Key points

  • We think the long-term secular tailwind behind EVs and, by extension, battery development, remains in place.
  • Forthcoming measures will force auto manufacturers in the UK and continental Europe to meet certain EV production targets.

Several auto manufacturers have had to change their business plans owing to stalling consumer growth in the EV market of late, but we are positive on the sector’s outlook.

In January, Renault announced it was cancelling the listing of its EV and software arm because of market conditions.1 This followed announcements in Q4 2023 from Ford, General Motors and Tesla that they would be slowing plans to increase EV manufacturing capacity in response to a reduction in consumer demand.2

The EV segment of the auto industry has certainly been through a cyclical trough. Last year a downturn in the market eased pressure on manufacturers to produce EVs. This was fuelled in the UK by the Conservative government reining back several green policies,3 while more recently the opposition Labour Party abandoned its £28bn green investment plan.4

“There was not as much pressure on the build out of EVs as governments seemed to be backtracking on their climate commitments. So, we’ve seen excess supply because companies in this space are building manufacturing plants on a 10-year horizon.”

EV tailwinds

But we think the long-term secular tailwind behind EVs and, by extension, battery development remains in place. One of the reasons we are optimistic is because of forthcoming measures which will force auto manufacturers in the UK and continental Europe to meet certain EV production targets.

In the UK, the zero-emission vehicle mandate requires 80% of new cars and 70% of new vans sold to be zero emission by 2030. This will increase to 100% by 2035. At least 22% of each manufacturer’s new cars sold in 2024 must be zero-emission or they will potentially face fines of £15,000 per internal combustion engine (ICE) sold.5 This comes despite Prime Minister Rishi Sunak’s decision to delay a ban on the sale of ICE vehicles from 2030 to 2035.6

In addition, in the European Union, CO2 rules are set to tighten again from January 2025. The rules mandate a 15% reduction versus the 2021 baseline.7 Tougher CO2 rules mean that European automakers will need to increase their battery electric vehicle volume in 2025 by about 40% on average versus their 2023 levels. Not being compliant is not an option for European auto makers, and they could face more than €10bn in fines collectively if CO2 emissions remain flat in 2025 versus 2023.

As the 2025 deadline approaches, it is likely that subsidies will come to the fore that could help to jump start the EV market, through discounts provided either by governments or manufacturers. Governments are unlikely to backtrack on the measures because the proceeds from these fines would go directly into their coffers.

Manufacturers across the whole supply chain, including the automakers, have already spent money building out the manufacturing lines. In effect, this means they are poised both to comply with and benefit from regulatory pressures.

“So, we think we are going to see more EVs because manufacturers have pivoted from traditional ICE vehicles to EVs and have spent the money, so it is going to come.”

There remains a challenge around enticing consumers to buy EVs given the price point. We think it pays to be in different areas of the supply chain. While our industry analysts are responsible for analysing the EV supply chain, our expertise in this area has been bolstered by our decision to rehire Mathieu Poitrat Rachmaninoff, a former automobile engineer and global industrial analyst, to our mixed assets and charities team. Mathieu has specific expertise in the EV supply chain, and his focus will be to build out our coverage of alternative assets.


1. FT. Renault cancels planned IPO of EV unit Ampere. 29 January 2024

2. FT. ‘The early adopters have adopted’: US carmakers slow their EV growth plans. 28 October 2023.

3. FT. Rishi Sunak announces series of U-turns on net zero pledges. 20 September 2023

4. BBC. Keir Starmer: Labour ditches £28bn green investment pledge. 8 February 2024.

5. Government sets out path to zero emission vehicles by 2035. 28 September 2023.

6. FT. Rishi Sunak announces series of U-turns on net zero pledges. 20 September 2023.

7. CO2 emission performance standards for cars and vans. Accessed 28 February 2024.


Paul Flood

Paul Flood

Head of Mixed Assets Investment


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