Electric vehicle investment appetite grows among PE firms

'I think we have a set of circumstances now that are very fertile for the acceleration of electric vehicles,' TPG Growth partner Scott Gilbertson told PE Hub in May.

UPDATED: As sales of electric vehicles pick up speed in the auto industry, PE Hub has noticed a flurry of deals from private equity firms investing in companies supporting EVs.

Big carmakers in the US and around the world are racing to dominate the EV market. Since taking office, President Joe Biden has been rallying automakers to crank up their EV production with a goal of 40-50 percent electric vehicle sales share by 2030.

The Infrastructure Investment and Jobs Act that was signed last year allots $7.5 billion for the construction of EV charging systems across the country.

This opens up avenues for investing within the broader EV sector. PE firms are scrambling to gain a piece of the cake from many fronts, such as awareness platforms, charging systems, battery technology development, among others.

In May, TPG acquired ChooseEV, a platform for EV market awareness and education tools across North America. TPG Growth partner Scott Gilbertson told PE Hub in an interview after the deal announcement that, “I think we have a set of circumstances now that are very fertile for the acceleration of electric vehicles.”

“Historically,” Gilbertson added, “the unit cost of operating an electric vehicle was cheaper, but the total cost of ownership was expensive. I think the democratization of vehicles and the knowledge of these EVs and charging locations is going to create a meaningful acceleration of electric vehicle adoption.”

TPG is not alone in this space.

Clearlake Capital agreed in May to buy BBB Industries, which has an arm called TerrePower that focuses on sustainable manufacturing process to the electric vehicle and renewable energy sectors.

“We see a significant opportunity to partner with BBB’s management team to build upon their core business as well as several compelling growth areas across the automotive and broader industrial and renewable energy ecosystems,” said Clearlake co-founder and managing partner José E. Feliciano in a statement.

High-performance

Last month, Clearlake-backed Alkegen completed its majority investment in the China-based Luyang Energy Savings Materials, a producer of high-performance specialty materials used in advanced applications, including electric vehicles.

In April, Lincolnshire Management, a Dallas-based private equity firm, exited Schumacher Electric Corporation, which offers battery life enhancements, including EV chargers to Ripple Industries. It came after just 18 months of investment, where it grew revenue by around 40 percent and double EBITDA due in part to the popularity of the sector.

Aterian Investment Partners, a New York-headquartered firm, acquired Sterling Heights, Michigan-based ATCO Industries in May. ATCO provides tech-enabled testing, measurement, and quality containment services to the North American automotive market.

“ATCO has organically built its business and leveraged its robust technology platform to become a provider of choice for quality assurance in North America and continues to position itself with customers that are expected to be significant players in the transformation of cars into electric and next-generation vehicles,” read the statement released by Aterian Investment partners when the deal closed.

Although these are still early days for EV charging systems solutions, it is the right time to claim space in the sector, Spring Lane Capital co-founder and partner Nikhil Garg told PE Hub. This week, the firm invested $50 million in EVCS, an operator of 600 charging stations on the West Coast.

“We see a lot of growth and opportunity,” Garg said, adding that Spring Lane’s investment is meant to scale EVCS for the increased high demand coming. “The market is nascent, and the charging opportunities are enormous.”

Last year, Spring Lane made a $20 million investment in 7 Generation Capital Corp, a Vancouver-based developer of commercial electric vehicle projects that is focused on commercial fleets. The deal is expected to help 7Gen develop an EV charging infrastructure across Canada.

The deal activity is likely to continue, as demand for EVs is rising, with consumers seeking alternatives to fossil fuels.