ANDREW DITTBERNER, Chief Investment Officer at Old Mutual Private Client Securities, explores the vast investment opportunities in the electric vehicle value chain.
As vehicle manufacturers continue to face unprecedented challenges, due to disruptive technology and a higher level of environmental consciousness, the growing list of countries that have committed to going electric-only is a good indication that the demand for electric vehicles (EV) is set to boom.
As such, the automotive industry is in the midst of a significant transition – one that offers a promising investment opportunity. Just as the internal combustion engine (ICE) displaced horses as the means to propel vehicles in the late 1800s, the electric engine is set to be the largest disrupter in the automotive market 120 years later.
This promising outlook for the electric car has already had an impact on many industries, shining a spotlight on potential investment avenues such as lithium-ion batteries and the elements used in their production. For example, with an increasing list of countries now introducing bans on petroleum and diesel-fueled cars, the rise of electric vehicles has contributed to the soaring price of cobalt – a key ingredient in the lithium-ion batteries used in electric vehicles.
According to Bloomberg, Samsung has joined Apple in taking an unprecedented step by reportedly negotiating directly with a mine in the Democratic Republic of Congo to secure cobalt supplies. “The element is an essential component in the rechargeable batteries used in smartphones, but increasing competition — mainly from electric car manufacturers — has made an already-scarce element even more valuable.”
Companies that we see as offering investment potential in this respect include Glencore – a large producer of copper, nickel, and cobalt, all of which are critical elements in the manufacturing of electric vehicles – as well as Anglo American Platinum, the world’s largest primary producer of platinum.
Earlier this month, Glencore Plc agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM Co Ltd. Currently the largest purchaser of cobalt in the world, China is vying to be the leading manufacturer of electric vehicles. The deal between Glencore and GEM will see China purchase 50% of the global supplies of cobalt by the end of 2018.
While there may be questions around the relevance of platinum with the onset of EVs, the mass adoption of pure EVs is still many years, if not decades, away. As a result, platinum and its derivatives will remain critical in reducing carbon emissions through their use in catalytic converters, in both the ICE as well as in hybrid EVs that make use of both fuel and batteries.
Other stocks to watch that may not necessarily be obvious candidates to benefit from the ongoing transition in the automotive industry include Alphabet (Google) – who are currently investing large amounts of capital in the autonomous vehicle market and Continental – who produces technologically enhancing products ranging from electric mobility and automated driving components to vehicle infotainment systems.
The onset of electric vehicles, however, has not happened overnight. Although their origins can be traced back long before the invention of the internal combustion engine, it was only in the 1960s following the need to reduce exhaust emissions along with our dependency on crude oil, that the electric vehicle came back into vogue.
A significant driver of the more recent push for EVs is the Electric Vehicle Initiative (EVI) – a body that was established in 2009 with the purpose of bringing together representatives from member governments and partners bi-annually to share knowledge on policies and programmes that support EV development. Ten countries are currently members of this initiative – including China, the United Kingdom, the United States and South Africa, among others – representing the vast majority of the global EV market.
This initiative recently launched the EV30@30 campaign, which set the ambitious goal of 30% market share for EVs in the member countries by the year 2030.
Although some motor vehicle manufacturers have committed to phasing out petrol and diesel-only vehicles by a specific date, we believe that investors should treat the transition as a longer-term, global megatrend, as opposed to an overnight development. Abandoning traditional motor vehicles in favor of elective vehicles will happen, but it may occur over a much longer timeframe than originally anticipated.
Car tech rules CES Asia
More than 60 automotive brands will highlight their latest innovations at the Asia edition of CES in Shanghai in June.
The Consumer Technology Association (CTA) has revealed that vehicle technology show floor space at CES Asia 2019 will double in size and showcase technology advances which make cars safer and more connected.
More than 60 global auto brands including Audi, Honda, Hyundai, Kia and Nissan will feature their latest innovations in vehicle technology across two major indoor exhibit halls, the event’s largest-ever vehicle tech footprint. CES Asia attendees will experience the latest concept cars and connected vehicles from self-driving to all-electric, making transportation safer and greener. CES Asia will run from 11 to 13 June 2019 at the Shanghai New International Expo Centre Center (SNIEC) in Shanghai, China.
