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October 12th, 2017 at 12:31 am

VC activity revs up as electric vehicles prepare to go mainstream

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Recent weeks have seen an acceleration—pardon the pun­—of news and developments related to electric vehicles.

There’s been everything from China setting EV sales quotas to vacuum and hair dryer maker Dyson spending billions to get in on the action. A cavalcade of EV-related announcements out of Europe includes plans for massive battery factories, high-speed EV chargers appearing at gasoline stations, and aggressive plans for electrified vehicle rollouts.

Regarding some of the industry’s biggest automakers:

  • Volvo plans to have an electric motor in every new car by 2019.
  • General Motors has plans for 20 new all-electric models by 2023.
  • Ford is spending $4.5 billion over the next five years to add 13 electric models.

With Tesla ramping up production of the Model 3 (with apparent difficulty, it should be noted), Nissan on the verge of releasing its second-generation Leaf, and lithium-ion costs continuing to fall, it feels like we’re at a tipping point.

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And that’s creating ample opportunity for private companies as the percentage of each new vehicle will shift away from heavy, metallic things like cylinder heads and multigear transmissions toward new tech like battery electrolytes, semiconductors, thermal management systems and more.

Private market investors are responding, with VC dealmaking ramping up after a lull.

Global VC activity in EV-related companies

Looking back, the industry weathered a number of storms during the past few years. OPEC’s oil price war dramatically lowered crude oil and gas prices from their 2014 highs. Teething pains have included a dearth of public charging locations and limited EV range. Those are fading now.

Tesla’s supercharger network continues to grow while competitors, like Volkswagen, are investing in growing the public charging network (to the tune of $2 billion).

Predictions of further growth are coming in hard and fast. It’s almost too much.

Bloomberg New Energy Finance projects that EVs are on track to represent 54% of new car sales by 2040 and will become cheaper than traditional gas-powered vehicles in most countries by around 2025 to 2029, thanks to a projected 70% decline in battery costs by 2030. BNEF notes that the world’s top automakers have a combined plan to sell 6 million EVs a year by 2025.

McKinsey estimates 50% of vehicles sold will have a cost-efficient “electrified” powertrains by 2030.

Looking further out is Morgan Stanley, which believes there could be 1 billion battery electric vehicles on the road by 2050 as the sales penetration rate swells (see below): 9% of global sales by 2025, 16% by 2030, 51% by 2040, and 69% by 2050.

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Oil exporters are spooked: OPEC increased their electric vehicle forecast by 500% last year (via Bloomberg). BP expects 100 million EVs on the road by 2035, a 40% increase vs. a year ago. And the International Energy Agency raised its EV fleet estimate for 2030 to 58 million from 23 million.

Everyone is in agreement: The future of the automobile is battery powered. And a survey of the space reveals plenty of exciting VC-backed startups rapidly innovating in the space.

These include Israel-based StoreDot, which is developing organic-based battery cells that use nanotechnology to enable ultra-fast charge times. The five-year-old company recently raised a $60 million round led by a Daimler’s trucking division at a reported $500 million valuation.

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Another is Nikola Motor Company, which is developing zero-emission freight trucks (pictured) that produce upward of 1,000 horsepower. According to previous reports, Nikola has raised funding at a $1 billion-plus valuation.

There are many others, including startups focused on wireless EV charging and helping drivers locate public charging stations. PitchBook Platform users can access the full list.

Via Pitchbook

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