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#3 - Unaffordable electric vehicles destroy demand

#3 - Unaffordable electric vehicles destroy demand

πŸ’‘ One idea: Unaffordable electric vehicles destroy demand

πŸ“ˆ One data figure: 1,000 square meters of arable land per capita

✨ One success: NatureMetrics, DNA-based biodiversity data

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πŸ’‘ Unaffordable electric vehicles destroy demand

Putting electric vehicles (EVs) within everyone's reach is a goal that both car manufacturers and policymakers have been trying to achieve for too long. A few years ago, the industry narrative was that, price-wise, all-electric vehicles would compete with their combustion-driven counterparts in 2025. The assumption was that battery production and economies of scale would gradually make new EVs more affordable as more and more consumers switch from dirty to clean cars. This would simultaneously drive down the CO2 emissions of the much-polluting sector; road transport roughly represents 12% of global greenhouse gas emissions. Unfortunately, the reality is quite different.

The EV market is facing record high prices across the board. The automotive industry has always promised that prices would come down as EV battery packs become more efficient to manufacture. Not only do EV prices are instead going up, but new traditional petrol-powered cars are becoming cheaper in the meantime. More about this tragic trend here.

EV prices went up 54.3% in July from last year compared to 10.1% for conventional cars.

On average, a new EV is today sold at a price above $60,000, roughly 20% higher than the typical transaction price of an internal-combustion vehicle. In particular, sourcing raw materials for battery production, a global chip shortage and rampant inflation are pushing prices in the wrong direction.

The Chevrolet Bolt, still too expensive

The Chevrolet Bolt, the most affordable electric car on the market, should be offered at an entry price of $26,595 in 2023. The Nissan Leaf, long listed as the world's top-selling plug-in electric car, is worth around $30,000. It was recently overtaken by the Tesla Model 3, the first EV to pass the 1 million global sales milestone, though worth above $55,000.

A recent study (2021) showed that a massive 81% of UK drivers thought electric vehicles were still β€œtoo expensive”. The risk is to destroy a still nascent demand. While early adopters are already satisfied, battery-powered car manufacturers have for now failed to address the mass market.

Arnaud Deboeuf, Chief Manufacturing Officer at Stellantis (Fiat, Jeep and Peugeot) recently announced that the group is seeking to reduce its EV manufacturing costs by 40% before 2030. It is a survival issue for the EVs sector.

If EVs don’t get cheaper, β€œthe market will collapse,” Arnaud Deboeuf told reporters.

On top of that, to continue selling vehicles in the European Union and China, manufacturers have to start complying with increasingly stringent emissions laws. There is no reason why the US would not follow.

Drastic improvements have to be made to avoid people irrevocably disregarding EVs, which would otherwise remain viewed as luxury vehicles reserved for well-off customers. Will they come from government incentives, ground-breaking technological innovations or triumphant unicorns? Probably from all three. Carbon emmisions reductions in the sector will hardly happen if EVs don't reach lower-income consumers' garages. EVs finest hours are yet to come.

πŸ“ˆ 1,000 square meters of arable land per capita

Humanity faces a risk of a scissor effect between the reduction of available arable land and world population growth. The surface of agricultural land per capita was divided by 2.3 in the last 60 years, from 1.45 hectares per capita in 1961 to 0.63 in 2018.

Given the current rate of desertification and the global population dynamic, this figure is very likely to be halved again by 2050, reaching 1,000 square meters per capita. In other words, each of us will roughly have two tennis courts worth of arable land in 2050 to grow crops and vegetables, keep a cow and a couple of chickens, harvest wood, and enjoy outdoor activities while preserving air and water quality and hosting biodiversity.

You can read my last article to learn more about this trend and understand how and why the asset management sector is interested in natural real estate.

The boom of natural real estate investments
Driven by climate change and relentless population growth, arable land is not an abundant resource anymore. And because anything scarce becomes expensive, it comes as no surprise that asset managers are increasingly exploring natural real estate investments. Let us understand the rationale behind th…

✨ NatureMetrics, DNA-based biodiversity data

As discussed in a previous edition, finding technics to quickly and reliably measure the impact of human activities on biodiversity is becoming of paramount importance. How to do that? you may wonder. I have the answer: it is called NatureMetrics!

NatureMetrics was founded in 2014 in the UK by scientists expert in the applications of genetics in the field of ecology. The company is now able to monitor biodiversity and to quantify natural capital in the environment using cutting-edge DNA analysis. By providing data on natural capital, the team can support businesses to transition to a nature-positive economy and drive good decisions for both business and nature.

They bring nature data to your boardroom

The start-up announced in May 2022 a raise of $14 million in a Series B round led by the urban sustainability-focused VC fund 2150, with participation from 4 other funds. As of today, NatureMetrics has sold its DNA-based biodiversity monitoring products to 480 clients across the renewable energy, infrastructure, marine water and banking sectors in more than 80 countries. The company already runs two DNA labs in the UK and Canada. This fresh funding will be used to accelerate its expansion into international markets and to build a series of new digital products.

The story does not tell if NatureMetrics has decoded unicorns' DNA, stay tuned!

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