The Race for EVs and Top Dividend Stocks

April 28, 2022

Decarbonisation is a crucial aspect dominating countries’ industrial and public policies today. Major economies have made pledges to uphold their sustainable development goals (SDGs) and fulfil the terms of the Paris Agreement. As a result, electrification is a trend gathering pace in the transport industry. In 2020, researchers in 53 regions of the world found that electric cars are less emission-intensive than fuel-based vehicles, which account for 95% of global transport.

Record Growth in Global Electric Vehicle Sales

There has been a notable decline in ICE (internal combustion engine) car sales since the onset of the pandemic, and experts suggest this shift could be permanent. The increase in electric car sales, on the other hand, has led to a huge jump in their market share between 2020 and 2021. Sales of EVs reached 6.6 million in 2021, tripling the market share since 2019. Overall, the net growth in global car sales in 2021 was due to electric cars. This could lead the top car makers to now set more ambitious targets and release more attractive models going forward.

For example, Volkswagen said that 50% of its sales would be accounted for by electric vehicles by 2030. During the same period, it will reduce its carbon footprint by 30% per car over its lifecycle, in line with the Paris Agreement. Toyota announced new investments to enable 3.5 million electric car sales per year by 2030. Ford aims towards the electrification of 40%-50% of its global vehicle volume by 2030.

Non-Uniform Global Adoption

In 2021, 6.8% of new vehicle registrations were accounted for by fully electric cars (BEVs), across 42 major economies, a significant increase from the 3.9% in 2020. However, adoption of EVs has not been uniform globally. Northern and Western European countries are leading in adoption rates for now. China is also keen to dominate this space, having invested $60 billion to support the EV industry. The country has an ambitious plan to switch to all-electric or hybrid cars by 2035. In contrast, the US, Japan, and most developing countries are lagging behind.

Why is China Beating the US in the Global EV Race?

China is now home to 5 million new EVs, including battery electric, fuel-cell vehicles, and plug-in hybrids, accounting for more than 50% of the world’s total EVs. In 2019, Tesla entered the Chinese market and saw rapid growth. Its Shanghai factory makes the electric Model 3 sedans and Model Y sport-utility cars for China and the international markets, including Germany and Japan. Tesla sold 473,078 China-made cars in 2021, contributing more than 50% of the company’s global deliveries. It also created a catfish effect, where a strong company compels weaker competitors to up their game. Domestic brands like Wuling, BYD, Nio and Xpeng are making huge inroads into the BEV markets.

Despite President Biden’s push, China’s record EV sales dwarfed the US numbers. In 2021, the US recorded sales of 607,567 light-duty electric and hybrid cars, which is less than 20% of China’s sales. EVs accounted for only 4% of total US vehicle sales in 2021, far from the President’s target of 50% by 2030.

The EV market in China is 6 times larger than that of the US. This is not just due to China’s huge population. The country has spent a decade in focused planning and made record-breaking investments. There are a lot of local and central government incentives that give it a lead over the rest of the world. Buyer subsidies drive sales and manufacturers face penalties for failing to meet quotas.

China also has a comprehensive programme for charging infrastructure. The country has installed over 800,000 public charging stations, almost 2x the rest of the world. It is building factories at a rapid pace and controls the global EV battery supply chain, which includes 80% of the global raw material refining and 60% of battery component making.

Tesla dominates both China and the US markets. The company is facing problems with China’s zero-Covid policy currently, idling its Gigafactory in Shanghai twice in March 2022. Despite that, its US sales rose 87.2% YoY to reach 129,743 units in Q1 2022.

Volkswagen Leads European Automakers in the EV Sector

German auto manufacturer Volkswagen is undergoing a radical transformation to cope with the competition from Tesla, Chinese start-ups and other companies from the Silicon Valley. While Tesla’s Model 3 was the best-selling electric car on the continent in 2021, Volkswagen was the leading manufacturer.

The company intends to spend $34 billion between 2019 and 2025, to launch 70 new electric models by 2028 and make an electric or hybrid version of every model in its line-up. It is the EV market leader in Europe, due to brand familiarity, local manufacturing and cheaper price points. The company’s flagship EV, the ID.3, has a lower price point than any Tesla EV model.

The brand has clearly come a long way since its 2015 emissions scandal. However, whether it can broaden its appeal to become a global EV leader remains to be seen.

Top EV Stocks That Pay Dividends

Higher discretionary spending by consumers will continue to boost EV sales. Several countries are expected to boost demand-side policies with tax incentives and ample charging infrastructure to increase adoption. This, alongside companies overhauling their business models to produce electric cars, could fuel auto stocks. However, most EV stocks don’t pay dividends, re-investing their earnings in growth instead. Here are some that do pay dividends.

BYD Company Ltd.

The China-based EV maker is forecast to announce an annual dividend of CNY 0.137 (approximately $0.021) on March 28, 2023, ex-div date of June 12, 2023.

General Motors

General Motors has not paid dividends since 2020 and is expected to keep a no-dividend policy for the near future.

BorgWarner Inc.

BorgWarner Inc. is expected to declare a dividend of $0.17 with ex-div date of May 31, 2022.

Predicting Dividends the Woodseer Way

The EV race is not between nations. It’s a race against time, as the disastrous effects of climate change will increase with each year. Sustainability awareness is key to EV adoption, and it’s a long and complicated road ahead toward a 100% transition to electric vehicles. At the heart of it lies the massive efforts of top automobile companies and their continuous R&D to offer EV models at lower price points.

Woodseer Global, with its AI+analyst approach, helps traders, fund managers and institutional iinvestors navigate the complicated journey for the auto sector. Will major companies like Tesla start paying out dividends? Investors and traders trust our reliable and accurate dividend forecast data.

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