In about eight years’ time there is going to be a rapid adoption of electric vehicles, according to experts at Legal & General Investment Management (LGIM).
Car battery costs will continue to decline, moving closer towards cost parity with internal combustion engines over the next decade, explains fund manager Shaunak Mazumder.
He says sectors well positioned to benefit from the electric car revolution are not only technologically disruptive companies like Tesla, but also original equipment manufacturers and auto suppliers.
Equipment manufacturers ‘need to dramatically shift their manufacturing facilities to adapt towards electric or hybrid solutions. If they can successfully transition, a few companies could become bigger and more profitable than before,’ he said. ‘Currently, the risks are factored into the price, but opportunities are not.’
Speaking at a recent Fundamentals briefing, Anton Eser, chief investment officer at LGIM, said: ‘With the hardware and software improvements required to address efficiency issues now within reach, futuristic vehicles are on the horizon.
‘Much like Henry Ford’s original low-cost assembly line, these innovations are capable of redefining the future of transportation – with significant implications for investors as well as consumers.’
But the change won’t occur as rapidly as many others tend to believe. Those predicting widespread electric vehicle within the next five years underestimate the impact of cheap oil, according to LGIM analyst Court Gilbert.
‘Demand for petrol is expected to remain robust. Falling oil prices in recent years has led to an uptick in gas-guzzling car sales in the US, which in turn put the brakes on fuel efficiency improvements.’
There are other trends in vehicle development that also offer potential investment opportunities. For example, the automation of cars will continue to progress. Automated cars are not necessarily electric, and vice versa.
These cars are expected to have the computing capacity of over 1,000 smartphones, so there’s an argument that utility companies and energy producers are set to benefit in future from this upturn in demand.
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