Watts on Wheels: Growth of the EV Sector
- Investment Desk
- Oct 28, 2024
- 9 min read
Updated: Oct 31, 2024
Today, Electric Vehicle adoption is rapidly increasing worldwide, with countries like China leading the way in terms of market share, with an estimated US$376.4 million revenue projections in 2024. Looking ahead, it is expected that the global market will demonstrate a steady annual growth rate (CAGR) of 6.63%. This growth will ultimately lead to a projected market volume of US$1,084 billion by 2029 from US$786.2 billion. Moreover, the sales of Electric Vehicles are anticipated to reach 18.84m vehicle units by 2029. This is according to statistics from Statista market insights.
1832, we have come a long way, right? Well, Robert Anderson was definitely ahead of his time. The 1800 was the renaissance of all we are witnessing in the automotive industry today. In the 1900’s, many innovators at the time took note of the electric vehicle’s high demand, and consequently exploring ways to improve the technology. For example, Ferdinand Porche developed an electric car called the P1 in 1898. Around the same time, he created the world’s first hybrid electric car, a vehicle that is powered by electricity and a gas engine. Thomas Edison, one of the world’s most prolific inventors, thought electric vehicles were the superior technology and worked to build a better electric vehicle battery. Even Henry Ford, partnered with Edison to explore options for a low-cost electric car in 1914. However, the EV innovations were short-lived due to affordable and readily available gasoline cars, which were also cheaper. This made it difficult to sell the EV concept as the future of the industry, and considering very few individuals had electricity outside of cities at the time, electric vehicles all but disappeared by 1935. But the dream was still alive.
The Electric Vehicles market is witnessing several trends that are driving its growth. Firstly, there is a growing number of government initiatives and incentives to promote the adoption of Electric Vehicles. Many countries are offering subsidies, tax benefits, and other incentives to encourage consumers to switch to electric cars. Another trend in the market is the improvement in battery technology. As battery technology continues to advance, Electric Vehicles are becoming more affordable, efficient, and have longer driving ranges. This has addressed one of the major concerns of consumers - range anxiety. Additionally, government policies and regulations related to emissions standards and fuel efficiency also play a significant role in the development of the Electric Vehicles market. Stricter regulations and targets for reducing carbon emissions are driving the adoption of Electric Vehicles as automakers strive to meet these requirements.
In October, the European Union voted to impose taxes on Chinas EVs, a tariff of up to 45%. This Is act to protect European automotive companies from losses and declining sales caused by cheaper Electric Vehicles from the Chinese. Even though some local manufacturers are trying to move into the EV industry, China has far surpassed them. The share of electric cars sold in the EU that were made in China climbed from around 3% to more than 20% in the past three years. Chinese brands accounted for around 8% of that market share, as international companies that export from China including Tesla Inc. taking up the rest. Still, Europe’s tariff hike will have a “minor impact” on Chinese manufacturers because the region accounts for only a fraction of their total sales. Chinese EV makers will have to decide whether to absorb the tariffs or raise prices, at a time when slowing demand at home is squeezing their profit margins. This has prompted some Chinese automakers to consider investing in factories in Europe, which might help them dodge tariffs.
These tariffs could mean a lot for the industry in Africa, Chinese manufacturers might look to other markets to maintain their sales volumes. Africa, with its growing interest in sustainable transportation, could become a key focus. They might consider setting up manufacturing plants in Africa. This move would not only help them bypass the tariffs but also reduce shipping costs and take advantage of local resources. Increased local manufacturing and investment can stimulate the development of supply chains within Africa. This growth can benefit various sectors, including raw materials, battery production, and component manufacturing, creating a self-sufficient EV ecosystem.
In Africa, the Electric Vehicles market is projected to reach revenue of US$205.4m in 2024 and expected to exhibit an annual growth rate (CAGR) of 8.87%, resulting in a projected market volume of US$314.2 million by 2029. The adoption of electric vehicles is gaining traction, driven by government incentives and the need for sustainable transportation solutions. Special circumstances in Africa also play a role in the development of the electric vehicle market. The continent has abundant natural resources, such as solar and wind energy, which can be harnessed to power electric vehicles. This presents an opportunity for Africa to become a leader in renewable energy and electric vehicle adoption.
Underlying macroeconomic factors are also contributing to the growth of the electric vehicle market in Africa, economic growth and increasing urbanization in many African countries are driving the demand for personal transportation. Furthermore, the declining costs of electric vehicle technology, including batteries, are making electric vehicles more affordable and accessible to a wider range of consumers in Africa. This presents a promising opportunity for the expansion of the electric vehicle market in Africa and the transition towards a more sustainable transportation system. With the soaring demand for minerals for battery and electric vehicles, Africa with its rich deposits of lithium, copper, cobalt and other minerals is well placed to build EVs and could be a key player in their manufacture.
