A billion BEVs on road by 2050: Morgan Stanley

Automakers around the world are facing increased costs in the manufacturing of internal combustion engines due to the existing and proposed emissions legislation. On the basis of this, a Morgan Stanley report states that by 2050 there will be as many as one billion battery electric vehicles (BEVs) on the road globally.

According to the report, the opportunities and challenges would be extended throughout the automotive supply chain with significant impact on component suppliers, semiconductor manufacturers, commodities, chemical producers and other players in capital goods.

Equally competitive for big and small players
With small and big automakers already announcing their electric-powered models, Adam Jonas, Morgan Stanley’s head of global auto and shared mobility research, said, “A confluence of competitive, technological and regulatory forces have pulled-forward automakers’ plans to aggressively introduce EVs over the next 3 to 5 years as against 20 to 25 years previously. The path from here involves many hundreds of billions of dollars of capital investment across the sector stack including autos, commodities, capital goods and the supporting infrastructure.”

The current BEV players in the industry are controlling the value of the car by designing and producing the major structures, powertrain, major systems, branding and distribution. This would mean that over 50 percent of the value of the car could migrate from mechanical to electrical systems and electronics.

As most parts of BEVs could be outsourced, big players would find the EV market as competitive as the new players. The report states that the range of profitability outcomes for these players is wide and will likely rely on factors such as BEV growth, price impacts on internal combustion vehicles, and gross margins for electric vehicles.

New components, new contingencies, new contentions
Battery costs have dropped nearly 30 percent per year for the past five years due to improved production scale. Harald Hendrikse, Morgan Stanley’s equity analyst for European autos and shared mobility, said: “Around half of the component cost of the battery cell is in the cathode. Improvements in the energy density of the cathode — the terminal through which electric current flows — will reduce the amount of metal required per kilowatt hour, thereby lowering the metal requirement and the metal price risk.”

As observed by analysts at Morgan Stanley, cathode manufacturers are going to increase their production while compromising with the prices and demand for battery components like copper, cobalt and lithium could increase sharply along with their prices. The recent developments in silicon carbine technology claim to offer 20 percent more mileage from a single battery pack, along with 20 percent less charging time.

Legacy suppliers for seats, wheels, tyres and safety mechanisms should make the transition somewhat seamless, but powertrain, transmission and fuel systems manufacturers who have built business models around internal combustion will likely face headwinds as BEV adoption increases. Wide adoption of BEVs will also expand the need for an entirely new level of electrical and electronic systems that don’t exist in internal combustion vehicles and hence could be priced high.

Mass adoption of BEVs need robust charging infrastructure
According to Nicholas Ashworth, co-head of European Utilities Research, a consensus is yet to emerge on the number of public charging points needed to service the BEV fleet. Current numbers vary widely from country to country, depending on the maturity of the market. There are some charging stations that are sponsored by automakers and available only to drivers of their vehicles and then there are those that are financed and maintained by governments or utilities. The perfect payment model for using these charging services is still up for debate.