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Environmental Social Governance (ESG)

Fully charged: The future of electric cars

At the other end of the spectrum from Formula One is Fully Charged Live, a three-day car festival with a difference. Fully Charged Live is a festival of clean energy tech and electric vehicles held at UK’s Silverstone racetrack. It showcases every electric vehicle available in the UK, as well as comprehensive exhibitions on renewable technologies demonstrating what the future has in store for us all.
AMP Capital Senior Manager, Corporate Governance, Karin Halliday attended the festival, which she said highlighted the number of initiatives that countries like the UK are undertaking to address the need to decarbonise road transport.

“Transport is at the heart of the UK’s economic success,” Halliday said. “It has the ability to transform people’s lives and build strong, vibrant communities. However, due to the threat of climate change and the urgent need to reduce greenhouse gas emissions, the industry is undergoing a technological revolution,” she explained.

A zero-emissions future is of huge importance, both economically and environmentally. So much so, the UK government plans to end sales of almost all conventional petrol and diesel cars and vans by 2040.

To achieve this, the Government is investing almost GBP1.5 billion to support the early market for ultra-low emission vehicles in the UK. With road transport being such an important source of greenhouse gas emissions, it’s vital the industry looks to reduce emissions through improved vehicle technology, alternate fuel sources and more efficient vehicle use.

Increasing adoption of low emission vehicles

Unfortunately, great change is difficult to achieve if it comes at significant cost to those that need to initiate progress. According Ms Halliday, “governments often step in and encourage change through the provision of financial incentives to do so – such as tax exemptions, subsidies and research grants.” Alternatively, she adds, “certain behaviours, or demand for certain products, can be discouraged when governments subject them to higher fees and/or taxes.”

In a bid to increase adoption of ultra-low emission vehicles, some governments are providing financial incentives. In the UK, for example, the government is encouraging greater adoption of electric vehicles through measures such as plug-in grants for low emission vehicles, exemptions from certain fees and millions of pounds in grants towards electric vehicle research.

In Norway, as a result of the government’s generous subsidy of electric vehicles, electric vehicle sales now account for over 40 per cent of all motor vehicle sales. In Australia, incentives vary from state to state but include a A$100 discount on annual registration and a 20 per cent reduction in registration fees in addition to the exemption from stamp duty for electric vehicles.

The risks and opportunities

The exponential rise in the demand and supply of electric vehicles over the past decade has focused attention on the significant risks and opportunities that occur at each stage of the product lifecycle. The complex environmental, social and governance (ESG) factors that impact this industry include:

  • emissions and climate change; 
  • human rights and supply chains;
  • regulation;
  • taxation; and 
  • governance.

According to Halliday, “road transport is at a major crossroad. It will be interesting to see how the various stakeholders respond to the wide array of risks and opportunities.”

What does this mean for investors?

The changing landscape for road transport and electric vehicles has significant implications for investors.

As the impact of climate change is felt, and people and products are moved in different ways, we expect:

  • fewer cars (pooled/shared cars) and new technologies (electric);
  • greater use of recycled materials (e.g. Nissan Leaf insulation is made from recycled clothes);
  • greater focus on strong, lightweight and technologically advanced materials that improve fuel efficiency;
  •  attention to shift away from oil and gas to increasingly sustainable electricity, sourced from solar, wind and other renewables; and
  • changed transport-infrastructure to accommodate different road usage patterns (by cyclists, autonomous vehicles) and new mechanisms for fuel delivery (kerb-side and wireless charging).

The future for electric vehicles is incredibly exciting. And it doesn’t stop there. While Fully Charged Live focused primarily on developments in the automotive sector, there was also widespread agreement that taxis, buses, and vans also need to demonstrate real progress toward a low emission future.

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Important notes

While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) (AMP Capital) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.
This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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