Electric vehicle companies are on track to secure fewer private equity and venture capital investments than non-EV manufacturers in 2024 because of concerns over slow market adoption and delayed profitability.

Global private equity and venture capital deal value in EVs and EV components totaled $3.32 billion in the first three quarters of the year, compared with $4.03 billion raised by combustion engine automobile companies, according to S&P Global Market Intelligence data.

Significant volatility, increasing competition, price wars among original equipment manufacturers (OEMs) and expectations of a slower relative annual growth as major EV markets mature are weighing on investor confidence, the International Energy Agency (IEA) said in its Global EV Outlook 2024 report published in April.

Most private equity firms are hesitant to invest in EVs, viewing the sector as too risky, said Leonard LaRocca, US automotive industry leader at KPMG, in an interview.

"The delay in adoption and the delay in profitability, mainly due to low volumes and delayed launches, doesn't make a very attractive business case for private equity," LaRocca said.

– Download a spreadsheet with data in this story. – Read about global venture capital funding rounds in October. – Explore more private equity coverage.

PE activity strong in China

Global private equity investments in EVs in the first nine months of 2024 have outpaced the $1.84 billion secured for all of 2023, driven by investments in EV companies based in Asia-Pacific, particularly in China.

The region accounted for $3.23 billion in investments in the first three quarters of the year, followed by Europe with $44.7 million, according to Market Intelligence data.

"All the activity is coming from China. There's significant EV investment in Chinese OEMs and the Chinese supply chain. China is going to charge ahead with electrification and attracting investments," LaRocca said.

In the largest deal of 2024 to date, Nio (Anhui) Holding Ltd., a subsidiary of Chinese EV-maker Nio Inc., raised $1.90 billion in an investment round announced in September. CS Capital Co. Ltd., Hefei Jiantou Capital Management Co. Ltd. and Anhui Provincial Emerging Industry Investment Co. Ltd. participated in the round.

Zhiji Motor Technology Co. Ltd.'s series B funding round in March was the second-largest in the analysis period. The Chinese EV-maker secured $1.11 billion from investors led by BOC Financial Asset Investment Co. Ltd.

In the third quarter, private equity investments in EVs reached $2 billion, up from $600 million in the same period in 2023, driven by the Nio and Zhiji Motor deals.

Outlook

Private equity firms are expected to remain cautious investors in the EV industry in 2025 as EV balance sheet concerns, particularly in North America, will likely linger.

However, private equity EV deals in Asia-Pacific are expected to continue growing.

"Companies like [China-based] BYD Co. Ltd. have big plans to enter other markets and expand globally. They've proven that they can make money at making EVs," KPMG's LaRocca said.