Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Thematic (Sector/Industry)

<div class="content-highlight">Electric Vehicle Sales in China and Europe Will Leave U.S. in the Dust, Driving Above-Consensus Global Adoption Rates</div><hr>Over the next decade, battery electric vehicles will reach cost parity with internal combustion engines. Additionally, battery innovations will increase driving range and shorten charging times so EVs will no longer be an inferior product versus ICEs. Charging infrastructure, which dictates range capabilities, will be the regional wild card that will either spur or limit EV adoption. In the medium term, emission-driven regulations will spur the investment to build better EVs and drive increased EV adoption.Over the long term, EV adoption will take off where regions combine abundant charging infrastructure with strong regulation. In China and the EU, we forecast EV adoption to reach 25% and 20%, respectively, of annual new light vehicle sales by 2028. In the U.S., where charging infrastructure will be less developed and regulations less stringent, EV adoption will lag, reaching only 12.5% by 2028. Using a regional buildup, we forecast EVs to make up 15% of global auto sales in 2028, which is above consensus of 11%. Our top picks to invest in growing EV adoption include <a href="https://www.smartkarma.com/entities/7678" target="_blank" data-smartkarma-citation="entities:7678:1">Albemarle Corp (ALB US)</a>, <a href="https://www.smartkarma.com/entities/21591" target="_blank" data-smartkarma-citation="entities:21591:1">Bayerische Motoren Werke Ag (BMW GR)</a>, <a href="https://www.smartkarma.com/entities/18392" target="_blank" data-smartkarma-citation="entities:18392:1">Borgwarner Inc (BWA US)</a>, <a href="https://www.smartkarma.com/entities/16455" target="_blank" data-smartkarma-citation="entities:16455:1">Edison International (EIX US)</a>, <a href="https://www.smartkarma.com/entities/18811" target="_blank" data-smartkarma-citation="entities:18811:1">General Motors Co (GM US)</a>, and <a href="https://www.smartkarma.com/entities/24555" target="_blank" data-smartkarma-citation="entities:24555:1">Soc Quimica Y Minera Chile-B (SQM/B CI)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/065/098/original/img%201.JPG?1537958835" class="editor-image img-responsive" data-smartkarma-image-id="65098"></figure><h2>Key Takeaways</h2>Medium Term: Evolving Regulations Strengthen Regulatory Push<ul>
<li>Regulation will be the driving force behind medium-term electric vehicle adoption. Over the past couple of years, regulations have evolved from being predominately based on fuel efficiency standards to including electric vehicle mandates. Regions with electric vehicle-specific regulations and incentives will provide a stronger push to EV adoption.</li>
<li>China will continue to make the strongest regulatory push to increase electric vehicle adoption. The regulations are already having the desired effect as China currently sells the majority of EVs globally. Tightening fuel standards in the EU will push automakers to electrification over the next decade, while fragmented U.S. policies that vary between states and the federal government will have a mixed impact.</li>
<li>The strongest regulatory push will come from governments that specifically address electric vehicles and give automakers a benefit for producing electric vehicles with better range. Further, regulations that either provide benefits for electric vehicle drivers or restrict ICE drivers will enhance the regulatory push on the consumer side</li>
<li>Implications for stocks: Auto suppliers who are positioned to help OEMs meet regulations across multiple powertrains are more likely to increase market share as regulations incentivize sales of EVs, hybrids, and ICE technologies. EV requirements create minimum annual increases in lithium demand.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/065/099/original/img%201.JPG?1537959026" class="editor-image img-responsive" data-smartkarma-image-id="65099"></figure>Lead Analyst: Seth Goldstein, CFA

Electric Vehicle Sales in China and Europe Will Leave U.S. in the Dust, Driving Above-Consensus Global Adoption RatesOver the next decade, battery electric vehicles will reach cost parity with internal combustion engines. Additionally, battery innovations will increase driving range and shorten charging times so EVs will no longer be an inferior product versus ICEs. Charging infrastructure, which dictates range capabilities, will be the regional wild card that will either spur or limit EV adoption. In the medium term, emission-driven regulations will spur the investment to build better EVs and drive increased EV adoption.Over the long term, EV adoption will take off where regions combine abundant charging infrastructure with strong regulation. In China and the EU, we forecast EV adoption to reach 25% and 20%, respectively, of annual new light vehicle sales by 2028. In the U.S., where charging infrastructure will be less developed and regulations less stringent, EV adoption will lag, reaching only 12.5% by 2028. Using a regional buildup, we forecast EVs to make up 15% of global auto sales in 2028, which is above consensus of 11%. Our top picks to invest in growing EV adoption include Albemarle Corp (ALB US), Bayerische Motoren Werke Ag (BMW GR), Borgwarner Inc (BWA US), Edison International (EIX US), General Motors Co (GM US), and Soc Quimica Y Minera Chile-B (SQM/B CI).Key TakeawaysMedium Term: Evolving Regulations Strengthen Regulatory Push
Regulation will be the driving force behind medium-term electric vehicle adoption. Over the past couple of years, regulations have evolved from being predominately based on fuel efficiency standards to including electric vehicle mandates. Regions with electric vehicle-specific regulations and incentives will provide a stronger push to EV adoption.
China will continue to make the strongest regulatory push to increase electric vehicle adoption. The regulations are already having the desired effect as China currently sells the majority of EVs globally. Tightening fuel standards in the EU will push automakers to electrification over the next decade, while fragmented U.S. policies that vary between states and the federal government will have a mixed impact.
The strongest regulatory push will come from governments that specifically address electric vehicles and give automakers a benefit for producing electric vehicles with better range. Further, regulations that either provide benefits for electric vehicle drivers or restrict ICE drivers will enhance the regulatory push on the consumer side
Implications for stocks: Auto suppliers who are positioned to help OEMs meet regulations across multiple powertrains are more likely to increase market share as regulations incentivize sales of EVs, hybrids, and ICE technologies. EV requirements create minimum annual increases in lithium demand.
Lead Analyst: Seth Goldstein, CFA

