Editor’s note: As before, what is good for utilities – EVs– is good for the wind industry.
Morningstar has published its latest Electric Vehicle Observer, “Charged Up: Adoption Will Take Off as Electric Vehicles Reach Cost Parity,” focusing on the long-term potential for electric vehicle (EV) adoption. Currently, the market underestimates EV adoption, citing high costs and low range versus internal combustion engine (ICE) vehicles.
The electric Ford Focus retails for $29, 120, as of Dec 2016.
Key highlights of the Electric Vehicle Observer include:
- Top investment picks to play higher EV adoption are lithium producer Albemarle, auto-parts supplier BorgWarner, and automakers BMW and General Motors. Lithium producer SQM and current EV leader Tesla should also benefit from higher EV adoption, though both companies have high Morningstar Uncertainty Ratings. More about lithium demand is in Morningstar’s latest Basic Materials Observer, “Lithium: EV Adoption Drives Once-in-a-Century Demand Surge.”
- Bears (downsides) point to high costs and low range versus ICE vehicles as reasons why adoption will not take off, noting that despite much fanfare and excitement, EVs still made up less than 1% of global vehicle sales in 2015. Consensus forecasts EV adoption growing to 2 to 3% by 2020 and 4 to 5% by 2025— just enough to meet fuel efficiency requirements.
- Morningstar equity analysts also see regulation as the main driver through 2020 but expect far greater adoption in subsequent years as battery technology improvements allow EVs to reach cost parity with ICEs by 2025. Morningstar forecasts EV penetration of 10% by 2025, comparable to the ramp rates of similar innovations that have reached cost parity.
- While EVs are currently restricted by mileage and charging times, Morningstar expects this will improve meaningfully by 2025. Once batteries are developed with greater energy density, range per full charge should increase from 100 miles on average in 2015 to 200 miles by 2025.
- ICE technologies are sufficient to meet just 62% of the tougher fuel efficiency gains through 2020 on a global basis. Greater adoption of ICE technologies and credits make up more than 95% of the required fuel efficiency gains in the United States but less than 30% in Europe and roughly 35% in China due to stricter 2020 fuel efficiency standards in the latter two regions. Morningstar expects the gap will need to be filled by electrified powertrains including start-stop systems, hybrids, and electric vehicles, which play a significant role.
The report is available from Morningstar.
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