MODERN FINANCE
Electric Vehicles: Driving Toward the Future
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By Philip Dudley
here’s a new industrial revolution unfolding right before our eyes as the rise of electric vehicles (EV) takes center stage.
The internal combustion engine (ICE) is enemy No. 1, with many states and even nations around the globe, are pledging to reduce greenhouse gas emissions. Philip Dudley Legacy auto manufacturers also are behind the curve because as pure play EV manufactures such as Tesla have a huge, first-mover advantage. It’s complicated, but there are many avenues to gain investing exposure to the EV revolution when estimates are that nearly 30 per cent of cars sold by 2030 will be electric. While Henry Ford was a visionary more than a hundred years ago, billionaire Elon Musk has been this century’s Photo by Dmitry Novikov on Unsplash pioneer, not to mention one of the wealthiest men on the planet. Manufacturing an ICE car is extremely difficult, but an EV car takes higher quality steel, lithium and semiconductors, not to mention flawless execution in the factory to ultimately produce an even lower margin product. And then there’s lithium, also known as an alkali metal, required for the production of batteries. Battery technology is what separates the wheat from the chaff, and the early winner is Tesla. Still, as the EV market grows, all the players need lithium, so pay attention to this commodity. Supply chain issues are currently plaguing much of the manufacturing space. New (EV) and legacy (ICE) companies each have their particular strengths and weaknesses, with the best supply chain management prevailing. Another technological area drawing lots of attention is so-called “autonomous driving.” Imagine a world with an electric vehicle that doesn’t require a human operator. Is this holy EV grail? One might assume yes, because Apple reportedly is developing a fully autonomous EV that will be available in the not too distant future, complete with all manner of other Apple products. No doubt, this is possibly the most complex car engineering project in history. Is an EV a computer on wheels? I would argue yes, particularly taking into account the amount of semiconductor chips needed for one vehicle—approximately 1,400. And this growing demand bodes well for the semiconductor industry, which has always been notoriously cyclical but now is emerging as structural. So do your homework and get in the EV game. There are many ways to gain diversified investment exposure: a company that mines lithium, supply chain management software, semiconductor chips, autonomous driving technology and auto manufacturing. Just ask yourself, what would Elon do?
Country ZEST & Style | Winter 2022
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