The Electric Vehicle (EV) industry is facing a significant surge as the US government plans substantial changes in auto emissions standards. The proposed alterations are set to compel automakers to dramatically increase the sale of electric vehicles. By 2032, about two-thirds of all new cars sold in America would have to be electric. Without these obligations, the transition to this kind of market share was projected to be beyond 2035, according to Moody’s industry analyst, Matthias Heck. The proposed goals by the EPA are achievable, but challenging, requiring high levels of investment to meet the target.
As the next decade unfolds, profound changes in charging infrastructure and vehicle technology are expected. With improvements in battery technology and decreasing prices, consumers will be increasingly attracted to electric vehicles. The Inflation Reduction Act will further facilitate this shift through government incentives.1 On a related note, Tesla’s recent announcement states that the batteries powering its Model S and Model X vehicles lose approximately 12% of their maximum capacity after approximately 200,000 miles, which interestingly also happens to be the average lifespan of a US vehicle.2
Chinese automakers are also making significant strides in the EV industry, challenging Western and Japanese brands in their domestic markets. Brands like BYD Auto offer fast-evolving technology and competitive prices, factors Tesla CFO referred to as “scary.” NIO Inc., another Chinese player, has successfully persuaded Chinese customers to match Tesla-level prices, and it is set to launch its new SUV, ES6, in Europe later this year. The Chinese government’s stringent regulations on EV credits has encouraged these brands to develop competitive EVs even without subsidies, further increasing their global market competitiveness.3
In the midst of this revolution, Mercedes-Benz is leveraging its Formula One team to expedite and enhance the development of efficient mass-market electric vehicles. The collaboration aims to reduce development times by at least a quarter as it propels efforts to compete with Tesla. Mercedes’ initiative is unique as it directly applies the racing mindset and technological expertise in product development. After decades of leading in combustion-engine technology, traditional carmakers like Mercedes have trailed Tesla in electric vehicles. However, the F1 team’s involvement could help Mercedes regain its competitive edge in the burgeoning EV market.4
Updates on Specific EV Companies
Microvision Inc
Microvision has reported encouraging financial results for Q1 2023 with revenue reaching $0.8 million, twice the $0.4 million figure of Q1 2022. This significant revenue growth in the first quarter has been primarily attributed to the acquisition of assets from Ibeo Automotive Systems GmbH. The boost in revenue reflects the successful sale of lidar hardware and associated software to a range of customers. The company’s leadership is particularly enthusiastic about the promising momentum of the financial performance, which exceeded expectations for this period.
CEO Sumit Sharma expressed his satisfaction with the substantial achievements made in the first quarter. The revenue growth was driven by the company’s expanded product offerings, efficient integration of teams in the U.S. and Germany, and accelerated engagement with multiple Original Equipment Manufacturers (OEMs). The CEO maintains an optimistic outlook for the future, reiterating Microvision’s 2023 revenue guidance of $10-15 million, derived from the company’s expanded product suite. This sustained progress in their top line reveals a robust business strategy and a promising future for the company.5
Nvidia
The EV industry’s growth is intrinsically tied to advancements in AI and semiconductors, essential for high-performance operations and autonomous driving. Leading semiconductor and AI firm, Nvidia, has reported impressive Q1 results for fiscal 2024, with earnings and revenue exceeding expectations. Its automotive division, responsible for chips and software for self-driving cars saw a remarkable 114% YoY growth. With its strong financial forecast indicating a crucial role in the EV market, Nvidia’s progress underscores the impact of AI and semiconductors on the EV industry’s future.6
EVgo Inc
EVgo Inc. released its Q1 2023 earnings in May, surpassing Wall Street projections for earnings per share. The company reported an EPS loss of $0.18 per share, an improvement over Wall Street’s estimated loss of $0.21 per share. However, the firm posted slightly disappointing revenues of $25.3 million, falling short of consensus estimates of $26.9 million. Despite this, the revenue figure represents a substantial 228.57% increase from the year-ago report. As the operator of a public DC fast-charging network in the U.S., EVgo’s growth in revenue is noteworthy. Nonetheless, the decline in earnings despite increased revenue indicates a decrease in profit margins for the company.7
Investing in Electric Vehicles: CARS ETF
If you’re looking to invest in electric vehicles, consider Canada’s first automobile innovation ETF, Evolve Automobile Innovation Index Fund (TSX Ticker: CARS). CARS ETF invests in global companies that are directly or indirectly involved in developing electric drivetrains, autonomous driving, or network-connected services for automobiles. Shift your investments into gear with CARS in your portfolio.
Portfolio Strategy and Activity*
The Evolve Automobile Innovation Index Fund returned 5.79% during the month of May. For the month, Microvision made the largest contribution to the Fund, followed by Nvidia and Fluence Energy. The largest detractors to performance for the month were EVgo, followed by Xpeng and Bloom Energy.
For more information on the Evolve Automobile Innovation Index Fund, please click here: https://evolveetfs.com/cars/.
*Source: Bloomberg as at May 31, 2023.
Sources:
1Valdes-Dapena, P. (2023, April 12). US Government’s proposal to boost EV sales is challenging but not impossible | CNN business. CNN. https://www.cnn.com/2023/04/12/business/electric-car-regulations-response/index.html
2Kana, J. (2023, April 26). Tesla: EV batteries lose just 12% range after 320,000 km – driving. Driving.ca. https://driving.ca/auto-news/driver-info/tesla-ev-batteries-lose-12-range-320000-km
3McDonald, J., & Kageyama, Y. (2023, May 1). Chinese electric vehicle brands expand to global markets. ABC News. https://abcnews.go.com/Technology/wireStory/chinese-electric-vehicle-brands-expand-global-markets-99002558
4CNBC. (2023, May 2). In race for efficient evs, Mercedes taps F1 team to keep up with Tesla. CNBC. https://www.cnbc.com/2023/05/02/in-race-for-efficient-evs-mercedes-taps-f1-team-to-keep-up-with-tesla.html#:~:text=Mercedes%2DBenz%20has%20plugged%20its,over%20into%20mass%2Dmarket%20vehicles.
5Yahoo! (2023, May 9). Microvision announces First Quarter 2023 results. Yahoo! Finance. https://finance.yahoo.com/news/microvision-announces-first-quarter-2023-205000947.html
6Leswing, K. (2023, May 24). Nvidia shares spike 26% on huge forecast beat driven by A.I. chip demand. CNBC. https://www.cnbc.com/2023/05/24/nvidia-nvda-earnings-report-q1-2024.html
7InvestorsObserver. (2023, May 9). Evgo inc down 7.89% to $5.93 after earnings beat. InvestorsObserver. https://www.investorsobserver.com/news/stock-update/evgo-inc-down-7-89-to-5-93-after-earnings-beat
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