Investors should consider the investment objectives, risks, charges and expenses carefully before investing. This information and other information about the Funds can be found in the prospectus and summary prospectus. For a prospectus and summary prospectus, please visit our website at bailliegifford.com/usmutualfunds. Please carefully read the Fund's prospectus and related documents before investing. Securities are offered through Baillie Gifford Funds Services LLC, an affiliate of Baillie Gifford Overseas Ltd and a member of FINRA.
As with any investment, your capital is at risk.
In the 1980s and 1990s, Japan’s auto industry shifted gears, accelerating past the US. Led by giants like Toyota, Japan's car industry reached unparalleled manufacturing efficiencies.
Ground-breaking technological and managerial innovations upended traditional mass production methods, and their productivity and product completion rates far exceeded those of many American factories.
Currently, we are witnessing a similar transformation, with China set to reshape the global car industry through its leadership in EV technology and manufacturing. Ultimately, EVs’ adoption and success will be influenced by several trends that Baillie Gifford continues to monitor:
01. EVs’ affordability differs dramatically by region
The EV market continues to experience robust growth, but adoption rates vary significantly by region. The first quarter of 2024 witnessed a 25 per cent surge in global EV sales from the previous year. EV sales could hit 17 million units this year, representing more than 20 per cent of worldwide car sales. However, adoption rates vary significantly by region. In the US, approximately one in ten cars sold is an EV. In Europe, the figure is one in four, and in China, EVs are nearing half of all new car sales. Much of this difference is a result of affordability.
According to the International Energy Agency, over 60 per cent of EVs sold in China last year were cheaper than the average combustion engine car. Entry-level EVs in China are now below $10,000. Yet, in the US and Europe, EVs are still 10 per cent to 50 per cent more expensive than their combustion engine counterparts.
02. Emerging and developing markets underpin EV uptake
To safeguard their domestic auto industries, Western governments have begun raising tariffs on Chinese EVs to counteract state subsidies provided to Chinese manufacturers. The EU has imposed provisional tariffs of up to nearly 40 per cent on EVs shipped from China. Meanwhile, the US has raised tariffs on Chinese EVs to over 100 per cent, effectively blocking nearly all Chinese EV imports. Despite these early measures, we believe that Western markets, especially Europe, will continue to be accessible to Chinese manufacturers. We think this is particularly true for vertically-integrated manufacturers with superior margin structures such as BYD Auto.
But it’s the rate at which EV sales increase in emerging and developing markets that will determine their worldwide success. In emerging economies with large car markets, EV penetration is still relatively low. In India (where EVs have a 2 per cent market share), Brazil (3 per cent share), Indonesia, and Malaysia (2 per cent share each), cheaper models, mainly from Chinese manufacturers, are underpinning uptake.
03. Charging infrastructure is improving but remains a challenge
Technological advancements, particularly in battery technology, are central to the EV revolution. The industry is witnessing dramatic improvements in battery capacity with new models boasting ranges of over 600 miles. NIO’s ET7 recently completed a journey of nearly 650 miles on a single charge.
The development of charging infrastructure remains a critical challenge for the widespread adoption of EVs, though. While there is a clear push towards electrification, the readiness of infrastructure and the alignment of government regulations vary significantly across geographies.
Baillie Gifford is well-equipped to understand the EV revolution
By leveraging our deep understanding of the industry's technological advancements, consumer trends, and regulatory landscapes, we can identify companies at the forefront of EV innovation. This insight not only enables us to identify businesses poised for growth but also helps us steer clear of companies likely to underperform in the shifting automotive landscape.
Our research methodology, grounded in thorough analysis and forward-looking perspectives, ensures that we are well-equipped to capitalise on the opportunities presented by the EV revolution.
Important information and risk factors
The Funds are distributed by Baillie Gifford Funds Services LLC. Baillie Gifford Funds Services LLC is registered as a broker-dealer with the SEC, a member of FINRA and is an affiliate of Baillie Gifford Overseas Limited. All information is sourced from Baillie Gifford & Co unless otherwise stated.
As with all mutual funds, the value of an investment in the Fund could decline, so you could lose money. International investing involves special risks, which include changes in currency rates, foreign taxation and differences in auditing standards and securities regulations, political uncertainty and greater volatility. These risks are even greater when investing in emerging markets. Security prices in emerging markets can be significantly more volatile than in the more developed nations of the world, reflecting the greater uncertainties of investing in less established markets and economies. Currency risk includes the risk that the foreign currencies in which a Fund’s investments are traded, in which a Fund receives income, or in which a Fund has taken a position, will decline in value relative to the U.S. dollar. Hedging against a decline in the value of currency does not eliminate fluctuations in the prices of portfolio securities or prevent losses if the prices of such securities decline. In addition, hedging a foreign currency can have a negative effect on performance if the U.S. dollar declines in value relative to that currency, or if the currency hedging is otherwise ineffective.
For more information about these and other risks of an investment in the Funds, see “Principal Investment Risks” and “Additional Investment Strategies” in the prospectus. There can be no assurance that the Funds will achieve their investment objectives.
| Companies held by Baillie Gifford |
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| BYD Auto |
As at 30 September 2024
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