Car makers ramp up investment across the electric vehicle value chain


As hundreds of billions of euros are invested to make the transition a reality, risk allocation throughout the value chain will be key.

By Societe Generale electric value chain experts Nicolas Sanson, Head of Automotive and Mobility Investment Banking and Christophe Hadjal, Regional Head of Mining, Metals and Industries Finance for Europe.

When Porsche raised €9 billion in its IPO in September 2022, it was one of the biggest and boldest listings in European stock market history. Launched in challenging market conditions, and with Societe Generale as joint global bookrunner, the IPO was intended to provide Porsche with greater agility and entrepreneurial freedom as the company transitions to electric vehicles (EVs).

While internal combustion engine cars continue to dominate the streets, the big auto companies are already making substantial investments into the electric future. Porsche is at the forefront of electrification and e-fuels, investing heavily as customer demand quickly shifts towards EVs.

But pioneering the car’s electric era goes far beyond just vehicles. For the global car fleet to switch to EVs in just a few decades, a significant number of battery gigafactories must be built and millions of EV chargers installed. All of these parts of the value chain must be created at the same time to ensure that consumers have enough charging networks in place, both for local and long-distance use. Without enough charging facilities, how can EVs operate? As a result, car manufacturers are committing exceptionally large investments to the value chain, amounting to tens of billions of euros, which also brings significant technological, industrial and financial challenges.

When looking to help finance the process, investment bankers need to understand every piece of activity taking place across the entire value chain. To facilitate this, banks like Societe Generale are undergoing major shifts internally to have the foundations in place to provide the debt and equity needed to scale up the automotive industry and other sectors, as well as promoting and furthering decarbonisation. As new value chains are formed, they are linking specialists together from across teams to collate the relevant expertise to accelerate the transition.

€2.5 trillion in estimated car sales by 2030

The pace and scale of change is huge and greater than many expected. By 2030, car sales could reach c.€2.5 trillion, with c.€1 trillion of this attributed to EV sales, a c.7x increase compared with today’s market. Significant software related revenues are also expected in the €150-200 billion range. The car industry supports 13 million jobs in Europe, amounting to 7% of the workforce, similar to the U.S. and China.

With the car industry revolution rapidly evolving, manufacturers are having to adapt quickly. By 2035, EVs are forecast to make up half of all light vehicle sales globally. What’s more, they are likely to account for two-thirds in the three big, developed economies of the US, Greater China and the EU.

As governments push to decarbonise economies, cars are a key focus area: in the EU, for instance, transport generates about a quarter of CO2 emissions, according to the European Environment Agency, with more than 70% of that from road transportation.1 While there was initially some reluctance to change, electrification is now happening faster than expected, as EU regulations are forcing car makers to curb emissions, and U.S. and Chinese regulations are catching up.

Risk allocation is key

At a time when capital is needed to engineer the EV transition quickly, different car manufacturers have different sized balance sheets. To give an idea of the scale of capital required, in early 2023 Europe’s largest car maker, Volkswagen Group, announced plans to invest €180 billion over five years, with most of this money set aside for the transition, including manufacturing its own batteries and developing software.

While the capital expenditure ambitions of other car manufacturers and tier one suppliers are somewhat smaller than those of Volkswagen, they are also preparing for their EV future through mergers and acquisitions. For instance, in the past year with the advice of investment banks such as Societe Generale, Faurecia has completed a €6.7 billion acquisition of Hella, and Plastic Omnium has acquired Varroc Lighting for c. €500 million. Societe Generale is also currently advising Stellantis on the acquisition of a 33% stake in Symbio, a leader in zero-emission hydrogen mobility.

As car manufacturers and other companies in the value chain prepare for the electric future, they will continue to rely on financing from capital markets to scale up, whether in the form of equity or debt. They will also continue to form joint ventures and partnerships with other companies as they look to share risks in ventures such as new gigafactories. But the success of these financings and new ventures will depend on the appropriate sharing of risks across the different parties in the value chain. With risk allocation at the heart of these opportunities, it’s an exciting time to be involved with negotiating the terms that reflect those risks and driving the future of EVs.






1 Data for 2019. 71.7% of transport emissions from road transportation.