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The is currently undergoing a transformational change, which affects investors in many ways. (Keystone)

Smart Mobility New electric vehicle IPOs underline market's growth potential

23 February 2021, 9:16 pm CET, written by UBS Editorial Team

Lucid Motors has become the latest electric vehicles (EV) maker to go public via a merger with a special- purpose acquisition company (SPAC). The IPO follows a number of similar deals in recent months involving start-up companies in the automotive sector. We believe this reflects the accelerated adoption of EVs in a post- pandemic world that is more conscious of environmental topics.

Lucid Motors has agreed to go public via a merger with special-purpose acquisition company (SPAC) Churchill Capital IV Corp. The transaction value of the combined company will be USD 11.75bn with Saudi Arabia's sovereign fund remaining its largest single shareholder. Lucid's IPO follows a string of similar deals involving other EV start-ups, such as Arrival, Canoo, Fisker, and . The company intends to use the new fund toward expanding its factory in Arizona and to ramp up production of its full-electric Sedan, which is due to be rolled out in North America in the second half of the year followed by its European and Chinese debuts in 2022 and 2023. A second EV, the performance luxury SUV Gravity, is expected to come to the North American market in 2024. In a first phase, the company aims to produce 30,000 vehicles per year, a number which could go up significantly over time. While EVs are currently generating a lot of headlines, the UBS Chief Investment Office (CIO) believes this is not just a short- lived trend, but a seismic shift for the automotive industry, which affects investors in different ways. Growing market penetration of electric vehicles: Increasingly tight regulations are forcing traditional automakers to commit ever growing funds to alternative drive systems—be it battery electric vehicles (BEV), hybrid electric vehicles (HEV), or fuel cell vehicles (FCV)—but they are also a chance for start-ups and companies without legacy technologies, such For UBS marketing purposes

as combustion engines. At the same time, consumers seem to be warming to the topic as shown by growing EV sales. Overall, CIO sees potential sales of some USD 400bn related to the Smart Mobility theme by 2025, of which electrification represents more than half, an increase of eight or nine times today's figure. Other future trends in this area include autonomous driving and sharing. For more on this please refer to our report on "Smart Mobility".

Growing efforts to curb carbon emissions: The increased adoption of EVs is part of a broader shift toward greentech that is supported by growing awareness for health and environmental topics in the post-pandemic world. This includes increased efforts to decarbonize electricity production through greater use of renewable energy (solar, wind), as well as increased production of "green" hydrogen and greater emphasis on digitizing sectors like manufacturing and transportation. Greentech firms should play a leading role in driving this shift, creating investment opportunities in diverse sectors such as energy, transport, industry, and building.

Growing appetite for sustainable investments: Investors are playing a growing role in global efforts to curb carbon dioxide (CO2) emissions. So far, more than USD 1tr is already invested in dedicated sustainable investing (SI) funds. CIO believes sustainability is continuing to build momentum, and now is the right time to incorporate it into portfolios given governments' commitment to a "green recovery". Doing so can enhance returns, reduce risk, and contribute to social and environmental goals.

So CIO believes that the growing number of IPOs of EV makers reflect the accelerated adoption of technologies to reduce CO2 emissions in a post-pandemic world that is increasingly conscious of health and environmental issues, but it also underlines growing opportunities in sustainable investing.

For a copy of the CIO report Greentech goes global 23 February 2021, which includes a global list of companies CIO expects to benefit, reach out to your UBS Financial Advisor.

For more on how to invest in "The Next Big Thing", including greentech, click here.

For more on how to "Buy into Sustainability" click here.

Main contributor: UBS Editorial

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