Some key players in the Ev industry in Africa include: JET Motors, which launched its flagship brand, the JET MOVER, a multipurpose van, in 2019 to encourage the use of locally manufactured vehicles. It revealed that it has a lofty goal of ushering Africa into a new era of mobility. BasiGo is also another EV company based in Nairobi; it envisions a future of clean electric public transportation in Africa. The startup intends to sell locally assembled electric buses made with parts from China’s BYD Automotive. After establishing itself in Kenya, the company intends to expand to other markets in East Africa. Climate Capital, a Silicon Valley venture capital firm, and Third Derivative, a climate-technology accelerator, are among the investors in BasiGo. SolarTaxi is also another player in Africa. The Solar Taxi Initiative is a project in Ghana that aims to produce solar-powered electric vehicles for transportation. Ghana’s Solar Taxi project, launched in September 2018, was powered by Kumasi Hive in collaboration with the Mastercard Foundation with the goal of alleviating poverty, creating jobs, and protecting the environment.
Across sub-Saharan Africa, electric two-wheelers (E2Ws) are emerging as the most promising sector in the industry. A good way to establish an industrial identity in the midst of much greater competition from superior manufacturers and economies like the US, China and Europe. In countries like Kenya, Uganda, and Rwanda, motorcycles have long been the lifeblood of urban transport, popular for parcel delivery and taxi services. Now, they’re at the forefront of an e-mobility transition.
The shift to electric two-wheelers presents an unprecedented opportunity for Africa, E2Ws are projected to constitute up to 70% of total EV sales in Africa by 2040. With high youth unemployment, motorcycles represent a vital source of livelihood, in Kenya, the motorcycle sector employs about 1.5 million people and contribute significantly to the economy. And I believe the same goes for other countries and economies. This makes E2Ws an increasingly attractive proposition for Africa’s transportation.
Innovative companies are already capitalizing on this opportunity. For example, Ampersand is making headway in the industry. By partnering up with Cross-Boundary energy, they will be able to incorporate renewable energy through solar-powered charging infrastructure. Financing and deploying renewable-led charging infrastructure requires substantial investment, which remains a hurdle to large-scale rollout. Companies like Cross-Boundary Energy are removing the burden of providing capital for the development of charging infrastructure for e-mobility users and providers. Additionally, innovative financing models are essential for scaling viable business ideas. By minimizing capital expenditure requirements for charging infrastructure, companies can focus on operational expenses, enabling off-balance-sheet growth. Operators can also focus on core business outcomes such as growing their customer base and footprint. This approach drives expansion while enhancing sustainability within the sector.
In Kenya, there is a high potential for electricity generation from renewable sources, which is supported by ambitious green energy policies. Although the Kenyan EV market is still in its infancy, the increasing awareness of EVs' benefits and the government's willingness to invest in the EV ecosystem are rapidly transforming this market.
The Kenya electric vehicle market is driven by a few key variables. Rising fuel costs are pushing customers and organizations to look for additional conservative other options, making EVs an alluring choice. One of the biggest trends in the Kenya electric vehicles industry is a shift towards using EVs for commercial transport. The rise of the use of e-motorbikes, which are especially popular in densely populated urban areas is also a key trend. These bikes are ideal for navigating narrow streets and offer a more cost-effective and eco-friendlier alternative to traditional petrol-powered motorcycles. Going electric could nearly double the driver’s income, due to reduced fuel and maintenance costs which would eat up more than 50% of a driver’s daily earnings. The market is also influenced by regional trends across Africa. For instance, international collaborations and investments from Indian and Chinese companies are helping to expand the distribution and manufacturing of electric two-wheelers in Kenya.
Despite the positive outlook for the Kenya electric vehicles market, there are still significant challenges that need to be addressed. Firstly, EVs remain relatively expensive when compared to their petrol-powered counterparts. This high cost is a major barrier to the adoption of EVs, especially for low-income households. However, prices are dropping, and as technology advances and production scales, costs come down. Besides, the total cost of ownership of electric vehicles is less than that of gasoline-powered cars in the longer term, based on their lower maintenance costs and savings in fuel costs. Therefore, the falling cost of EVs is making them more accessible to the growing middle-class population in Kenya. Secondly, charging infrastructure remains a challenge, particularly in rural areas where access to reliable and affordable electricity is often limited. There is also need to train more mechanics and technicians to handle assembling, maintenance and repairs for these motorbikes.
There are several companies that are exploring the EV industry in Kenya, and most of them are making headway to provide better functionality for the customer. The Electric two-wheeler (E2W) sector is making the most noise in Kenya, same as the rest of Africa. Ampersand has made the most advancements in the country. Now in their third generation of production, it has the largest market share. Other companies like Roam, have raised up to $24 million to scale their production capacity to about 1000 units a month, also adding a new assembly plant to support the same. Arc Ride, Kiri EV and Ecobodaa are also companies trying to make an impact in their own way. This overall contribution is crucial to keep the growth and adoption of electric vehicles, starting with E2W, a reality.
The electric vehicle market in Kenya, and the wider Africa, is at an exciting point, with significant potential for growth. Addressing challenges such as high costs and inadequate infrastructure, policy support, and technological advancements will be crucial for the widespread adoption of EVs.
In conclusion, the stage is set for us to ‘go green’ and help reduce carbon emissions and climate change. This is an opportunity to build something for ourselves, we have the resources, all we need now is cohesion. This is just the tip of the iceberg, we still have a long way ahead.
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