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Electric dreams: the rise of electric cars
11 September 2023
Investment and personal finance experts assess the ESG and commodities challenges, charging questions and how Tesla, BP and Aston Martin are navigating the EV revolution.
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SUSANNAH STREETER: Hello, and welcome to Switch Your Money On, with me, Susannah Streeter, Head of Money and Markets here at Hargreaves Lansdown.
SARAH COLES: And me, Sarah Coles, the Head of Personal Finance.
SUSANNAH STREETER: Sarah, it has been a rollercoaster couple of weeks, and I’m not just talking about the fall in business activity in August and the pound’s moves against the dollar – no, it’s been the tortuous journey waiting for GCSE results, and then working out what to do with them. Not my own – my son’s. Thankfully he is on to his preferred next stage, but there were plenty of butterflies.
SARAH COLES: Yes, and for me and my son too, but we’ve now got a plan for the year ahead, and inevitably it’s gonna involve driving, given that the 17th birthday’s looming.
SUSANNAH STREETER: We are like mirror images in this respect, as that it’s passing a driving test rather than doing his A-levels which is the big focus for my nearly-17-year-old, and it means that our plan to buy a little electric car for city living might have to be put on hold because he’s determined he wants to learn with a gearstick.
SARAH COLES: Yes of course – electric cars have a single-gear system, which means they always have an automatic transmission, so you don't have to worry about any gear changes.
SUSANNAH STREETER: He doesn’t want to lose out on the ‘experience’ of being able to drive a car with an internal combustion engine. But I wonder how many other parents are being put off from making the switch by wannabe learner drivers in the family? Certainly, in the UK, the ownership of electric cars is climbing sharply, but we do still lag behind Norway, for example, which has more electric cars per head anywhere in the world.
SARAH COLES: Yes, the EV revolution is accelerating fast, with sales rising around the globe, led by China, and that’s what we are focusing on in this podcast, in an episode we’re calling Electric Dreams. We’re going to get a snapshot of the market here in the UK with the co-founder of the Zapmap app – that’s Mel Shufflebotham. Mel, your company maps out the charging infrastructure right across the UK, so is range anxiety now less acute, or is there a way to go?
MEL SHUFFLEBOTHAM: Certainly range anxiety is much less now that the majority of new EVs have around 200 to 250 miles of range, but you know I think it’s fair to say there’s still some concern out there, particularly around those considering an EV or new EV drivers going on longer journeys, and that’s really what Zapmap’s about and I’m looking forward to telling you more about that later in the programme.
SUSANNAH STREETER: Really looking forward to diving into that in more detail, Mel. Thank you. We’re also going to hear about some of the companies attempting to swerve into the fast lane in the EV race, and look at the case with our Lead Equity Analyst, Sophie Lund Yates.
SARAH COLES: And we’ll unpick fact from rumour about the environmental case surrounding electric vehicles with our ESG expert, Laura Hoy, who knows all about the environmental, social and governance issues. We’ll also take a look at the funds perspective with HL’s Head of Investment Analysis and Research, Emma Wall.
SUSANNAH STREETER: But first, let’s get into the driving seat when it comes to cold hard statistics on electric vehicle take-up. A new electric car was sold every 60 seconds in the UK in July this year, according to the Society of Motor Manufacturers and Traders and its forecast is that EVs will snare a 22.6% market share next year. Take-up is expected to be boosted by more manufacturers releasing new models onto the market, which could persuade more drivers to switch from petrol or diesel cars.
SARAH COLES: The introduction of new or larger clean air zones is also likely to propel EV take up, with the expansion of the controversial Ultra-Low Emissions Zone known as ULEZ in London. This has resulted in drivers of older petrol and diesel cars being charged £12.50 to enter the capital, and it came into force at the end of August. And the government’s proposed a zero-emission vehicle target, under which 22% of a manufacturer's car sales must be battery-powered EVs, starting next year.
SUSANNAH STREETER: However, the ongoing cost-of-living crisis may act as a brake, given that EVs are more expensive on average than conventional cars, but in the US, increased rivalry among manufacturers, government incentives and falling prices for raw materials needed for battery manufacturing are making EVs more affordable. By some estimates, it could be as soon as this year when mass-market EVs become as cheap or cheaper than cars with internal combustion engines.
