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Stock Analyst Update

What Biden's Executive Order Means for EVs

Biden's plans are in line with our thesis for higher U.S. and global EV adoption.

On Aug. 5, President Joe Biden announced plans to sign an executive order calling for electric vehicles to be 40%-50% of new auto sales in the United States by 2030. The target includes battery electric vehicles and plug-in hybrids. This mirrors our thesis that the U.S. will see 30% EV adoption and 50% hybrid adoption, of which we expect plug-in hybrids will be 10%-20%, by 2030. Though the order is nonbinding, this aligns with stated plans from multiple U.S. automakers. As a result, we maintain our U.S. EV and hybrid adoption outlook. Using our regional buildup model, we continue to forecast that EVs and hybrids will make up 2 of every 3 autos sold globally by 2030, with 30% coming from EVs.

The executive order will also reportedly aim to set tough fuel and emission standards through 2026 in line with the regulations set by the state of California. While we view regulation as a near-term driver of EV adoption, we do not view it as a long-term sales driver. Instead, we point to the build-out of high-powered chargers along highways and throughout cities as the best way governments can drive greater long-term EV adoption. Given that Biden's infrastructure proposal, which includes funding to build HPCs, continues to advance through Congress, we view the U.S. as well on its way to greater long-term EV adoption.

In our view, mass-market EV adoption will occur when EVs reach cost and functional parity with internal combustion engines. We define functional parity as the EV being able to drive at least 300 miles on a single charge and recharge in 10 minutes in regions where there is mass availability of chargers. These characteristics are important to relieve road trip anxiety, which currently holds back EV adoption as some consumers fear an EV will not be suitable to take road trips. We expect EVs will reach cost and functional parity with ICEs by 2025, spurring rapid adoption in the second half of the decade.

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