Seth Goldstein: We recently published a deep dive report highlighting our bullish outlook for global electric vehicle penetration. Based on our findings, we see a number of attractive long opportunities that will allow investors to capitalize on increasing electric vehicle production.
For background, in 2017 electric vehicles accounted for only about 1% of total light vehicle sales globally. By 2028, we expect this number to increase to 15%, which is above consensus estimates of 11%.
A key driver of this outlook is our analysis that, over the next decade, electric vehicles will reach cost parity with internal combustion engine vehicles. Battery innovations will increase driving range and shorten charging times so that electric vehicles will no longer be an inferior product versus internal combustion engines.
Although we have an above-consensus global electric vehicle penetration outlook, our research indicates that electric vehicle adoption will vary widely by region. The density of charging infrastructure will be the key factor that either spurs or limits electric vehicle adoption in a given region. China will build the world's largest electric vehicle charging infrastructure system. Combined with the strongest regulatory push, we forecast electric vehicles to account for 25% of all new light vehicle sales in China by 2028. Europe, with solid charging infrastructure and tightening fuel standards will be second at a 20% electric vehicle adoption rate. The U.S. will lag the global average at 12.5% due to fragmented regulatory policies that will limit electric vehicle adoption.
Our top picks for industries that will benefit most from growing electric vehicle adoption are lithium producers and utilities. Lithium will be needed in all electric vehicles, regardless of battery chemistry or auto brand. Meanwhile, utilities that grow their rate base by building electric vehicle charging infrastructure can offer the security of regulated returns to investors.
Our top picks to play the electric vehicle adoption trend are Albemarle, BMW, BorgWarner, Edison International, General Motors, and SQM.