In China, Chinese EV manufacturers have also had the benefit of billions of dollars in government subsidies, tax breaks and other incentives. Tough competition has helped the industry accelerate in China. More than 3.2 million new plug-in electric cars were registered in China by August, up roughly 38% year-on-year, which is about 35% of the total volume sold in the country, and China’s share of the global EV market is now estimated at 57%, with home-grown manufacture BYD still dominating the market.
SARAH COLES: As Mel mentioned, so-called ‘range anxiety’ is also still a bit of worry for some motorists, particularly if they live in remote areas or can’t charge at home, but it may surprise you to know there are more public electric charging points in the UK than there are petrol stations, and that’s according to industry data from Zapmap at the end of July 2023. There were almost 46,000 electric vehicle charging points across the UK across nearly 27,000 charging locations, and that represents a 40% increase in the total number of charging devices since July 2022.
SUSANNAH STREETER: And these figures don’t include any charge points installed at home or at workplace locations, which are estimated to be more than 400,000, and some of these EV charging points are available to the public in some form via community or visitor charging, for example. Even so, there is clamour for more charging points to be installed, particularly in more isolated areas, with greater incentives for developers.
SARAH COLES: In the US, Joe Biden’s huge stimulus deal, known rather unintuitively as the Inflation Reduction Act, is providing incentives for organisations putting in new charge points. The IRA extends the current tax credit for new EV charging stations to installations made before 2022 for up to $100,000 in costs, so the tax credit increases to 30% and 20% for the remaining costs, with direct pay and transferability.
SUSANNAH STREETER: Is the UK at risk of being left behind in the green transition without a big environmental stimulus plan of its own? The Institute for Policy Research in the UK wants Britain to set up a National Investment Fund to back new firms and support infrastructure and secure a share in any future profits for the public. The think tanks say it risks losing out to the US and the EU, which has also proposed a Green Deal Industrial Plan.
SARAH COLES: And one of the interesting developments in Europe, which could prove a game-changer if it comes to our shores, is the concept of battery swapping, and that’s when instead of waiting to charge a car you simply take out and switch battery instead, so the Chinese EV maker NIO has opened its first European power swap station in Denmark, with plans to open around 100 more this year across five European countries.
SUSANNAH STREETER: As all of these developments continue apace, against this backdrop EV culture wars still appear to be playing out, with a number of newspaper columnists and celebrities here in the UK pointing out what they consider to be the pitfalls of EVs and even questioning are they good for the planet, while in the US too the issue appears to be becoming somewhat of a political football.
SARAH COLES: This is a good time to bring in Laura Hoy, our Environmental, Social and Governance expert. Laura, is there any grounds to say that EVs are less environmentally friendly than cars powered by combustion engines which are thirsty for petrol and diesel?
LAURA HOY: Thanks, Sarah. You know the claims that EVs are not environmentally friendly aren’t totally unfounded – their batteries contain a whole host of rare earth materials that can be difficult to mine. Add to that the water demands needed to manufacture the semiconductors they run on, and the energy required to put them together, and you can understand why some people might question how green the EV revolution actually is. In fact, a lot of research suggests that EVs are actually dirtier during the production process because of their batteries.
SUSANNAH STREETER: There has certainly been a lot of discussion about this, but it doesn’t necessarily mean they’re not worth bothering about, does it, from an environmental perspective?
LAURA HOY: No, absolutely, so it’s important to remember EVs aren’t a silver bullet, but what is important is that they’re friendlier to the planet than their fossil fuel counterparts. Research has shown that in over a year just one electric car on the road can save an average of 1.5 million grams of CO2, and to put that into perspective, that’s the equivalent of four return flights from London to Barcelona, so over their lifetime they’re emitting a lot less than petrol cars.
SARAH COLES: So the cars themselves are cleaner, but what about the electricity that powers them? Is that cleaner as well?
