Investing in the EV revolution

Tim Gerrard

Janus Henderson

The transportation sector accounts for approximately 16% of all global emissions, of which road transport is responsible for about three quarters(1). It’s clear that the decarbonisation of cars, trucks and other road transportation is a global imperative. The days of the internal combustion engine in vehicles are numbered – and savvy investors are paying attention.

Chart 1: Electric vehicle sales projections

Source: Visual Capitalist, 2021. There is no guarantee that past trends will continue, or projections will be realised.

Insatiable demand for ‘green’ metals and minerals

As the popularity of electric vehicles (EVs) continues to grow, so will demand for various minerals, metals and rare earth elements, including lithium, cobalt, nickel and graphite. These are all raw materials used in the production of batteries, motors and other EV components.

In the case of lithium, a key component in EV batteries, production is forecast to expand by 20% a year(2) – and this still might not be able to keep up with growing demand. It is expected that the lithium industry will need a minimum US$42 billion of investment between now and 2030 to avoid a supply crunch.(3)

Chart 2: Forecast lithium carbonate production

Source: Comisión Chilena del Cobre; Servicio Nacional de Geología y Minería (Chile); Benchmark Minerals, 2020. No forecasts can be guaranteed.

Supercharging the fundamentals

Despite the COVID-19 pandemic, interest and demand for EVs has only strengthened. In 2020, the overall car market contracted, but the EV segment bucked this trend, with global sales increasing to 3 million, or 4.1% of total car sales. In 2021, EVs doubled to 6.6 million sales globally, representing almost 9% of the global car market.

  • The global EV market is set to grow at a compounding annual growth rate of 33.6%, to reach US$2,495.4 billion by 2027.(4)
  • In 2012, approximately 130,000 EVs were sold. Today, that many are sold within one week.(5)
  • It’s estimated that the supply of critical minerals for EVs will need to rise 3000% by 2040 to meet climate goals.(6)

Unlimited investment potential spanning multiple industries

The outlook for the electrification of passenger and commercial transport vehicles is exceptionally strong, with individuals, businesses, and governments worldwide moving to support the transition. That’s fuelling unprecedented demand for the raw materials needed to keep pace. The investment required to drive this step-change in technology can’t be understated.

Invest in the transition to net zero

Our new active ETF, the Janus Henderson Net Zero Transition Resources Active ETF (Managed Fund) (ASX:JZRO) offers access to this multi-trillion dollar investment thematic. It invests in companies all over the world that are enabling the transition to a net-zero carbon emission future. Visit our website or the fund profile below to learn more.

ETF
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1. Global Fuel Economy Initiative – International Energy Agency 2. Lithium Mining: How new production technologies could duel global EV revolution, McKinsey 3. Lithium industry needs $42 billion to meet 2030 demand – Benchmark Mineral Intelligence 4. EV market to Grow at CAGR 33.6% - Bloomberg 5. Global Fuel Economy Initiative – International Energy Agency 6. The role of critical minerals in clean energy transitions – International Energy Agency This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited (AFSL 444266, ABN 16 165 119 531). The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Whilst Janus Henderson Investors (Australia) Institutional Funds Management Limited believe that the information is correct at the date of this document, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson Investors (Australia) Institutional Funds Management Limited to any end users for any action taken on the basis of this information. All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson Investors (Australia) Institutional Funds Management Limited is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect.

Tim Gerrard
Portfolio Manager
Janus Henderson

Tim Gerrard is a Senior Investment Analyst at Janus Henderson Investors, a position he has held since 2015 when Henderson acquired 90 West Asset Management. Prior to joining 90 West, Tim worked for Lonsec Securities conducting sell-side research...

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