The pursuit of environmentally friendly mobility solutions is undoubtedly one of the most relevant trends of our time. On one hand, there is an increasing demand from consumers, while on the other hand, regulatory requirements are forcing companies to act. Given the dynamism of the industry, it is obvious that investors are also paying attention to the e-mobility sector. Have traditional car brands, therefore, no future, and how would a recent re-evaluation of electric cars by the EU, as not automatically emission-free, impact the market? Olga Milko, Business Development Director at the online broker Freedom Broker, shares her thoughts on investing in e-mobility.
E-mobility is not only gaining momentum but also showing significant economic growth. In 2023, 14.2 million new electric and hybrid cars were sold worldwide, a 35 percent increase compared to the previous year. Additionally, electric cars, with a market share of 14.6 percent in the European overall market, became the third most popular type of car, surpassing diesel cars in the rankings. As a prominent investor in European mobility startups, EIT Urban Mobility alone led 62 funding rounds last year, with a total portfolio value of one billion euros. All these data point to increasing dynamism in the field of e-mobility worldwide and in Europe. We expect the sector to continue experiencing strong growth and investor interest in the coming years.
Traditional car brands are far from being obsolete
Private investors who want to include companies in the mobility sector in their portfolio or strengthen their existing stake should not only consider new players in the market but also keep proven companies on their radar. Potential investment targets span a wide range. Traditional automakers like Volkswagen, General Motors, and, of course, Tesla offer opportunities because they are not only leaders in innovation and production of electric cars but also attract investors who value stability and industry knowledge. New players like BYD, Li Auto, NIO, Rivian, and Lucid Motors, on the other hand, impress with cutting-edge technologies, attractive product offerings, and tend to attract investors looking for fast growth opportunities. Apart from individual stocks, interested investors can also find opportunities in the fund sector to benefit from the growth potential of this dynamic sector. Funds such as the Global X Autonomous & Electric Vehicles ETF (DRIV) or iShares Electric Vehicles and Driving Technology ETF (IDRV) focus on companies involved in electric and autonomous transport technologies.
Will e-mobility become the "gold standard"?
As promising as these prospects may sound, investors must always consider risks and potential headwinds for an industry and assess them correctly. Recently, reports caused a stir that electric cars may no longer be automatically classified as CO2-free by the EU, and even a reversal of the already decided ban on new combustion engines from 2035 was discussed. Even if a new classification of electric cars by the EU does not automatically mean a return to combustion engines, it could still significantly disrupt the industry. From an investor's perspective, this could have serious consequences because the perceived environmental benefits of electric vehicles would be undermined, potentially affecting consumer demand and investor sentiment towards this sector. Consequently, companies that have invested heavily in e-mobility could become less attractive to European investors. Tesla, known for its pioneering role in the electric vehicle market, could face increased scrutiny if its products are no longer classified as climate-neutral. European automakers like Volkswagen, BMW, and the Renault-Nissan-Mitsubishi alliance, which have allocated significant resources to electrification, could also suffer, as these companies rely on selling electric vehicles as a clean alternative to traditional combustion engine cars. A change in the EU classification could cast doubt on the reliability of their products, undermining investor confidence and affecting stock dynamics.
EU aims to become more independent in e-mobility
While some politicians argue that the EU should stop imposing bans and self-restrictions, which would only harm EU countries and companies based there, Freedom Finance Europe analyzes the intensified efforts towards more e-mobility as an attempt to strengthen European competitiveness in the global e-mobility market and reduce dependence on exports, especially from China. Moreover, the EU's commitment to e-mobility aligns with broader economic and geopolitical goals, such as achieving energy independence, creating jobs, and promoting sustainable economic growth. Overall, investments in the mobility sector could offer attractive prospects for investors looking to benefit from the transition to sustainable transport solutions and technological innovations.
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