LAURA HOY: This is where things get dicey. Where you plug your car in matters. If it’s being charged by a grid that’s largely coal-powered, then a lot of those emissions savings are more or less cancelled out. However, if it’s a grid that’s more focused on lower-carbon energy like natural gas or renewables, then the EV is going to be much more efficient. In the UK, more than 40% of the electricity grid is powered by renewables currently, and there is a target for a carbon-free electricity grid by 2035. That’s why it’s so important that we don’t zero in on just one solution or industry. Slowing climate change is going to be an all-hands-on-deck situation.
SUSANNAH STREETER: It comes partly down perhaps to where you’re charging your car. I’d love to find out what Mel Shufflebotham makes of all this, the co-founder of Zapmap app. You heard from her earlier – Mel spent years helping propel the green transition on the roads. What do you make of these culture wars, Mel?
MEL SHUFFLEBOTHAM: First of all, it’s very strange to me to have all these discussions about electric cars not being environmentally friendly. There’s been multiple studies that have shown, over a lifetime, electric cars have lower emissions and have a very positive impact on climate change, which is why of course they are front and central of the drive to net zero, supported by the government, multiple environmental agencies, the Committee for Climate Change etc. So in parallel they also have a positive impact on air quality, which is the central objective behind the rollout of all these Ultra Low Emission Zones. I don’t want to go over all the in-depth discussions on this, but as Laura says, there’s three elements. There’s the production of the vehicle, and there’s no dispute that there is more carbon embodied in the production of the vehicle, in the battery, so that is not under dispute. And then the other two areas – using the car, obviously an electric car is zero emission at the point of use, and then it comes down to the fuel production. All the studies show that net net, without even looking at where the fuel comes from, an electric car is more efficient by around 30%. And then the great thing about electric cars is there’s an acceleration. As you decarbonise the grid, then it gets more and more green and you go up to 70%, 80% benefit compared to a fossil car.
SUSANNAH STREETER: It’s clear you’ve dived deep into this industry all the time, constantly, but what inspired you to set up Zapmap app right at the beginning? What got you involved in all of this?
MEL SHUFFLEBOTHAM: I’d been in the world of looking at environmentally friendly cars back in 2010 and then, around 2012, when some of you will have heard of the BMW i3 or the Nissan Leaf or the Renault Zoe, they came out – the first affordable electric cars for the mass market – we saw them coming out, we reviewed them, looked at them within our website and then we knew that people would need to be able to find charge points when they’re out and about, so we thought, no-one’s mapping this, so we’d better do that, and so Zapmap was born.
SUSANNAH STREETER: Yeah, we’ve spoken at various times as your business has grown over the years, including one memorable trip driving into Wales that we were filming. Tell me, what would you describe take-up like now? How enthused are you?
MEL SHUFFLEBOTHAM: We’ve really come on a long way since we went over the bridge and found that charging point for a cup of coffee. It’s fun now when you’re out and about – I’m sure everyone can see now the EVs on the road with the nice green number-plate, and we’re often, when we’re out and about, we’re spotting how many we can see and we’re often seeing many tens of EVs, whereas before it wasn’t. Now we know the technology is there, the charging points are rolling out at a really good pace and the whole industry is really looking towards this ban on new petrol and diesel cars in 2030. It’s about more cars, more choice, more charging points, improving the grid, government policy all coming together, and there’s a real passion to move forward and provide really a good experience of electric vehicles
SUSANNAH STREETER: And how is the UK charging point network growing over time? What are the projections, and do you think, as they currently stand, that they’re good enough to fulfil the potential demand?
MEL SHUFFLEBOTHAM: Yeah, it’s an interesting question and it’s something we’re always asked. As you mentioned earlier, the number of charge points in the UK today is 40% more than there were this time last year, and when you’re looking at these ultra-rapid chargers, the chargers where you can add 100 miles of range in around 15 minutes, they have been growing at 80% and there’s 80% more than there were this time last year, so it feels like the pace has really picked up. There was a bit of a slowdown during Covid, when there was issues with the supply chain, but now it’s really picked up and it feels like we are getting to the speed we need to. In terms of projections, there needs to be thousands more of the ultra-rapid and rapid, and also to support people who don’t have off-street parking near their homes.
SARAH COLES: Presumably not everywhere in the country is equally covered by chargers, and similarly, some of them are specific to certain brands of car, aren’t they?
