Goldman Sachs, Electric Vehicle Boom
Goldman Sachs research: Electric Vehicle Boom.
What if EV adoption shifts to hyper mode?
From the report (Sept 2017)
Although the internal combustion engine (ICE) is entering its twilight years, we think the decline could be stead-ier and shallower in the near term relative to consensus, with electric vehicles (EVs) accounting for just 8% of global auto sales by 2030.That’s below industry expectations of 10%-20%. Further out, we’re more bullish.
We see 2025-2030 as the inflection point and expect EVs will make up 32% of global auto sales by 2040. Swing factors that could shift the baseline into “hyper-adoption” mode include increased government incentives (still a wildcard) and lower battery costs (where a number of hurdles remain).
7 things that may supprise you
- We see a payback period of three years as the benchmark for consumers to take to EVs.
With the boom in hybrid sales, three years was the magic number, and if the payback period narrows to three years by 2025-30, we will move from regulatory to consumer-led EV adoption. (p.12)
- Subsidies supporting EV adoption should no longer be necessary by 2028.
Over the medium term though, we see a need for new tariffs to offset the decline in tax revenue from gasoline tax, etc. In Japan, gasoline tax contributes 3% of annual tax revenue or above ¥2 tn. (p.16)
- EVs are not necessarily eco-friendly.
On a tank-to-wheel basis, EVs undeniably are easy on the environment, but on a well-to-wheel basis, CO2 emission volume varies greatly according to the energy mix. A shift to nuclear power and
renewable energy is likely critical to radically lowering CO2 emissions. (p.17)
- Misconception to say EVs are simple to manufacture.
EVs may have only two-thirds of the parts used in gasoline vehicles, but the supply chain must still deliver some 18,000 components. Tesla is spending massive amounts in order to achieve annual capacity of 300,000 vehicles, but the reality is that many new players exit the market before reaching mass production. (p.25)
- Payback period for ICEs is typically 10-15 years.
We expect further technological breakthroughs in conventional engines through 2040, but think competition will be limited to a select few makers, as achieving a payback period of 10-15 years looks difficult amid the prevailing shift toward EVs. (p.11)
- Raw material costs standing in the way of battery cost reductions.
EV makers’ fervent wish is for battery costs to fall. While some see mass production greatly lowering battery costs, prices of lithium, cobalt, and other key inputs remain a significant hurdle. (p.34)
- All-solid-state batteries nearing viability.
Toyota is working with Japanese suppliers to debut EVs powered by all-solid-state batteries in 2022, greatly aided by the discovery of solid electrolytes with better ion conductivity than liquid lectrolyte solution. (p.31)
- Executive summary: What if we see hyper-adoption from 2025?
- Driving EV adoption: The road ahead from regulators to consumers
- Shift to hyper-adoption mode: Potential tailwinds OEMs/Parts: First-mover benefits for EVs?
- Timing is everything
- Batteries: Value-add revving up
- Battery materials: Lithium supply/demand to tighten
- Energy: Crude oil demand to slow as EVs become mainstream