The transition to the age of the electric car promises a superior driving experience, a more economical and efficient business model and the emergence of new stars in the automotive industry. He claims it Matthew Williams, Investment Director – Global Emerging Markets, Aberdeen Standard Investments in a commentary on the automotive sector and in particular on the evolution of electric vehicles and their impact on the industry.
“Thanks to improved performance and a better cost structure, electric cars – he writes – will encourage a new wave of competition capable of threatening the traditional automotive industry. This will likely catalyze a change in leadership. Traditional manufacturers, constrained by high fixed costs and low cash flow, will only be able to slowly migrate to electric vehicles."
“Tesla is certainly an undisputed leader in electric car technology – he continues – but the possible repercussions for the industry go far beyond that. New and more traditional car makers are rushing to develop their own electric vehicles, hoping to be able to compete in the industry before others. Technological development in this sense also introduces a new set of suppliers with expertise in areas such as light materials, electronics, software and battery technology”.
More functional and cleaner electric motors
“Electric cars are a disruptive force which threatens the very survival of traditional car manufacturers. Instead, it offers disruptive entrepreneurs the opportunity to grab a slice of the global auto industry that is now worth a trillion dollars."
At the heart of this change stands out Tesla Motors, which pioneered electric car technology and overhauled the traditional business model of the automotive industry: from design, procurement and assembly of spare parts to marketing, distribution and after-sales service. sale. Many consider Tesla the exception rather than the rule, but in our opinion pioneered in crafting a vehicle that delivers a superb driving experience. This is encouraging new automakers, particularly in China, to adopt a similar approach."
“The electric car offers additional space and, more importantly, the performance is outstanding thanks to the acceleration in cars with larger battery sizes, which make them able to compete with most supercars. Particularly evident are the superior consumer entertainment and safety features that can be easily engineered with this technology.”
“Many potential electric car buyers are generally discouraged due to the infrequency of charging stations and slow charging times. However, coverage continues to improve and larger batteries reduce this by offering a range of up to 300 kilometers. It is estimated that this figure covers 95% of trips and 99% of urban journeys. Also considering that cars are stationary for an average of over 23 hours a day, there is no shortage of time to recharge the battery".
Driving cost reduction
"The biggest obstacle to mass adoption of EVs is price, mainly due to the large size of the batteries. However, as with other technologies, continuous progress leads to constant cost reduction.
“After comparing ourselves with leading battery manufacturers, including LG Chem and Samsung SDI, we believe that costs will decrease much faster than the market expects, thanks to increased scale of production, improvements in energy density, advances in material composition and improvements in manufacturing processes”.
“To give an idea of scale, at the end of 2016, the estimated cost of batteries was $300/kWh. According to our analysis, by the end of 2017 it will be around 200 USD/kWh, reaching only 2020 USD/kWh by the end of 100, well below the estimate suggested by the consensus of 200 USD/kwh at the end of 2020”.
Using a 60 kWh battery, with a range of 250-300 miles, drops the cost for manufacturers from $18.000 to just $6.000. This is important because today the cost of a conventional engine is about $5.000, and with stricter fuel efficiency standards on emissions, it could rise to about $6.000 by 2020. So, by 2020, we estimate that the electric car will achieve parity with a traditional engine vehicle.
"Looking beyond 2020, we believe the cost structure of EVs will outpace traditional models. In addition to significant fuel savings, repair and maintenance costs will be lower, because the moving mechanical parts are 90% less, with a consequent reduction in wear and tear. This decreases the need for an extensive service network. Furthermore, the evolution of consumers' search habits towards the ever more extensive use of the Internet also guarantees a reduction in the commercial footprint”.
“This significantly reduces distribution costs for pure electric vehicle makers, but will be difficult for traditional automakers to adopt.”
Investing in change: which companies to focus on?
In addition to electric vehicle manufacturers, this industrial transformation will see companies in the new supply chain among the winners. Among these we can cite for example Minth, a Chinese manufacturer of structural and decorative auto parts. The company specializes in lightweight materials particularly suitable for electric vehicles, for which excessive weight limits range and battery life.
Samsung SDI stands out in battery development, which is recognized through the acquisition of important new customers, including VW and BMW.
Another name to highlight is that of Syrah Resources in Australia. Syrah is the world's only supplier of high-quality, coated, spherical graphite used in lithium-ion batteries. Basically, the structure of this form of graphite improves the energy density and substantially reduces the cost of the battery. It is therefore of primary importance for electric vehicles and will accelerate the eventual accessibility and adoption of the technology.