MEL SHUFFLEBOTHAM: There’s a big concentration in Greater London and the South-East. Part of the reason that Greater London has so many charge points is that most of those charge points are the low-powered chargers to support people without off-street parking, and I think there’s a reason why that started in London – London’s a little bit more affluent, it’s got a higher propensity of houses that doesn’t have off-street parking – and of course it’s got those Ultra Low Emission Zones, so there’s a whole demand there. The good news is what we’re seeing now is especially on the high-powered ultra rapid, those are being spread all round the country. I looked at some numbers and, of the twelve geographical regions, nine of them had had at least 100 brand-new ultra rapid chargers in the last twelve months and the other three had seen really good growth. It's definitely not perfect – more needs to be done – but there is evidence of a better geographical spread. I think on the on-street side, it is still very concentrated and that’s where the government policy… There’s this scheme called the LEVI Scheme which is helping local authorities think through and roll out charging at a local level, and that certainly needs to increase.
SUSANNAH STREETER: Do you think, Mel, some consumers still need more of a monetary incentive to switch? I outlined earlier that it’s considered to be still more expensive to buy an EV car, and also the technology does risk being updated and getting out-of-date very quickly, so could it be worth leasing rather than buying?
MEL SHUFFLEBOTHAM: Electric cars are generally the higher end of cars, and it’s something that I would like to see more and more affordable, smaller cars, city runarounds for people to buy, and I think there is evidence of the cost-of-living crisis is having an impact. There used to be the plug-in car grant – that’s now been taken away – and I think there could be some new policies, especially to incentivise the used car market. That’s happening in Scotland and in France, but I think that could be something in England and Wales as well, and Northern Ireland. And I think the other thing is the cost of charging when you’re out and about, so it’s very cost-effective to charge your car at home. You can have sub-10p a mile and that can even be improved if you’ve got solar panels, but when you’re out and about, some of the ultra-rapid chargers are more expensive, and one of the issues is that the VAT is not equalised on domestic versus public charging, so that’s a policy that I think would be good to be brought in.
SARAH COLES: Something that we covered a little bit earlier is this idea of battery swapping rather than charging. Do you think that could take off?
MEL SHUFFLEBOTHAM: I think it’ll be part of the mix. I don’t think it is going to be the thing, and I think there’s lots of new technologies coming – there’s wireless charging, there’s solid-state batteries, there’s more efficient batteries, there’s all sorts of developments coming – but what I’d say is here and now there is a charging infrastructure that is there when you’re out and about in an EV. I would suggest that people go and have a look at Zapmap and see how many chargers there are, and I think people would be surprised. Yes, battery swapping will be part of the mix, but it’s not something that’s gonna change our world in the near term.
SUSANNAH STREETER: Do you think though that we risk falling behind the US and Europe in terms of infrastructure, longer-term?
MEL SHUFFLEBOTHAM: With the new policy moves from the US and Europe, it would be good to see a parallel industrial strategy within the UK, not just on charging but thinking about supporting battery manufacturers and the whole green revolution, because there is gonna be so many jobs as we make this shift. Currently, 2% of all cars are electric. By 2030, that will go up to 30% - 10 million cars – and there’s a lot of jobs in that rollout, so yes, government support is really important.
SUSANNAH STREETER: Okay, Mel, it’s been fantastic speaking to you. Thank you so much for your time, and you can get back behind the electric wheel again.
SARAH COLES: It’ll be interesting to get some perspective from Sophie Lund Yates on some of the companies in this space.
SUSANNAH STREETER: You’ve been looking at a very famous name in the EV space haven’t you? I am of course talking about Tesla. What can you tell us?
SOPHIE LUND YATES: Hi, yes, we can’t really not take a deeper look at Tesla this week. It’s one of the most well-known and talked about stocks of recent years. Looking at Tesla as a stock we need to consider the fact it’s been cutting prices. There’s huge competition from the likes of BYD in the important Asian market, and in order to stimulate demand, Tesla has been cutting its prices reasonably aggressively to ward off market share erosion, especially because inflation means consumers are perhaps less likely to be convinced to part with their cash on a new motor.
SARAH COLES: Is this something people should be worried about?
