Orders are outstripping supply from car producers, which are suffering from a worldwide shortage of microchips that power the computer brain of electric vehicles (EVs). VW Group, which includes Volkswagen, Porsche, Škoda and Audi and was the biggest maker of EVs in 2021, has a backlog of 300,000 in Europe alone, CEO Herbert Diess told the Financial Times.

Shareholders in automobile companies and investors in environmental, social and governance (ESG) funds, which both have exposure to the EV market, have been left stumbling for answers as analysts and markets failed to forecast for demand outstripping supply.

David Harrison, lead fund manager of the Rathbone Greenbank Global Sustainability Fund, welcomes the “significant” pivot of the past 18 months from many global automakers towards long-term electrification.

But, he adds, while this is clearly positive from a sustainability point of view, it also throws up “a whole range of issues and potential speed bumps for investors”.

Seth Goldstein, equity and credit strategist at Morningstar, admits the market has generally underestimated the speed of EV adoption since 2016, when Morningstar began forecasting EV adoption.

Goldstein cautions investors will have to look at each car company individually and evaluate their plans to transition their vehicle sales towards EVs and hybrids over time.

He says: “Investors need to evaluate which major automakers will be able to benefit from the transition to generate incremental profit growth.”

You can read more about this from the Financial Services Faculty here: Electric vehicles are in demand | ICAEW