (PHEVs): vehicles powered by a combination of liquid fuel and electricity. They can be charged with electricity using a plug but also contain an internal combustion engine that uses liquid fuel.
3. Fuel cell electric vehicles (FCEVs): vehicles that use a fuel cell to power their electric motors. The fuel cell may also be used in combination with a battery or supercapacitator. FCEVs are typically fuelled by hydrogen and usually provide greater range than BEVs. One example is H2X Global, an Australian automotive company that specialises in FCEVs and fuel cell electric generators.
4. Non-plug-in hybrid EVs (HEVs): the electricity generated by the HEV’s braking system is used to recharge the battery instead of using an external plug to charge the vehicle. This is called ‘regenerative braking’ and is also used in the other types of EVs mentioned above.

The uptake of EVs in Australia has been relatively slow compared to other developed countries due to certain limitations such as the number of charging stations and range of car models.⁴ However, the number of EVs in Australia is expected to grow as further infrastructure is rolled out and cheaper EV models enter the market.

Key investment opportunities

Key investment opportunities in the EV revolution include:

1. Battery Technology: Battery technology is a critical factor shaping the EV market as it influences the range, performance and cost of the EV.⁵ Investors are closely monitoring developments in battery chemistry, manufacturing processes and recycling technologies as breakthroughs in these areas could dramatically impact the competitive market of EVs. Companies involved in battery production, as well as those developing innovative battery technologies, are attracting significant investment interest.⁶
2. Charging Infrastructure: The expansion of charging infrastructure is essential to support the widespread adoption of EVs. As the demand for EVs grows, this presents ideal investment opportunities for companies involved in the deployment of charging stations, fast-charging technologies and smart grid solutions.
3. Automotive Manufacturers: EVs are estimated to reach 40% of global car sales by 2030, up from only making around 3% of global car sales back in 2020.⁷ Traditional market leaders in the EV manufacturing space such as Tesla are facing growing competition from traditional automakers in addition to new entrants.⁸
4. Supply Chain: The shift towards electrification is driving demand for key materials used in EV batteries such as lithium, cobalt and nickel. The International Energy Agency (IEA) estimates that there will be over 40x growth in lithium demand by 2040 and an anticipated lithium uptake of 180,000 metric tonnes by 2030.⁹

Government Initiatives in Australia

Australian Government

The Australian Government announced its National Electric Vehicle (NEV) strategy on 19 April 2023.¹⁰ The strategy looks to increase the affordability of EVs, expand the national rollout of EV charging infrastructure and reduce Australia’s transport emissions.¹¹

The Australian Government has partnered with a number of businesses to implement its NEV Strategy.¹² On the 7^th March 2024, the Clean Energy Finance Corporation announced it is investing up to $50 million with Angle Auto Finance with the aim of having 20,000 new EVs being utilised in Australia over the next 2 years.¹³  The Australian Government also has a partnership with the NRMA to build 117 fast EV charging sites on national Australian highways.¹⁴

NSW Government

The NSW Government has also made commitments to increasing the uptake of EVs. The Government’s commitments currently consist of plans and strategies such as the Net Zero Plan Stage 1: 2020 – 2030.¹⁵

Net Zero Plan Stage 1: 2020 – 2030

Stage 1 of the Net Zero Plan sets out how the NSW Government will deliver on its objective to reduce emissions from 2020 – 2030.¹⁶ The Plan sets out how the Government’s first priority is to provide a pathway to deploy proven emissions reduction technologies (which includes EVs) at scale over the next decade.¹⁷ To do this, the NSW Government will reduce where possible certain barriers to entry for such technologies and also co-investments to ease the issue of high upfront capital costs in deploying such technologies.¹⁸ Further, in encouragement of the update of EVs, the NSW Government will support amendments to the National Construction Code and NSW Building Sustainability Index (BASIX), to ensure new buildings are EV ready.¹⁹

Exploring investment opportunities in the EV revolution

Overall, the EV revolution presents a range of investment opportunities such as investment into automotive manufacturing, battery technologies and charging infrastructure. However, these investment opportunities will not be without their risks, as regulatory dynamics and competitive pressures will continue to influence the market in the years to come.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.