SOPHIE LUND YATES: I’m actually in the camp that would say no, not at this point. Tesla can afford to sacrifice some margin in the name of volume growth at the moment, and its scale and popularity is still substantial. Looking at that in a bit more detail, last quarter Tesla's revenue rose 47% to $24.9bn, and a 21% increase in operating costs contributed to a 3% fall in operating profit to $2.4bn. Crucially, the group generated $1.0bn in free cash flow too, which gives it room to be able to stomach ups and downs. Something to keep in mind when it comes to future potential growth is Tesla’s software options. The group's self-driving technology is already delivered to existing vehicles through wireless updates. This lends itself well to software subscription programmes, which would help pad profits and squeeze more out of cars already sold.
And another potential avenue is actually insurance. It's still early days, but Tesla is already seeing green shoots. Driver data is used to set premiums. This creates an instant feedback loop, ultimately encouraging safer driving. Tesla is responsible for fewer accident costs and customers save money. Further afield are aspirations for a fully self-driving robotaxi.
SUSANNAH STREETER: We know you stand by the famous saying of ‘price is what you pay, value is what you get’. Is that a consideration when looking at Tesla, given the ride its valuation has been on recently?
SOPHIE LUND YATES: Definitely. While Tesla’s price to earnings ratio, which looks at how much the market is willing to pay for $1 of future profits, has come down some way and is more compelling in my opinion, it’s still high, and that means there will be ups and downs along the way, and the valuation will be susceptible to broader changes in investment attitudes if growth stocks fall out of favour.
SARAH COLES: Thanks Sophie. What about Aston Martin, who many of our listeners might not naturally associate with being part of the EV revolution?
SOPHIE LUND YATES: You’re absolutely right. Aston Martin’s core customers aren’t traditionally the ones flocking to get an electric car, but back in June they announced a supply agreement with Lucid, which is an EV battery system and tech company, which Aston Martin thinks will help supercharge its efforts to launch its first EV in 2025. The proof will of course be in the pudding, but it’s a step in the right direction. Regardless of how things feel now, electric and hybrid cars are the future, so to future-proof itself, Aston Martin needs to get going on its EV offerings.
SUSANNAH STREETER: What’s been going on at a deeper level in the company?
SOPHIE LUND YATES: One thing to keep in mind with Aston Martin is free cash flow. Capital expenditure affects free cash flow and capex is expected to rise because of the ongoing transition to electrification and rising prices. It's unclear exactly when inflation is going to come down meaningfully. This isn't enough to derail Aston Martin's plans, but it is one to keep in mind, and something else to keep in mind is that production delays have been especially painful. The bulk of cash only comes in when cars are delivered, so we're keen to see continued progress on this front. It’s too soon to say issues have been cured, even if problems are easing. The group's also focused on selling higher-margin Specials. Customers sign up and pay a deposit for these rare models before they're built, allowing for tighter working capital control. The cars have also become cheaper to make thanks to efficiency improvements.
I have to say it’s been a relief to see that volumes have also been picking up, which is indicative of the fact that the average Aston Martin customer simply isn’t as put off spending when inflation is high, compared to your average buyer. Ultimately, Aston Martin has been doing good work operationally, but the execution of the electrification strategy will be a key driver of long-term success.
SARAH COLES: Thanks Sophie. Taking a slightly different approach, the reason the pivot to EVs upon us is of course because of environmental concerns and wanting to reduce reliance on petrol and diesel, which are of course the main sources of income for the oil majors. One of the companies that’s looking to benefit from the shift to electric is BP, and it’s made a lot of promises in this area. What can you tell us about that?
SOPHIE LUND YATES: BP has said it’s spending £1bn in the next ten years in the UK on electric vehicle charging, and they have a global aim of installing 100,000 charging points this decade. To put that into context, they managed about 9,000 points last year. This all sounds positive, but critics would argue that these ambitions are a drop in the bucket for the group. I’d also say that as things stand, that’s not something that is going to move the dial for them.
BP has big plans to increase exposure to broader renewable and lower carbon energy sources too, but it's proving harder than expected to wean off the black stuff. Its carbon emission reduction target from 2019 to 2030 for oil and gas production has been reduced to 20-30%. The prior target was 35-40%.
