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Over the past couple of years, governments across the world have been accelerating the transition from petrol and diesel to electric vehicles through the announcement of multiple regulations and incentives. Despite these efforts and all the publicity surrounding electric cars, we estimate adoption worldwide at the end of 2020 represented 3% for battery electric vehicles (BEVs) and 1.3% for plug-in hybrid-electric vehicles (PHEVs).
Based on this, we envision BEV penetration in Western Europe increasing to 20% by 2025, while China will reach 17.5% and the US 7%. By 2050, penetration could reach 95% in Western Europe and China and 80% in the US. When it comes to PHEVs, we believe they will be considered a transition technology reaching a sales peak in 2035 with sales starting to decline at that point.
A key challenge to the success for a large scale adoption of BEVs will be the availability of batteries. We estimate that lithium ion battery cell capacity could increase >7x over by 2030 to 2.9TRw bearing in mind there is other demand for cells (such as commercial vehicles). We also estimate that for light vehicles alone, nearly 6TRw capacity is needed to electrify all new light vehicles. This could require an investment in the trillions of US dollars.
Another question raised by the public over the past few years has been the lack of charging infrastructure. While this still remains low, we believe home charging will be an alternative solution while the network expands. Based on current plans for network deployment by 2025, countries such as the UK, France and Germany will appear to have enough charging density to support the increasing demand.
The impact of the electrification transition on automakers is costly with traditional automakers still in the earlier stages of a heavy investment and capex cycle. Further, many new entrants may try to compete in the electric vehicle space. However, this is a clear growth area within automotive and the investment by traditional automakers is likely necessary to ensure their participation in the future.
Joseph Spak and Tom Narayan authored “RBC ESG Stratify: Electric Vehicle Forecast to 2050” published on December 17, 2020. For more information about the full report, please contact your RBC representative.
ESG Stratify™ encompasses all of RBC Capital Markets’ ESG thought leadership and insights, including our monthly ESG Scoop series and industry-specific publications from our research analysts. RBC’s Equity Research Group delivers thorough, comprehensive assessments of companies spanning all major sectors, along with macro insights and stock-specific ideas to help guide portfolio management decisions.
Joseph is a Managing Director and leads Auto & Auto Parts coverage for RBC Capital Markets. He is consistently a top-ranked analyst in the Institutional Investor poll, including a #2 ranking in 2019. He also leads coverage of the “powersports” sector. Joseph joined RBC Capital Markets in 2008 having previously worked at Banc of America Securities. Joseph holds an MBA from the Yale School of Management and a BBA from the University of Michigan. He is a CFA charterholder and a member of the New York Society of Security Analysts (NYSSA).
Tom leads coverage of the European Auto sector for RBC Capital Markets. He was double ranked as “Rising Star of Wall Street” in Institutional Investor’s 2018 poll. Tom joined RBC Capital Markets in 2015, bringing with him over a decade of experience in investment banking, investment management, and equity research at Lehman Brothers, Deutsche Bank, and other firms. He holds a BA/MA with Honors in International Economics from Johns Hopkins University/SAIS.
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