The demand for electric vehicles (EVs) has been growing, and this does include not only cars, but also trucks, fleets, and even tour buses. Although the numbers are growing, EVs only account for a small fraction of vehicles on the road.
Several challenges, such as production, technical limitations, and financing, have been restricting the industry’s development. With the improvements in production and technical aspects, what can help advance the electric vehicle industry in terms of funding?
In the earlier stages of EVs, it took 20 years to sell its first million. Although, the current electric vehicle industry has been growing steadily, reporting a growth rate of 50 percent or more most years since 2010, with over a million vehicles sold within 4 to 5 months. While this seems like an impressive growth in the EV industry, it is still essential to maintain a sense of proportion when comparing EVs to the whole automotive industry.
Currently, only around one in 250 cars on the road is electric; that’s four million out of over one billion vehicles globally. EVs now account for less than 5 percent of new sales in most markets. Its growth is expected to increase by 2040 and is expected to make up one-third of global cars. With its expected growth, particular challenges need to be met to achieve the full potential of electric vehicles.
Manufacturing EVs at scale is just as critical as the quality and performance of the individual vehicle. Manufacturers must need to address these challenges before the whole industry takes off. Automotive giants have infrastructures ready, giving them a distinct advantage when it comes to their production strategy. Tech companies and startups, on the other hand, most struggle with manufacturing as a whole, whether infrastructure or financing.
The highest cost in manufacturing electric vehicles has always been its battery. “[T]he battery and power systems in an EV currently require a more substantial deposit due to technology development and adoption costs,” says Alf Poor, Chief Executive Officer of Ideanomics, a global FinTech company that focuses on transformative and sustainable industries.
“In 2015, the battery cost 57 percent of the total manufacturing price of a mid-size EV in the US. In 2019, the number dropped to 33 percent and is expected to be only 20 percent of the total vehicle cost by 2025. Battery prices have dropped significantly by 80 percent since 2010, from $1,000 per kilowatt-hour (kWh) to $209 per kWh this year,” says Kenny Au, Founder at Elevate Ventures, a Hong Kong-based venture builder.
“The continuous improvement of battery technology and chemistry will cut battery costs and make electric vehicles less expensive than internal-combustion engine vehicles within the next decade.”
These numbers may seem promising, especially to the future of manufacturing cost-effective EVs.
But even if companies can manufacture the highest-performing electric vehicle, it still won’t get far without proper charging stations or garages to repair it. Until now, infrastructure is still a chicken-and-egg problem for the EV industry. According to studies, 58 percent of Americans are either unlikely or unsure about purchasing an electric due to not having enough places to charge as a concern.
The influx of electric vehicles on the road is needed for businesses to invest in the necessary infrastructure. But to achieve the demand in manufacturing EV, the need for financing should be fulfilled. Thankfully, innovative financing solutions are available to aid the current need in the electric vehicle industry.
According to a study conducted by Hitachi Research Institute, the digitalization of financial flows using FinTech links capital providers and users directly, enabling low-cost fundraising, account settlement, and collections. EV companies looking for capital can now have access to financing through the FinTech space.
“Blockchain-based financial technologies have already disrupted the existing financial system as we know today,” says Aaron Tsai, Founder and Chief Capitalist at MAS Capital Inc. and MAS Capital Universal Exchange (MASEx), a global exchange for digitized securities.
“Security tokens that tokenize tangible and intangible assets, such as corporate equity, will revolutionize capital raising,” he added.
For example, EV companies can offer equity investments through tokenized securities to help them raise the necessary capital for manufacturing EVs. Through this tokenized approach, companies can now produce enough electric vehicles to introduce EVs for mainstream adoption finally. FinTech offers opportunities to companies to continue their growth in the EV industry.
The current status of the electric vehicle industry is still improving. The prediction of the global stock of electric cars will grow at a compounded annual growth rate of 33 percent from 3.1 million units in 2017 to 125 million by 2030. According to the International Energy Agency, by 2040, 55 percent of all new car sales and 33 percent of the global fleet will be electric.
This only means that the demand for manufacturing and production will continue to rise, and EV companies will be needing all the support it can get through financing. Thankfully, FinTech solutions can provide the necessary resources for them to keep moving forward to reach its full potential for mainstream adoptions.
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