While the electric vehicle was introduced in 1896 by William Morrison, the public demanded little demand to mass-produce these cars. The thought process of the people did not change until Tesla started the mass production of electric vehicles. Tesla was founded in 2003 to accelerate the world’s transition to sustainable energy. The EV concept is not new, but it fits into an idea that is gaining traction. The movement of Environmental, Social, and Governance (ESG) is infiltrating companies around the globe and perpetuating the focus on electric vehicles.
What is ESG?
Environmental, social, and governance (ESG) criteria are standards for a company’s operations. It means that the people that make up the company are aware and socially conscious stakeholders. The environmental criteria describe how a company performs as a steward of nature. Social criteria determine how it manages relationships and where it operates. Governance deals with a company’s leadership. As the first pillar, the environmental concept focuses on the way companies will treat the planet and how the product they create will impact the globe. In the wake of this movement, several large automobile manufacturers have pledged to move to an all-electric vehicle fleet within a 1-20-year period.
GM Announces Zero-Emissions Fleet
The movement to produce a zero-emissions fleet picked up in January of 2021. It appears that the pandemic has accelerated the move to an ESG pillar. During this time, Mary T. Barra, the chief executive officer at General Motors, will sell only zero-emission cars and trucks by 2035.
The announcement by Barra came in the wake of an executive order by President Biden which focuses on climate change. While the shift seemed to occur quickly, General Motors and other car manufacturers have been attempting to embrace electric vehicles for years. Some investors who engage in share trading of General Motors stock were skeptical of the announcement by Barra. When former President Donald J. Trump became president Barra pushed him to relax Obama-era fuel economy standards. For now, GM announced they would spend $27 billion to introduce 30 electric vehicle models by 2025.
Gearing Up for a New President
Part of the quick response by General Motors was that the company was gearing up for the potential of a change in the White House. While former President Trump was known as someone who wanted to make America’s oil and coal companies “great again,” President Biden has other ideas about the environment. On his first day in office, President Biden used the power of the office to alter the landscape for car production. The new President signed an executive order which required that the Environmental Protection Agency begin developing new tailpipe pollution regulations. The share trading in many automakers became volatile after this announcement. The new President’s goal was to get the most significant automaker’s support of the administration’s policy to fight climate change.
The Race in a New EV ERA
In the wake of the GM announcement, many automakers have also set calendar dates for when they’ll start reducing petroleum-driven vehicles. Well-known automakers are making commitments to shift to EVs. For example, last week, Volkswagen introduced a program where the company will become the world’s largest seller of EVs by 2025. The company said it would invest around 46 billion Euros to build a zero-emission vehicle lineup.
The theme is also helping to boost the share trading of the EV supplier companies. This group includes companies that make the raw materials for batteries and the components used to make electric vehicles.
To prepare for the new EV models coming down the pike, franchise car dealers in the U.S. are pitching electric vehicles to their customers. In the United States, most cars are sold through dealerships that could be located in small towns in rural communities and the suburbs. Tesla builds each vehicle and does not provide access to dealerships where the cars sit on the lots.
Reservations in the light truck space for EVs have surged. Ford’s debut of the F-150 Lightning pickup truck was much better than expected. Ford.com initially saw 70,000 reservations for the Lightning within the first week of the announcement. The deluge of reservations, which required only a $100 deposit, followed the successful introduction of Ford’s Mustang Mach-E electric vehicle.
The Bottom Line
The electric vehicle era is here. Announcements by prominent car manufacturers show that they are focused on both the long and short run. Their goal is to be compliant with zero emissions within a decade or two and sell EVs today. The race to get consumers in the door is on now. Both U.S. and European manufacturers are attempting to catch Tesla as a first to market leader. The share price of Tesla has continued to outperform, with investors questioning how long they will hold the lead in the new era of EV.