What’s fuelling growth of EV auto deals?

A supply deficit of battery metals is forecasted in 2024 and electric vehicle sales are expected to double, reaching 31.6 million units by 2027.

Shortages of cobalt and lithium are projected through 2027, according to S&P Global Commodity Insights.

However, despite this looming shortfall an analysis of key themes driving M&A activity reveals EVs accounted for 29 automotive M&A transactions announced in Q3 2023, worth $1.2 billion.

The $700 million minority acquisition of XPeng (Guangzhou Xiaopeng Motors Technology Co (SEHK:9868)) by Volkswagen was the largest disclosed deal.

A global survey and report by DLA Piper, supported by Infralogic, forecasts that over the next 5 years the total value of EV infrastructure deals globally is set to balloon to US$57.4 billion.

A hive of recent dealmaking activity over the past 5 years illustrates an upwards trajectory of such transactions looking ahead.

In its survey, DLA Piper notes in 2019 there were 9 EV infrastructure deals completed. Even in current challenging global economic conditions, in 2023 there were 104 deals of which 53 that were announced with disclosed values totalling US$24.4 billion in the first 9 months of the year. The other 50 did not have disclosed values.

In 2019 of the 9 EV infrastructure deals completed 5 disclosed their values, with a total of US$321 million. This rose dramatically to 78 deals in 2022, with 47 disclosing values with a total of US$12.5 billion.

DLA Piper Global Chair, Energy & Natural Resource Alex Jones says growth in the global EV market will also be a significant driver for Australia’s battery minerals industry.

“Global demand for battery minerals will continue to support our economy. Investors value the Australian resources industry for its expertise and also its stability and rule of law. Australia will benefit from the EV revolution through the export of battery minerals as well as from their broader adoption across industry and amongst consumers.”

Australia will benefit from the EV revolution through the export of battery minerals as well as from their broader adoption across industry and amongst consumers

According to GlobalData’s Automotive Industry Mergers and Acquisitions Deals by Top Themes in Q3 2023 report, in terms of value, EV-related deal activity increased by 229% in the quarter compared with the previous quarter’s total of $365 million but fell by 90% compared to Q3 2022.

Related deal volume increased by 45% in Q3 2023 versus the previous quarter but was 12% lower than in Q3 2022.

DLA Piper’s Melbourne-based Corporate and Projects Partner Chris Mitchell says clearly there is strong investor appetite in this asset class over the coming 12 months.

“Even taking a relatively conservative growth trajectory from the past 5 years, this would lead to a forecast combined deals value of US$57.4 billion by 2028.

“Even taking a relatively conservative growth trajectory from the past 5 years, this would lead to a forecast combined deals value of US$57.4 billion by 2028

The increasing number of EVs on Australian roads has placed increased pressure on our rather nascent network of charging infrastructure, and a number of institutional investors have spotted opportunities to invest in the growing pool of early-stage technology companies.”

Mitchell adds that growth in the global EV market is being driven by a combination of favourable tailwinds. These include supportive regulation, subsidies, and incentives across major car markets worldwide, ambitious corporate ESG goals, and shifting consumer preferences.

“Surging demand for EVs also correlates to demand for, and investment in, EV charging stations and related technologies.”

When it comes to the rollout of EV charging infrastructure over the past 3 to 5 years, the largest share of respondents to DLA Piper’s survey overall identifies the US (65% of top 3 selections) as having made the most significant progress, followed closely by China (59%).

S&P Global says market tightness is keeping lithium prices strong as the supply side is a key issue for any market deficit. The firm has identified 16 projects that have set first shipment targets in 2023-24, comprising 10 hard rock and six brine, making up 9 concentrate and seven chemical operations. These 16 assets are poised to bring 567,941 tonnes of lithium carbonate equivalent, or LCE, capacity online by the end of 2024.

Write to Adam Orlando at Mining.com.au

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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.