BP's valuation remains some way below the long-term average. I’d say this really reflects investor concern over the long-term outlook for the oil and gas industry. While BP is making a considerable effort to participate in the energy transition, only time will tell if this is actually enough to keep convincing investors that it can become greener without sacrificing investment returns.
SUSANNAH STREETER: Okay, Sophie, thank you very much – a really broad look at the industry there – and this is not a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment and investors should form their own view on any proposed investment.
So let’s bring back in Laura Hoy now. Laura, what other considerations should people take into account when it comes to investing in EV technology as a consumer and an investor?
LAURA HOY: One of the biggest controversies when it comes to EVs is this idea that environmentally friendly automatically equals great ESG scores. Some responsible investors will look to invest in sustainability as a trend, so looking for companies that will meet a growing demand for more sustainable goods and services, and EV makers fit firmly into this category, but this doesn’t mean that they rank well on an ESG investor’s list of priorities.
SARAH COLES: Of course, that’s something that Elon Musk has been critical of for some time, so is there any truth to his ire?
LAURA HOY: Only if you’re using ESG and sustainability interchangeably, which is a common mistake. While the Environment part of the equation may be strong, there’re still two other letters to be mindful of— S for Social and G for Governance. In the case of Tesla, the company’s overall rating has been dragged down by governance issues. Its exposure to regulatory oversight and safety issues, thanks to the cars’ self-driving technology, means there’s a lot of product governance risk, and so far Tesla has disclosed very little in the way of safety risk assessments and quality management standards. With that in mind, investors looking to add EVs to their portfolios should be considering some of the other risks facing all automakers. Quality and safety is probably the biggest factor here, but worker treatment is also a big one, given their large, often low-skilled, workforces.
SUSANNAH STREETER: Thank you very much, Laura. Some really interesting food for thought there. Okay, let’s now get the lowdown from Emma Wall, who’s our Head of Investment Analysis and Research, about how demand for certain commodities fits in with the EV revolution. She’s been speaking to Olivia Markham from Blackrock.
EMMA WALL: Hello, Olivia.
OLIVIA MARKHAM: How are you?
EMMA WALL: Very well, thanks. How are you?
OLIVIA MARKHAM: Not too bad.
EMMA WALL: I thought we’d go back to basics. What is the connection between mining in natural resources and the electric vehicle revolution?
OLIVIA MARKHAM: In very simple terms, you cannot have an electric vehicle, you cannot have batteries, without the essential commodities that underpin it. If we maybe look at those commodities that are key for EVs and batteries, we can break it up into a couple of different parts. If we first think about a battery, a battery consists of a cathode and an anode. Within a cathode there’s lithium, cobalt, nickel and manganese, and within the anode it’s largely graphite. The battery obviously is core to an electric vehicle, but there’s also other commodities and metals that are also a big part of the actual body of the electric vehicle. If we have a look firstly at the electrical motor, the electrical motors have a lot of magnets. That’s underpinned by rare-earths such as neodymium and dysprosium. If we also have a look at the wiring that’s required within electric vehicles, that’s very copper-intensive. Interesting fact for you – if you look at an electric vehicle versus an internal combustion engine or a traditional car, the copper intensity is four times higher for that electric vehicle. And there’s one other last bit I think is also important to remember here, is that these EVs aren’t going to be able to drive or move if we don’t have the necessary charging infrastructure, which is very copper-intensive. We’re gonna have to see upgrades in the grid, and if we really want the sustainability and carbon benefits that an electric vehicle brings, we also need to be able to power them with low-carbon electricity, which is gonna require a huge build-out of renewables such as wind and solar to effectively give us the full benefits that EVs are designed to do.
EMMA WALL: In short, you can’t have one without the other.
OLIVIA MARKHAM: That is a very good way of explaining it.
EMMA WALL: With that in mind, natural resources of course are finite. There have been some concerns about the availability of these metals, and not just about whether or not they’ll run out, but also how we get to them. How do you think about that supply and that demand and that availability when making investment analysis decisions?
