Driving to electrify Latin America

Generally speaking, Latin America is lagging behind the developed world in terms of electric vehicle (EV) uptake. Just in South America, the EV market is set to hit $955m this year and just under $2bn by 2027, at which point it will be selling over 37,000 vehicles per year, according to Statista. By comparison, the Americas as a whole is expected to reach over $67bn in 2023 and $153bn by 2027, while Europe will have reached $332bn.

“I think clearly, at least in my head, we’ve ended the first phase of EV charging where it was all sort of new,” says Brian Walsh, head of Wind Ventures, the San Francisco-based corporate venture capital unit of Chilean energy company Copec, in a recent episode of the Global Venturing Review podcast.

“You didn’t know exactly where to put them, we’re experimenting with different technologies, we’re experimenting with different user experiences and there’s a lot of learning in phase one. But with learning comes a lot of things that are not optimised, things that are not as good as they probably should be.”

Now, according to Walsh, we are entering phase two, where we are facing and having to deal with inadequacies in how systems actually work in practice.

These inadequacies include the frequency with which people can approach public charging points, only to have them not working for a variety of reasons, such as their need to be hooked up to an internet connection that ends up being sub-par. Given that demand for EVs is heavily dependent on the presence of reliable infrastructure, having a sizeable chunk of it be effectively inoperable is not good enough. The wider need to have grid upgrades to support the surge that would accompany heavier uptake is also a significant bottleneck.

Wind Ventures already boasts at least two EV charging technology companies in its portfolio, namely Xeal and Wallbox. Other companies include CleanFlame Engines, a company decarbonising heavy-duty industrial engines, as well as energy storage technology developer Yotta Energy, electric bike rental company Zoomo and energy efficiency technology provider 75F.

EVs

“We’re in the S-curve, which is really, really interesting. We should all expect that number to increase quickly here in the United States and, and everywhere else where it’s above 10% for sure,” says Walsh, referring to the S-shaped curve of adoption, where it starts slowly, then rises sharply before tapering off again eventually.

An often-overlooked corner of the EV story, which typically focuses on vehicles for passenger transport, is in the industrial space. According to Walsh, some 66% of all new forklifts are electric already. Even in markets with low EV penetration, fleets are being electrified at a rapid pace. Chile, for example, where less than 1% of passenger vehicles are electric, some 20% of new forklifts are electric, while it also has the second largest fleet of electric buses in the world, with only Beijing topping it. Retrofitting taxis and last-mile delivery vehicles are also coming along in stride.

Another encouraging element in the market is the seeming merging of what constitutes a venture play and an infrastructure play where EV charging is concerned. Typically, venture and infrastructure are on opposite ends of the risk spectrum (the latter being a mainstay for longer-term limited partners like pension funds and insurance companies), but we are seeing a growing number of tech-based charging manufacturers haul in cash from infrastructure investors to roll out their charging networks. An example Walsh pointed out was that of TeraWatt Infrastructure, which secured a mammoth $1bn series A round late last year to build out its charging centres.

Unfair access

Solving climate change without focusing on emerging markets, says Walsh, is a fool’s errand. While the bulk of advances in the energy transition is happening in the developed world, the vast majority of the world’s population lives in the developing world. There is no solution without them.

One of Wind’s main offerings is what it calls “unfair access” to the Latin American market for foreign companies that want to tap it. Wallbox, based in Germany, is a prime example, according to Walsh.

“They were at the right place at the right time to say, listen, that resonates, we’d love this TAM expansion. We think we’re ready to go do that with you. And so we brought them to Chile. We brought them to Latin America, the first time they’re on the continent. Fast forward to today, they’re now I think in 16 different countries throughout Latin America,” he says.

Walsh initially engaged with Copec while at McKinsey, where he helped developed Wind as an innovation platform. Ultimately, Copec asked him to turn theory into reality and brought him on board.

“We came up with this open innovation model, which we call Wind. It’s a global model, the premise being that Chile and Latin America have a lot to offer global startups and founders and so let’s have this global-local model where we go trying to attract the best and the brightest to our little country in Chile to start, but then hopefully help them expand, quite significantly throughout the region,” says Walsh.

Wind Ventures is just one part of the wider Wind organisation, which also includes a venture-building side called Wind Garage, located in Santiago and Bogota, that looks for new ideas to launch into companies. Wind Labs, by virtue of its closer proximity to the ground, also helps Wind Ventures in finding smaller, more under-the-radar companies, and also acts as the more hands-on side of the business that helps portfolio companies create value, according to Walsh.

The firm tries to make around six investments each year, deploying between $2m-5m typically at the series A stage or later, though Walsh says they prefer to go in later as there is more basis on which to determine a product-market fit for its cross-border model.

Wind doesn’t typically lead rounds, but is equipped to do so, particularly if one of the aims of a particular company is to have that next financing round be – for market signal or to expand their addressable market – based in Latin America.

“If a founder wants the headline of their series A, B, or C – whatever that financing is – to be Latin America, they’re going all in Latin America, we’re one of the best firms in the world, I think, for that. We’ve set up the best, it’s quite a unique sort of special power that we have, of bridging to Latin America.”

If, on the other hand, those companies want to strengthen their position in their core markets, Wind tends to follow in rounds.