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. 

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Thematic (Sector/Industry)

Colombia Automobiles and components / Thematic (Sector/Industry)

<div class="content-highlight"><p><strong>Electric Vehicle Sales in China and Europe Will Leave U.S. in the Dust, Driving Above-Consensus Global Adoption Rates</strong></p></div><hr><p>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.</p><p>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>.</p><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><p></p><h2>Key Takeaways</h2><p>Medium Term: Evolving Regulations Strengthen Regulatory Push</p><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><p><em>Lead Analyst: Seth Goldstein, CFA</em></p>

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

Sociedad Quimica y Minera de C (SQM/B CI)

Electric Vehicle Observer: September 2018