OLIVIA MARKHAM: If we have a look at the metals that are typically used by electric vehicles and are typically used by low-carbon technologies, be it wind or solar, many of those metals fall within the critical materials or the critical minerals. These are all commodities that are seeing substantial uplifts in their growth rate as a result of the energy transition, and the reality is, suppliers are finding it very challenging to keep up with them. If we look at a number of the metals, they are sourced in countries which are challenging to operate – if you look at something like cobalt, predominantly produced in the Democratic Republic of Congo – but actually, if we just have a look at the growth rates for many of the commodities, like lithium for low-carbon battery-grade nickel, it is going to be a real challenge for supply to keep up. As a result of this, we are beginning to see this awareness of the challenges of the supply chain keeping up with the forecasted growth rates in EVs, that you’re now beginning to see governments, along with customers, step up and either from governments providing regulatory and funding support – you’re seeing a lot of this coming through from the US as well as in Europe – and you’re also seeing OEM customers look to secure supply to sign up long-term offtake agreements and to provide financing for a number of the mining companies to make sure that they are able in the future to be able to secure these key raw materials which effectively enables their entire business.
EMMA WALL: And then how do you translate that to investment opportunities? Where are you seeing the most interesting metals, areas, markets at the moment, as an investor?
OLIVIA MARKHAM: When I look at the entire mining universe, I am particularly excited by those commodities that really benefit from the entire energy transition, so that’s everything from the copper that’s going to be required for the build-out that we’re gonna need to see in the grid, that we’re gonna see in wind and in solar, the huge build-out that we’re going to see in terms of batteries, so the lithium, the cobalt, the nickel that’s all essential for the batteries. But actually, in general, as we look at this huge, multi-decade transition that we’re going through, moving away from fossil fuel, carbon-based sources of energy to more cleaner sources of energy, that entire transition is actually very metals-intensive. Step 1, the metals that really benefit are those that are directly linked to EVs, to low carbon technologies, so think copper, think the battery materials, but actually, the entire commodity suite benefits. We see step-ups in steel, we see step-ups in aluminium demand as a result of this transition.
EMMA WALL: Olivia, thank you very much.
SUSANNAH STREETER: And that was Emma Wall talking to Olivia Markham from Blackrock on the 16th of August 2023.
SARAH COLES: Please bear in mind these are the views of the fund manager and are not individual stock recommendations.
SARAH COLES: You’re listening to Switch Your Money On from Hargreaves Lansdown.
SUSANNAH STREETER: Before we go, Sarah, I wanted to share one of the more unusual stats about the EV revolution. This isn’t the first wave of electrification of cars. That actually took place around the dawn of the motor car in the late 19th century. This statistic covers how many of the cars on the road in the US that were electric in 1900. You’ve got to put your thinking-cap on. This is another guessing game for you, Sarah, I expect. Was it a tenth, a fifth or a third?
SARAH COLES: Yeah, you’re absolutely right. It’s something I’d know nothing about, so it is gonna have to be a pure guess. As usual, I’m gonna go down the middle and say a fifth.
SUSANNAH STREETER: No, it was actually a third. They were really popular because petrol cars at the time took a huge effort to change gear and start with a hand crank, but actually petrol cars only really took off when Henry Ford made them so much cheaper, improvements made them easier to drive and roads improved enough for people to take longer journeys, and petrol proved easier to refill en-route.
SARAH COLES: Although I’m sure that the refilling part of learning to drive is what’s going to end up putting my son off, in the end.
SUSANNAH STREETER: Yeah, the price, the horrendous cost as well of insurance at that age! There is just so much to look forward to for us parents.
SARAH COLES: Yes, the fun never ends.
SUSANNAH STREETER: That’s all from us for now. Before we go, we do need to remind you that this was recorded on the 4th of September 2023, and all information was correct at the time of recording.
SARAH COLES: Nothing in this podcast is personal advice. You should seek advice if you’re not sure what’s right for you. Investments and any income they produce will rise and fall in value, so you could get back less than you invest.
SARAH COLES: This hasn’t been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.
SUSANNAH STREETER: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place, including dealing restrictions, physical and information barriers, to manage potential conflicts of interest presented by such dealing.
SARAH COLES: You can see our full non-independent research disclosure on our website for more information. All that’s left is for me to thank our guests, Olivia, Laura, Sophie, Emma, Mel and our producer, Elizabeth Hotson.
SUSANNAH STREETER: Thank you so much for listening. We’ll be back again soon. Goodbye!