Electric vehicles have captivated retail investors for years, particularly with Tesla shares climbing more than 900 per cent since the start of 2020.
As the green tidal wave of vehicle transition ascends upon us, Australia’s EV adoption has been a laggard compared to the rest of the world.
The Australian EV market
Electric vehicle (EV) sales in Australia tripled to 20,665 in 2021, up from 6,900 in 2020. A significant increase and a step in the right direction, but from a very low base. This increase represents a 2% market share of all light vehicle sales, compared to 0.78% in 2020 of the total light vehicle market. Significantly lower than the UK (15%), China (21%) and global sales of (9%).
Electric vehicle sales rose sharply in 2021, with increased model availability, lower prices, and state and territory government incentives stimulating the market.
However, Australia continues to struggle to attract global car manufacturers due to its low-efficiency standards compared to the rest of the world. Without stricter fuel efficiency standards governing the amount of carbon emitted per kilometer, these manufacturers see no benefit in cross-subsidising EV sales to sell their more profitable combustion engine vehicles. Australia is just one of two major countries that does not have any emission regulations for new vehicles, the other is Russia.
This may be evident in the considerable gap between model sales in Australia. Tesla Model 3 is by far the top-selling EV vehicle in the country, accounting for almost 60% of all EV sales in Australia, so it’s no wonder it’s the most owned stock by Australian investors on eToro.
Traditional manufacturers such as Volkswagen aren’t anywhere to be seen on the EV sales list in Australia. However, if we look at Europe, its sales are only marginally behind Tesla.
Local vs. global: how Australia measures up
Given the low rate of EV sales in Australia, global EV manufacturers are exploring other markets. For obvious reasons, Nio, the 3rd most held stock on eToro by Australians, is looking to Europe. The company is already established in Norway and plans to enter Germany, Netherlands and Sweden by year-end, given the vast uptake in electric vehicles.
As supply chain issues begin to dwindle, and with the Chinese Government recently handing down a huge USD$150 billion infrastructure package, Nio looks set to ramp up production, which could help its deliveries soar throughout Europe.
Tesla faced its issues in 2022, with lockdowns in China slowing production, which saw Q2 deliveries decline, ending years of gains. However, Elon Musk insisted on a recent shareholder call that the worst was behind them and announced that June was a record month for production.
From global delivery data, EV manufacturers don’t have a demand problem but a supply and infrastructure problem. Chip shortages, lockdowns, and commodity pricing have all heavily affected deliveries, as well as simply not having the infrastructure to manufacture more cars.
Rivian, the new boy on the block, delivered 4,467 vehicles in Q2, up 72% from Q1. Rivian has a pre-order list stretching to 2023, and we may not see their vehicles in Australia until 2024 but Australian investors on eToro are certainly keeping an eye on the electric pick-up manufacturer with the stock being the 24th most held by Australian users. Like the rest of the EV industry, demand is high, but it is struggling to boost output.
So we already know Australia is falling behind the curve on EV adoption. But, the new Labor government has pledged to cut fringe benefits and import taxes for EVs while promising to double the amount of money spent on charging infrastructure to AUD$500 million.
The missing piece
A significant drawback for Australians is losing ‘the weekend road trip’ given electric vehicles’ low travelling distance. In a survey from the Electric Vehicle Council, 92% of respondents indicated that public fast charging infrastructure is vital for buying an EV.
The addition of fast charging infrastructure is starting to improve. From August 2020, to January 2022, public fast charging locations across Australia have almost doubled. NSW is currently leading the way with a plan to ensure fast charging is available every 100km along regional routes and every 5km along major commuter corridors in Sydney.
Lithium leader
Australia is playing catch up and probably needs to do more to attract global EV manufacturers, given that demand for electric vehicles is soaring. However, it could ultimately be a strong force in manufacturing. Australia has great industrial infrastructure, clean energy resources and is a leader in lithium and rare earth minerals.
Along current projections, Australia’s lithium industry is forecasted to contribute $9.4 billion in revenue to the Australian economy by 2023-24. This wealth of lithium, which currently generates revenue primarily as an export, provides the potential to create a self-sufficient supply chain for electric vehicles.
Tesla continues to dominate the EV market globally as it ramps up production and rolls out new vehicles. Nio, however, is rapidly expanding and promises to be a significant player in the future of electric vehicles alongside traditional manufacturers such as Volkswagen.
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