By Brian Sponheimer, A. Carolina Jolly, CFA, and Matthew Brooklier
Twelve months removed from our first (and hopefully, last) virtual Auto Symposium, leading automotive companies and investors returned to Las Vegas for two days of fireside chats at the Waldorf Astoria. Our hybrid conference featured a mix of 24 companies offering insights in person as well as virtually via Zoom from locales as far away as Israel and China.
Innovation and necessity ultimately drove the technological achievements required to help this conference run seamlessly, with those speaking remotely conversing as if they were with us in the hotel ballroom. In a similar manner, investments in the leading edge of mobility are having profound impacts across every subsector of the automotive ecosystem, driving changes that will ultimately shift how consumers buy, drive, and service cars.
This Reflections piece covers our Symposium, with the overarching message that the Electric Vehicle (EV) era is here and that in every conversation about the auto industry from here forward, Batteries Must Be Included.
Batteries Included: The New World Order in the Post-Pandemic World
The rise of the Electric Vehicle has combined with adjustments and investments made during the pandemic to set up the “Roaring 20s”, with more revolutionary change in the auto industry than at any point in the last 60 years. Shifts in consumer behavior and preferences, either created or accelerated by COVID-19, have forced companies at every step in the automotive ecosystem to reexamine their business models to ensure their future within the industry.
Exhibit 1 Sample EV Content
Layered onto all of these tectonic shifts in areas such as Electrification, Online Car Buying, and Active Safety/Autonomous Mobility, has been a massive disruption in vehicle production due to chip shortages, supply chain issues, and labor availability. Added into the conversation has been considerable upticks in inflation and the ability for companies to absorb and ultimately pass along increases in input costs.
We highlight below some of the major issues facing the automotive industry today as well as what we expect in the future – most notably amazing technologically driven changes taking place that will reshape the sector in the years ahead.
Electric Vehicles: Zero to Sixty
– With OEMs set to roll out countless models of Battery Electric Vehicles (BEVs), ecosystem stakeholders, from OE suppliers to dealers to charging station suppliers, are preparing to help build and service the Electric Vehicle industry as it explodes over the next decade.
Auto Dealers: Adjusting to Post-COVID
– Supply chain-driven inventory reduction, coupled with Covid-driven cost cuts, have led to massive increases in operating profit and outsized earnings for dealers, with little expectation for the environment to shift, near term.
– Dealers believe that they will be structurally more profitable post-pandemic as OEMs believe they can be more profitable producing fewer, highly contented vehicles.
Automotive Aftermarket: Inflation Station
– Aftermarket parts retailers are well positioned to pass along input costs as auto parts are less discretionary by nature than typical goods. Further, increases in the “sweet spot” of the 6 to 11-year-old vehicle population acts to grow the addressable market.
Light Vehicle Suppliers: No Chips, No Ships, But Production on the Way
– OE Suppliers will benefit as the need to re-inventory dealer lots from all-time lows necessitates production in excess of demand for the next two years.
The EV Revolution is Here
Our conference built on last year’s overarching theme regarding the arrival of Electric Vehicles (EVs). EVs, within the past four years, have transformed from what was largely a technological curiosity and eco-consumer lifestyle choice to a true industry competitor where performance, convenience, and cost can ultimately outperform Internal Combustion Engines.
Consumer options within the EV space are set to grow from expensive luxury vehicles and small cars to an entire spectrum of choices, including full size pickup trucks and “Last Mile” delivery vans for businesses where unit economics are in many ways superior to Internal Combustion Engine vehicles. Further, rapidly expanding charging infrastructure is slowly removing “range anxiety” as a reason to avoid owning an EV.
We expect global electric vehicle sales to grow from 4.5 million units in 2021 to 32 million by 2030 and the total number of electric vehicles on the road to grow from 7.7 million to 168 million over the same period (Table 1,2, below). This includes both battery electric/fully electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). Our presenters stressed that the momentum for electrification will only increase over the next decade; we highlight the major driving forces in the pages ahead.
Table 1 Global Electric Vehicle Sales 2020A – 2030P
Source: Gabelli estimates, EV Volumes, Inside EVs, IEA, McKinsey
Table 2 Global Electric Vehicle Population
Source: Gabelli estimates, EV Volumes, Inside EVs, IEA, McKinsey
Originally Posted on December 2, 2021 – Automotive Outlook and Reflections from Our 45th Annual Symposium
This whitepaper was prepared by Brian Sponheimer, Carolina Jolly, CFA, Matthew Brooklier, and Wayne Pinsent, CFA. The examples cited herein are based on public information and we make no representations regarding their accuracy or usefulness as precedent. The Research Analyst’s views are subject to change at any time based on market and other conditions. The information in this report represent the opinions of the individual Research Analyst’s as of the date hereof and is not intended to be a forecast of future events, a guarantee of future results, or investments advice. The views expressed may differ from other Research Analyst or of the Firm as a whole.
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