CES Asia show director John T. Kelley said: “Today, every company is a tech company. Traditional automotive manufacturers are joining vehicle tech newcomers to exhibit at CES Asia, the perfect platform that brings together different industries to showcase their latest technologies in self-driving, clean energy and smart navigation features. CES Asia uniquely challenges the traditional auto shows in targeting the world’s largest auto market – China.”
German auto giant Volkswagen will join forces with Beijing-based Mobvoi for their CES Asia debut showcasing the latest development of AI coming to Volkswagen’s future cars. Inceptio Technology is another first-time exhibitor to demonstrate next generation self-driving technologies for trucks and transportation services. Other first-time exhibitors include Denso, FAW Hongqi, Great Wall Motor, Hexagon Manufacturing Intelligence, Hyundai Mobis, and Polestar. 3M, Bose, Continental, NIRA Dynamics AB, OnStar, Opus Microsystems, Smart Eye AB and United Automotive Electronic Systems are just a few of the notable exhibitors returning to the automotive show floor at CES Asia 2019.
CES Asia 2019 will focus on AI, 5G, Vehicle Tech, and startups from around the world. The show is expected to feature 550+ exhibiting companies, including more than 125 startups and represents the full technology ecosystem with innovations spanning 20 product categories. For the fourth year in a row, the United States Department of Commerce (USDOC) has granted Trade Fair Certification for CES Asia 2019, a formal federal endorsement of CES Asia as a recognized opportunity to showcase U.S. products and services overseas.
Visit CESAsia.com to register now and find more event details. WeChat registration for CES Asia 2019 is also available now. Follow us on WeChat (ID: CESAsia_II) to register.
How cars can stop flu
The car of the future could help win the battle against superbugs – according to Jaguar Land Rover. Future models could help stop the spread of colds and flu thanks to innovative ultraviolet light technology (UV-C) borrowed from the medical industry, where it has been used for more than 70 years.
By integrating UV-C, Jaguar Land Rover believes it could help to stop bacteria and harmful viruses, known as pathogens, from surviving in the cabin. UV-C is currently widely used for disinfecting water, filtering air and sterilising surfaces by utilising wavelengths of light between 200 – 280 nanometres.
Exposing pathogens to UV-C within the air conditioning system breaks down the molecular structure of the DNA, neutralising them. Clean air is then released into the cabin. The technology could even help in the fight against drug-resistant superbugs.
Jaguar Land Rover is exploring UV-C technology as part of its vision to create a tranquil sanctuary inside each of its luxury vehicles. The manufacturer is piloting a wide range of driver and passenger wellbeing features, as it looks towards a self-driving future.
Dr Steve Iley, Jaguar Land Rover chief medical officer, said: “The average motorist spends as much as 300 hours per year behind the wheel. There is a clear opportunity to better utilise cars for administering preventative healthcare.”
“The implementation of individual wellbeing measures as part of our ‘tranquil sanctuary’ research promises to not only improve quality of life for our customers but in this case, offers clear advantages in reducing pathogen spread – protecting the overall population from the threat of disease; particularly as we move towards shared mobility solutions.”
Jaguar Land Rover is already actively seeking to neutralise pathogens in its latest generation Heating, Ventilation and Air Conditioning (HVAC) systems, available across the range including the all-electric Jaguar I-PACE and Range Rover Sport. The current Four-zone Climate Control and Cabin Air Ionisation system works by using high voltage to create trillions of nano-sized negatively charged particles (ions) coated in water molecules. These ions deactivate pathogens, forming larger particles which are removed from the air as they are brought back into the filter. As well as combatting pathogens, the ions also act upon odour molecules and allergens in a similar way.
Dr Iley said: “In the colder months infections are spread more easily, it’s reassuring to know that in your car at least, you can be confident that harmful pathogens are being neutralised.”
Recent medical trials* suggest the use of UV-C could be even more effective as it has been shown to cut the transmission of four major superbugs by up to 30%. Researchers focused on four drug-resistant organisms: MRSA, vancomycin-resistant enterococci (VRE), C. difficile and Acinetobacter.
Immunology expert, Dr. Hellmut Münch, CEO at Medical Enzyme Research Association, said: “The rise of superbugs and allergens is one of the largest threats we face as a species today. Investment in immunology is vital in ensuring that our immune systems stay ahead of the race against microorganisms, which are evolving far quicker than traditional pharmaceuticals can keep pace with. It is important that we continue to take an innovative look at how we can adapt our environment to help prevent the spread of the most harmful pathogens – which is why this research is paramount.”