Merrill Lynch’s investment research points to smart-money bullishness on electric vehicle adoption, with commercial fleets leading the way
Investment analysts at one of the world’s leading financial institutions are banking on the rapid adoption of EVs, projecting the sector will see a hockey-stick curve in market share over the next 10 years.
Its projections range from conservative to bullish, but all have one thing in common: the lines trend up.
Merrill Lynch, the investment and wealth management branch of the Bank of America, responsible for portfolios worth more than US$2.3 trillion cumulatively, has a strong bet riding on EVs emerging as a winning industry in the 2020 decade.
“We are seeing a four-fold increase in the number of electric models between now and what will be released in 2023,” says Martyn Briggs, vice-president of thematic research at Bank of America Merrill Lynch.
“At the Frankfurt Motor Show, recently, half the models that were released were electric.”
Merrill Lynch’s thematic investing report, published in mid-November, looks at 10 areas of investment interest in the decade ahead.
It predicts EVs (including plug-in hybrids and battery EVs) will have a rise in annual market share from 2.5 per cent annual sales in 2019 to over 46.2 per cent by 2030 — that’s 55 million EVs sold in that year alone.
It’s an aggressive forecast when compared to statistics from other think tanks.
Today, there are around 5.1 million EVs, which is less than .3 per cent of the global market share of over 1.1 billion passenger cars.
The International Energy Agency predicts 120 million EVs will be on the road by 2030. The Bank of Canada seconds that projection, but says the range could vary between 57 to 300 million EVs in total, depending on policy initiatives.
Briggs says Merrill Lynch’s prediction is based on evaluating the investment and profit opportunities in all the fields that EVs affect.
“It’s not just the auto industry. Things like charging that would impact utilities, the metals and mining impact, the environment and climate change, even down through technology as well — the amount of content going into electric vehicles is 10-15 per cent higher than a combustion engine vehicle.”
Many investment opportunities lie in fields tangential to EVs: affordable and clean energy, innovation and infrastructure, sustainable cities and communities, responsible consumption and production, climate action and advancing artificial intelligence and smart technologies.
Changes in EV incentive and ICE disincentive programs, policies around greenhouse gases, changing purchase patterns and consumer behaviour, reduction in battery costs, waning range anxiety and a greater variety in products will also drive adoption rates up exponentially.
But the most influential factor could be commercial fleet adoption.
“When it comes to how we think this EV transition will take off, the headline is always the private consumer. But where there is more value in the short term and is more likely to take off, we think, is in fleets,” says Briggs.
“Car companies are looking to tap into those to shift as much volume to as few customers [as possible], so that they don’t have to spend millions on marketing as well as producing the cars. That’s where there is probably an under-appreciated opportunity here.”
While long-term forecasts are subject to change and must accommodate for “anything can happen” events, the more bullish outlooks projected for the next decade seem to be on track.
Sales of battery and plug-in hybrids in Norway, the global leader in EV adoption, exceeded 50 per cent of total annual car sales for the first time in 2019. It’s a milestone that closes out the decade of EV advocating with a resounding win and begins the 2020s with increasing momentum for universal EV adoption.