Industry outlook: A growing market for electric vehicles and EV infrastructure
In September this year, the UK’s largest electric vehicle charging hub opened in Birmingham. It can charge 180 cars simultaneously and it was funded entirely through private investment.1 Although unique in its size, the development speaks to a burgeoning market for electric vehicle infrastructure, with the number of fast chargers alone rising by 55% in Europe between 2021 and 2022.2
DLA Piper, working with Infralogic, has commissioned a report into this growing industry to examine the outlook of investors, EV businesses and government entities towards the opportunities and risks in the industry and across different markets, as well as the role of ESG factors and technology in supporting further growth. The report considers the views of 106 senior executives in the industry, consisting of 30 from private equity firms and 76 corporate respondents.
But firstly, the basics – what is an electric vehicle?
Electric vehicles are powered using electric motors that source energy from rechargeable electric batteries. The term includes hybrid cars, which can be powered using both electricity and traditional fuel.3
Key findings
Investor appetite and risk
In examining attitudes towards investment opportunities and risks, the report found that the overwhelming number of respondents (92%) saw an increase in investor appetite for EV charging infrastructure over the last year, with the same high number of respondents anticipating further growth in the next 12 months.
But what fuels this growth in investor appetite?
According to the respondents, investors are primarily attracted by the opportunity to gain access to a rapidly growing market and capitalize on innovative business models and revenue streams.
When it comes to selecting investments, the report found that the majority of private equity investor respondents identified either fast-charging technologies (57%) or investments related to battery storage and energy storage capabilities (53%) as key investment drivers. Three-quarters (76%) of respondents reported having already invested in battery storage. The corporate respondents, on the other hand, emphasized opportunities in charging network expansion and scalability.
In their assessment of investment risks, the respondents’ focus was on the operational and maintenance costs of charging stations, and the industry’s high upfront costs. However, few respondents (7%) expressed concerns over the rate of adoption of EVs or market growth, painting an optimistic picture of high demand in the industry.
The role of ESG
One of the many factors driving the interest in EV technology is the focus on ESG objectives. On the environmental side, EVs offer opportunities for vehicles and their charging infrastructure to make use of green energy. Notably, the vast majority (92%) of respondents reported that they expect EVs to be the most significant facilitator of green energy use in the automotive sector. The report also revealed a shared belief, from both the corporate and investor side, in the potential of EVs and EV charging infrastructure to reduce air pollution and greenhouse gas emissions.
The results are not, however, entirely auspicious, with a few governance challenges highlighted by the respondents. The findings show that investors will want to see that the industry can respond to technological and innovation risks and that it can maintain sustainable practices across its business models and supply chains.
When weighing up ESG initiatives, most (58%) of the corporate respondents felt that the industry should look to introduce supply chain improvements to improve its sustainability and reduce adverse environmental impacts further down the supply chain. Interestingly, private equity investor respondents specifically prioritized building robust relationships with suppliers with a view to improving environmental and social performance (47%) and ensuring the sustainable sourcing of raw materials (43%).
The outlook across different markets
The findings do, however, highlight that the opportunities in EV charging infrastructure are not spread equally worldwide. Whilst the report found that respondents based in Europe overwhelmingly agreed (82%) that the number of EVs on roads will overtake legacy internal combustion engines in the next five years, fewer respondents (46%) share the same conviction for the US. The largest share of respondents (42%) also predict that Europe will receive the greatest investment focus when it comes to both EV and EV related infrastructure. It remains to be seen to what extent these views will change in light of the UK government’s recent announcement that it will be delaying the ban on the sale of new internal combustion engines for five years (with a new deadline of 2035).4
The majority of respondents took the view that this milestone is more likely to be achieved in the next 5-10 years in the US, Middle East, and Asia Pacific, but not for at least 15 years in Latin America and Africa.
When considering how to drive consumer interest in EVs, respondents cited that the priority should be to collaborate with governments and private entities to expand charging networking. The findings also identified that the US and China are perceived to have made the most progress in developing charging infrastructure as a result of positive government policy and regulation and consumer demand in those markets.
The role of innovation and AI
The respondents were also asked for their views on innovation and the use of AI in the industry. The report found that most respondents (58%) believe that those investments focusing on improving the performance and cost-efficiency of EVs will remain the most attractive for industry investors. This in turn presents opportunities for technological solutions to attract investor interest.
The role of AI in the success of the industry was also considered, with the respondents focusing on AI’s capabilities in predictive maintenance and diagnostics for EVs, its potential for improving fleet management and its possible use in the optimization of battery performance and energy efficiency.
Despite this, respondents remain very conscious of the cybersecurity and ethical risks associated with greater technology adoption in the industry, noting that data breaches and lack of regulation in cybersecurity practices are some of the most significant risks for the industry. The corporate respondents also cited risks around the impact of autonomous driving technology on road safety and the possible environmental risks introduced by the production and disposal of EV batteries.
Leveraging the opportunities identified in the report
A key takeaway from the report is that industry players feel confident in the level of consumer demand and the rate of EV adoption, especially in Europe and North America. This should be a reassuring message to any organization operating in this industry that it remains a strong market in the short to medium term.
Unsurprisingly, the report highlights that the key to further developing demand is through supplying additional charging infrastructure. There’s evidence that investor attention remains drawn to fast-charging technologies and those that can improve the performance and cost-efficiency of EVs. On the environmental side, the widespread belief that EVs and charging infrastructure can pave the way for a reduction in air pollution and greenhouse gas emissions appears undiminished. The report highlights that a key priority for the industry, to ensure these benefits are realized, is to strengthen supply chains and ensure they’re sustainable going forward.
The report was published on 23 November and is available to download from our website, or alternatively from your usual contact at DLA Piper.
1 BBC, 'UK's largest' EV-charging hub opens at NEC
2 IEA, Trends in charging infrastructure
3 Houses of Parliament, Electric Vehicles
4 Fleet News