Electric Vehicle Observer: September 2018

<ul><li>The drive to green power is the well-understood destructive impact of fossil fuel consumption: Investment in renewable energy is driven by the reality that the current consumption of fossil fuels, and related air pollution, water pollution, and public health costs, are unsustainable. As hundreds of millions of people push for higher living standards&mdash;and thus increased consumption of polluting resources&mdash; governments around the world are acting. With governments meeting in early December for the COP21, stronger commitments are possible. We do not expect legally binding agreements on all parties to emerge from the talks.</li><li>With policy support, high investment is set to continue: Though some governments have throttled back support following inefficient overbuild, the trend points upward in the largest markets, primarily the United States and China, and key new markets in emerging economies like India, Mexico, South Africa, Turkey, and others. With more players chasing development, and lower absolute subsidies in many cases, we think renewable energy investment returns may fall.</li><li>Ormat is our favorite way to play renewable energy generation capacity: Even though we think the stock is currently modestly overvalued, Ormat Technologies&mdash;a narrow-moat pure-play geothermal developer&mdash;is the only independent power producer with an economic moat. It has a long and impressive growth runway well beyond our five-year explicit forecast, and its baseload geothermal generation has a major operational advantage over intermittent solar and wind.</li><li>Renewable energy growth was one factor in our recent midcycle power price cuts: We recently cut our midcycle outlook for Texas power markets by 20%, primarily because of the state's huge pipeline of renewable energy projects that we expect to go into service during the next three to five years. There are more than 24.5 GW of active generation requests under review for new-build wind generation through 2020, including 11 GW in the next two years, with the state's primary grid operator, ERCOT, or the Electric Reliability Council of Texas.</li></ul>Analysts: Mark Barnett, Travis Miller, Andy Bischoff CFA &amp; Charles Fishman, CFA

The drive to green power is the well-understood destructive impact of fossil fuel consumption: Investment in renewable energy is driven by the reality that the current consumption of fossil fuels, and related air pollution, water pollution, and public health costs, are unsustainable. As hundreds of millions of people push for higher living standards&mdash;and thus increased consumption of polluting resources&mdash; governments around the world are acting. With governments meeting in early December for the COP21, stronger commitments are possible. We do not expect legally binding agreements on all parties to emerge from the talks.With policy support, high investment is set to continue: Though some governments have throttled back support following inefficient overbuild, the trend points upward in the largest markets, primarily the United States and China, and key new markets in emerging economies like India, Mexico, South Africa, Turkey, and others. With more players chasing development, and lower absolute subsidies in many cases, we think renewable energy investment returns may fall.Ormat is our favorite way to play renewable energy generation capacity: Even though we think the stock is currently modestly overvalued, Ormat Technologies&mdash;a narrow-moat pure-play geothermal developer&mdash;is the only independent power producer with an economic moat. It has a long and impressive growth runway well beyond our five-year explicit forecast, and its baseload geothermal generation has a major operational advantage over intermittent solar and wind.Renewable energy growth was one factor in our recent midcycle power price cuts: We recently cut our midcycle outlook for Texas power markets by 20%, primarily because of the state's huge pipeline of renewable energy projects that we expect to go into service during the next three to five years. There are more than 24.5 GW of active generation requests under review for new-build wind generation through 2020, including 11 GW in the next two years, with the state's primary grid operator, ERCOT, or the Electric Reliability Council of Texas.Analysts: Mark Barnett, Travis Miller, Andy Bischoff CFA &amp; Charles Fishman, CFA

United States

Edison International, through its subsidiaries, develops, acquires, owns, and operates electric power generation facilities worldwide.  The Company also provides capital and financial services for energy and infrastructure projects, as well as manages and sells real estate projects.  Additionally, Edison provides integrated energy services, utility outsourcing, and consumer products.

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Edison International (EIX US)

Electric Vehicle Observer: September 2018

Electric Vehicle Sales in China and Europe Will Leave U.S. in the Dust, Driving Above-Consensus Global Adoption RatesOver the next decade, battery...

Morningstar, Inc.

Why the Renewable Energy Boom Has Legs

The drive to green power is the well-understood destructive impact of fossil fuel consumption:Investment in renewable energy is driven by the...

Morningstar, Inc.

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