Trends in the electric vehicle industry – Global EV Outlook 2024 – Analysis - IEA (2024)

Venture capital investments in electric vehicle start-ups dropped in 2023, following the global trend

Venture capital (VC) funding to EV start-ups has boomed in the past decade. Financial investors such as banks and VC or private equity funds see in EV start-ups a potential for significant future returns. Many companies – including major incumbent carmakers – also use corporate VC to fund start-ups to develop new technology, or to acquire concepts developed by new entrants. Whereas in the past century, most carmakers typically developed ICE technology and manufacturing through in-house R&D, investing in start-ups has now become a notable trend. This allows incumbents to bolster their own position and maintain a competitive edge in quickly evolving markets and regulatory environments.

In 2023, however, global VC investments in clean energy start-ups fell considerably relative to 2022, and EVs and batteries were no exception. Early-stage investments (i.e. seed and series A, referring to the first rounds of financing and the earlier stages of development) in start-ups developing EV and battery technologies dropped 20% to USD1.4billion in 2023. Meanwhile, growth-stage investments (i.e. series B and growth equity, which refer to the later rounds of financing as start-ups increase activity) dropped 35% to USD10.1billion.

Several important factors are contributing to this downward trend. As competition intensifies in EV and battery markets, and as incumbents ramp up their own investments and manufacturing plans, barriers to entry for new actors get higher, and so do investor perceptions of risk. The front-running start-ups that raised funds over the 2015-2020 period are now maturing and transitioning to other sources of capital, leaving fewer alternatives for newcomers – early-stage VC for electric carmakers dropped radically in 2023. Geopolitical tensions, supply chain disruptions, high energy prices, and rising inflation and interest rates limit the availability of higher-risk capital. We also observe a cooldown following the post-Covid-19 boom of 2021-2022, which was fuelled by investment restraint during the pandemic and the expectation of significant economic recovery packages afterwards.

Despite the drop, investments remain far greater than in 2019, prior to the Covid-19 pandemic. Start-ups developing EV charging technology attracted over USD400million in early-stage VC, and battery and battery component makers USD260million, together accounting for half of early-stage VC. There was also a surge for two- and three-wheeler start-ups, which raised USD200million in early-stage VC in 2023, up from below USD100million in previous years. While early-stage funding for electric carmakers has dried up, and in 2023 fell far short of the 2018-2022 rounds, investors continue to show interest in upstream and downstream segments of EV supply chains, as well as other EV types, especially if these can scale quickly.

Notable deals in 2023 included Germany-based Jolt Energy’s first round of VC funding, which raised USD160million. The company seeks to bring its fast-charging technology to urban areas of Europe and the UnitedStates, and claims to provide 100km of driving range in just 5 minutes. Similarly, German EV charging start-up Numbat raised USD75million in series A funding through the European Infrastructure Fund, as well as another USD75million in loans. Indian start-up Charge Zone also raised nearly USD55million to develop nearly 300 charging stations.

Chinese electric truck maker DeepWay raised USD110million in series A funding to start mass production, after having raised USD70million in 2022 to fund R&D and early-stage manufacturing. In the 2/3W space, Benin-based start-up Spiro raised USD60million, Indonesian Maka Motors raised over USD37million and Volta Indonesia USD35million, Brazilian Vammo raised USD30million, and Indian Simple Energy India raised USD20million, illustrating the importance of this segment in EMDEs. In India, Evera, a provider of all-electric cab services and management, raised USD7million to expand operations in Delhi, and Zyngo, an operator of electric last-mile delivery fleets, raised USD5million.

At the growth stage, battery technology developers attracted USD5billion, and electric carmakers USD2.5billion, with significant support from public investors, indicating interest from governments to help new entrants ramp up manufacturing capacity or accelerate expansion and deployment. However, growth-stage investor appetite for electric trucks and EV charging dried up relative to previous years.

Notable deals include French battery maker Verkor, which raised USD900million in growth equity from investors including public-private EIT InnoEnergy and BPI France, and major incumbent carmaker Renault. The company also received a nearly USD700million grant from the French Government and another USD650million in debt from the European Investment Bank to develop a 16GWh gigafactory project in Dunkirk. To support its global expansion, Swedish battery maker Northvolt raised USD400million from Ontario’s asset manager, USD1.2billion and then another USD150million in debt from public Canadian investors and private banks, a USD740million grant from the German Government, and a USD5billion loan from the European Investment Bank and Nordic Investment Bank. Chinese lithium-ion battery maker Hithium also raised over USD600million.

Chinese electric carmakers continued raising money in 2023, such as Hozon and Rox Motor, which each raised around USD1billion. Like other Chinese new entrants, Hozon Automobile is looking to expand in overseas markets as well as domestically, and could go public in Hong Kong. Rox Motor launched its first model in 2023, an electric SUV priced under USD50000. Premium electric carmaker Avatr raised USD400million, after having raised a similar amount in series A funding in 2022.

In the electric taxi fleet space, India-based BluSmart, a start-up providing ride-hailing services, raised two rounds of USD42million and USD24million in growth equity in 2023, and another USD25million in 2024. However, there has been fierce competition with larger taxi fleet apps and operators in the past few years in EMDEs. In 2023, for example, electric ride-sharing app Beat, owned by Free Now, withdrew from Latin America.

Trends in the electric vehicle industry – Global EV Outlook 2024 – Analysis - IEA (2024)
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