E-Cars: Growth momentum shifts from China to Europe

Dear Shareholders & Friends,

To date, the music for electric cars is playing clearly in China; however, there are quite some indications that Europe will start catching up this year. A major trigger is the upper limits for carbon dioxide (“CO2”) emissions of new car fleets. Effective January 1st of this year, this will be 95 grams of CO2 per 100 kilometers driven (approximately 62 miles). This corresponds roughly to the consumption of three litres of diesel or four litres of gasoline. Car manufacturers are miles away from this and if they want to avoid the billions in fines that are threatening from next year, they must above all push the sale of e-cars. This is the only way they will be able to comply with the prescribed upper limits. No wonder that this year numerous new electric vehicles are making their debut in Europe. The marketing machines are already running: more and more e-cars are being advertised in the commercials.

 

There are other factors driving the spread of Stromers: there are numerous support programs, especially in European countries where large car manufacturers are located. In Germany, for example, the purchase subsidy for e-cars has risen from 4,000€ to 6,000€. As a result, Volksagen's ID.3 electric compact car will achieve cost parity with a Golf Diesel. When considering maintenance and other operating costs, it is already cheaper.

A decisive cost factor for electric cars is the batteries. According to a forecast from BloombergNEF, the prices for lithium-ion batteries will fall by a further 13% this year to an average of $135 per kilowatt hour. Without subsidies, $100 is the mark for cost parity. With its market power as the world's largest car manufacturer, VW is said to have already reached this level. If costs continue to fall at the current rate, average prices should also be in the range of $100 per kilowatt hour in two years, at the latest.

Better charging infrastructure

In addition to the cost of the batteries, the insufficient number of charging points has so far been regarded as a deterrent for the adoption electric cars. Here too, an end is in sight. According to Blomberg, there were 880,000 public charging points in Europe last year. Analysts expect the number to rise by more than a third to 1.2 million in 2020. While Europe is stepping on the gas in terms of subsidies and infrastructure development, China is freezing its support. As a result, growth momentum is likely to shift at least partially to Europe.

 

The "old continent" has now also understood that the entire supply chain is important for the breakthrough of electric mobility. In Germany alone, seven lithium-ion battery factories are currently in the planning or even already under construction - including CATL from China, the Swedish Northvolt together with VW as well as Tesla and the European consortium of the French Total subsidiary Saft, BMW and Varta, probably supported by Brussels. This means that the Federal Republic of Germany is currently recording the highest growth dynamic in the world in this area - even ahead of China. The total investment volume is at least 3€ billion (around $3.3 billion).

Supply chain thought through to the end

It is becoming clearer that the value chain does not begin with the battery cells. Consequently, the Dutch Advanced Metallurgical Group (AMG) has announced its intention to build a refinery for lithium hydroxide in the state of Saxony-Anhalt. There, the metal will be processed to battery quality. According to AMG, the proximity to the customers was a decisive factor in the choice of location. Production is to start in two to three years. Until then, of course, the reliable supply of the required battery raw materials must also be guaranteed. This is a particular advantage for suppliers from politically stable countries such as Canada or Australia..

 

For our German-speaking audience:

Recently, I visited Aktionar TV for an interview about electric vehicles and their impact on raw material supply chains. Please watch the video below:

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