Fuel crisis: Good times ahead for electric vehicles?

Highlights 

• Despite plunging UK car sales, September was a record month for EVs amid the fuel crisis.
• Around 215,312 new cars registered in September, lowest September figure since 1998 as per SMMT, with EVs sales increasing year-on-year.
• A real recovery in car sales is expected by March next year, but Government must step up investments towards public recharging infrastructure with accelerating EV sales.

The sale of new cars in the UK has gone down as the country is tumbling to the weakest September total for over two decades with the sector being hit by the shortages of semiconductors across the globe. However, for electric vehicles, it was a record month as sales went up amid panic-buying at the pumps.

According to the Society of Motor Manufacturers and Traders (SMMT), around 215,312 new cars were registered in the previous month, which is the lowest figure recorded in September since 1998. As compared to September 2020, when the economic activity across sectors was suffering due to the pandemic restrictions, the sale of vehicles went down by 34%. While comparing with the 10-year average before the pandemic, the sales went down by approximately 45%. This was despite September being the second-busiest month of the year for the industry.

According to the chief executive of the SMMT, Mike Hawes, the headline figures were very dissatisfying while the shortage of semiconductors, especially from Asia, was negatively impacting the industry.

The sale of petrol and diesel cars had the worst disruptions, falling by 47% and 77%, respectively. On the other hand, 32,721 electric cars got registered in the previous month, which was more than the figure recorded in September 2020, and almost as much as the entire figure for 2019 according to SMMT. The previous month’s bestseller was Tesla Model 3.

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Over the last week and a half, extensive panic-buying was witnessed at the petrol pumps and the sale of electric cars has jumped up due to a significant shortfall of lorry and tanker drivers leading to fuel shortages.

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While the share of plug-in hybrid cars has increased to 6.4% of the new car market, the share of battery-powered electric cars has also jumped up from 11% in August to 15% in September. With the uptake of plug-in vehicles, particularly battery electric cars, soaring at a high speed, Hawes is calling on the government to increase the investments for charging infrastructure and meet the demand for new technologies.

However, the ambitious plans of the UK Government for decarbonisation can’t be achieved if only the drivers with private driveways, rather than all the drivers, switch to Electric Vehicles. Thus, the Government essentially needs to step up and channelise massive investments towards public recharging infrastructure. Also, the pace of the charge-point rollout must be in line with the increasing registrations for plug-in vehicles.

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According to Seán Kemple, managing director of Close Brothers Motor Finance, car sales are expected to undergo a real recovery by March 2022. He added that dealers, manufacturers as well as consumers are facing several challenges at present due to the current chip shortage along with soaring manufacturing costs. Despite restrained choice, consumer demand persists, which in turn is leading buyers towards new options like a growing trend where vehicles which are up to 12 months old are exceeding the price of their new counterparts. This is quite unusual and probably won’t ever be seen again in future.

Customers wanting to buy cars are left in an unescapable position with second-hand vehicles going for premium prices along with supply chain pressures in the run-up to Christmas.

Race among battery makers

The global shift of the auto industry towards EVs has initiated a race among battery manufacturers. More than 12-fold growth is forecasted in the global sale of EVs, from 2.5 million vehicles in 2020 to 31.1 million by 2030, according to Deloitte. Thus, major players are coming forward with their expansion plans in the key markets for EVs, which include Europe, China, and the US.

The major battery makers planning for expansion include Chinese companies CATL and LG Energy Solution, South Korean companies SK On and Samsung SDI Co, and Japanese company Panasonic.

Let’s take a look at some of the UK companies powering up the EV revolution.

Ricardo plc (LON: RCDO)

Ricardo plc is a UK-based engineering services company, and its current market capitalisation stands at £264.43 million, and it has given a return of 23.19% in 1 year. Its YTD returns stand at 23.19%. The previous close price of Ricardo plc’s shares was GBX 425.00 as on 5 October 2021.

AB Dynamics PLC (LON: ABDP)

Ab Dynamics PLC deals in automotive test systems which has been focusing on testing EVs. Its current market capitalisation stands at £450.18 million, and it has given a return of 2.05% in 1 year. The previous close price of Ab Dynamics PLC’s shares was GBX 1,990.00 as on 5 October 2021.

Johnson Matthey PLC (LON: JMAT)

Johnson Matthey PLC is a UK-based global chemicals company with a focus on production of EV battery materials. Its current market capitalisation stands at £5,028.00 million, and it has given a return of 5.82% in 1 year. Its YTD returns stand at 7.13%. The previous close price of Johnson Matthey PLC’s shares was GBX 2,598.00 as on 5 October 2021.

Bacanora Lithium PLC (LON: BCN)

Bacanora Lithium PLC is a UK-based company engaged in lithium exploration and development, very crucial for the battery production for EVs. Its current market capitalisation stands at £257.38 million, and it has given a return of 148.15% in 1 year. Its YTD returns stand at 6.35%. The previous close price of Bacanora Lithium PLC’s shares was GBX 67.00 as on 5 October 2021.

Glencore PLC (LON: GLEN)

Glencore plc is an Anglo-Swiss commodity trading and mining giant, which is getting into EV batteries and has recently cracked a deal with startup Britishvolt for the same. Its current market capitalisation stands at £48,803.80 million, and it has given a return 124.53% in 1 year. Its YTD returns stand at 57.77%. The previous close price of Glencore plc’s shares was GBX 67.00 as on 5 October 2021.

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