US Electric Vehicle Value Outstrips Legacy Alternatives

Growing market for EVs to accelerate shift away from ICEs, for manufacturers and investors.

The average lifetime cost of owning an electrically-powered vehicle (EV) in the US is now US$100 cheaper than vehicles with internal combustion engines (ICE), according to investment bank Jefferies. The monthly analysis noted that the individual costs of powering, maintaining and repairing EVs to owners are less than ICE-powered equivalent vehicles.

This is increasing the investor appeal of automakers investing in the production of EVs, charging infrastructures and batteries, therefore serving as a warning for automaker laggards. Leaders in the field are further looking to expand. For example, Renault has recently partnered with Geely, owner of Volvo, to sell hybrid cars in China.

With the transportation industry causing 15% of global greenhouse gas (GHG) emissions annually, EVs have become an “ESG focal point” for ensuring the decarbonisation of the sector, said Jefferies. “The ongoing ESG push could help drive increased adoption of charging infrastructure while sustainability-linked financing is gaining traction as an option for well-positioned players,” the report noted.

EV sales in the US grew by 80% in July alone, compared to 18% in Europe and 17% in China. US battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) also saw year-on-year sales increase by 47% and 234% respectively.

Despite the economic impact of the pandemic, total global sales of EVs reached over three million last year, compared to 2.1 million in 2019, according to the International Energy Agency.

“As a number of EVs are set to roll out in the next 2-3 years, potentially lower average battery cost per kilowatt-hour could have significant implications for lifetime affordability, potentially accelerating EV adoption”, the Jefferies report added.

Automakers developing and selling EVs will be further incentivised through US policy. Earlier this month, President Joe Biden signed an executive order to make half of all new vehicles sold in the US electric by 2030, further outlining new vehicle emissions standards from 2026.

The Infrastructure Bill currently under consideration would also allocate US$7.5 billion to the development of EV charging infrastructures.

“Post Infrastructure Bill, we would expect a renewed push for EV tax credits with a potential range of US$7,500 to US$12,500 and likely removed volume caps, potentially addressed in the US$3.5 trillion budget framework,” Jefferies said.

Similar policies are being seen throughout the rest of the world. The European Union’s Euro 7 emissions legislation could see ICEs phased out of production by 2026. China has also imposed a mandate on automakers requiring that EVs make up 40% of sales by 2030.

The increased production of EVs will require further investment in the production of quality battery cells and EV charging points, according to Moody’s Investors Service, adding that this means more reliance on electricity utilities to support the sector’s transition away from carbon-intensive fuels.

To ensure net-zero by 2050, all new cars sold around the world need to be fully electric by 2035 at the latest, according to a report by NGO ShareAction.

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