¹Australian Renewable Energy Agency, Electric Vehicles (Web Page, 2024) <https://arena.gov.au/renewable-energy/electric-vehicles/ >.

²Transport for NSW, ‘Available electric vehicles’, NSW Government (Web Page, 2024) <https://www.transport.nsw.gov.au/projects/electric-vehicles/available-electric-vehicles>.

³Department of Planning, Industry and Environment, NSW Electric Vehicle Strategy (Report, 2021) 5. <  https://www.energy.nsw.gov.au/sites/default/files/2022-09/nsw-electric-vehicle-strategy-210225.pdf>.

⁴Arenawire, ‘Why are people reluctant to buy EVs?’, Electric Vehicles (Web Page, 09 October 2023) <https://arena.gov.au/blog/why-are-people-reluctant-to-buy-evs/>.

⁵John Cook and Gregory Payne,  ‘The race for a better EV battery’, Mackenzie Investments (Web Page, 2023) <https://www.mackenzieinvestments.com/content/dam/mackenzie/en/insights/mi-q2-2023-greenchip-quarterly-update-retail-en.pdf>.

⁶Simon Schnurrer, Henning Tielker and Stefan Dobler, ‘Where to find Investment Opportunities in the Battery Value’, OliverWyman (Web Page, 2024) <https://www.oliverwyman.com/our-expertise/insights/2023/jun/where-to-find-investment-opportunities-in-the-battery-value-chain.html>.

⁷Megan Neil, ‘Investing in the electric car revolution’, Morningstar (Web Page, 24 April 2023) <https://www.morningstar.com.au/insights/stocks/234390/investing-in-the-electric-car-revolution>.

⁸Ibid.

⁹‘Top Electric Vehicle Stocks to Invest in Australia’, Veye (Blog Post, 23 December 2023) <https://veye.com.au/blog/top-electric-vehicle-stocks-australia>.

¹⁰‘Top Electric Vehicle Stocks in Australia’,Veye (Blog Post, 23 December 2023) <https://veye.com.au/blog/top-electric-vehicle-stocks-australia>.

¹¹Ibid; Australian Government Department of Climate Change, Energy, the Environment and Water, ‘Driving the Nation Fund’ Reducing transport emissions (Web Page, 16 May 2024) <https://www.dcceew.gov.au/energy/transport/driving-the-nation-fund#:~:text=The%20Fund%20will%20expand%20the,the%20Fund%20to%20%24500%20million>.

¹²Australian Government Department of Climate Change, Energy, the Environment and Water, ‘Australian government partnerships to boost ev uptake and infrastructure’, energy.gov.au (Web Page, 07 March 2024) <https://www.energy.gov.au/news-media/news/australian-government-partnerships-boost-ev-uptake-and-infrastructure>.

¹³Ibid.

¹⁴Chris Bowen, ‘Electric vehicle charging network to connect all of Australia’ (Media Release, 26 April 2023) <https://minister.dcceew.gov.au/bowen/media-releases/electric-vehicle-charging-network-connect-all-australia>.

¹⁵Transport for NSW, ‘What are we doing?’, NSW Government (Web Page, 2024) <https://www.transport.nsw.gov.au/projects/electric-vehicles/what-are-we-doing>.

¹⁶NSW Government Department of Planning, Industry and Environment, Net Zero Plan Stage 1: 2020 – 2030 (Report, 2020) 4 <https://www.energy.nsw.gov.au/sites/default/files/2022-08/net-zero-plan-2020-2030-200057.pdf>.

¹⁷Ibid 12.

¹⁸Ibid.

¹⁹Ibid 18.