- The number of Electric vehicle SPACs could increase in the coming years as the world turns to full EV adoption and looking for ways to raise money to finance the transition that could cost up to $ 2.5 trillion, according to Bank of America.
- 2020 saw a boom in electric vehicle SPACs, with companies like Nikola, Fisker and XL Fleet going public through a reverse merger with a special purpose acquisition company.
- BofA said the recent SPAC boom indicates that there is a lot of capital waiting to be employed for companies participating in the “electrification revolution”.
- “With that in mind, we expect the EV SPAC boom and capital increases for new EV companies to continue in 2021+,” added BofA.
- Sign up for our daily newsletter here, 10 things before the opening bell.
The number of Electric vehicle SPACs it may increase in the coming years as the world turns to full EV adoption and looks for ways to raise money to finance the transition, according to Bank of America.
“The auto industry is reaching an inflection point for electric vehicles, but financing this revolution is a tremendous obstacle,” said a team of BofA strategists led by John Murphy in a note on Wednesday.
BofA estimates that the transition to 100% electrification may require more than $ 2.5 trillion in investments worldwide in the next decade. One way to raise this capital could be through a SPAC.
2020 was a landmark year for electric vehicle SPACs. Nikola, Fisker, Lordstown Motors, Canoeand XL Fleet Corp it was just a few of the companies that went public through a reverse merger with a special purpose acquisition company in 2020. According to BofA, more than $ 6 billion has so far been raised through EV SPACs.
While that amount is far from the $ 2.5 trillion capital target, the recent SPAC boom indicates that there is a lot of outside capital waiting to be deployed for companies participating in the “electrification revolution,” said BofA.
“With that in mind, we expect the EV SPAC boom and capital increases for new EV companies to continue in 2021+,” added BofA.
The move towards electrification raises the question of whether historic automotive equipment manufacturers or new entrants will see the biggest investments in the race to electrify. Bank of America says that new EV participants, and those who could use SPAC money to raise capital, may have an advantage.
“The main competitive advantage offered to new EV participants over incumbent OEMs / suppliers is unrestricted access to low-cost capital to finance product development, installation / capacity expansion and other business efforts, as illustrated by the boom in SPAC and TSLA steady capital increases, “said the strategists.
Other sources of that capital to meet the $ 2.5 trillion target will include domestic financing within existing auto suppliers, other forms of raising external capital outside SPACs and government funding, said BofA.
For example, the Green New Deal proposal in the United States may be a harbinger of possible support to come, although the $ 2.5 trillion estimate is an approximation of the required capital worldwide, not just in the United States, said the strategists.
In the UK, the sale of new gasoline and diesel vehicles will be banned in 2030 as part of the country’s “green industrial revolution” plan. The plan also involves an investment of around US $ 1.7 billion in new public and private charging stations and US $ 774 million in concessions to encourage buyers of low- and zero-emission vehicles, in another example of government financing that could help drive the transition to a world with 100% electric vehicles.