JP Morgan Cazenove has joined the ranks of those who believe the EV revolution is happening a lot faster than anyone expected. In a note to investors last month, the investment bank pointed out widespread electric car adoption will happen faster than many analysts expect, according to Clean Technica.
Battle of the batteries
They pointed out that price differences between legacy vehicles and EVs are gradually narrowing as battery prices fall, but that once a certain tipping point is reached, things could start happening quickly.
“Concerns about scrap values of internal combustion vehicles (ICVs) may drive consumers towards EVs even before the price differential between the two classes of vehicles closes,” wrote J.P. Morgan’s analysts. They predict that electric cars could account for 35 percent of the global auto market by 2025, and 48 percent by 2030.
Winners and losers in the EV revolution
Automobiles are an integral part of our lives and the transition from fossil fuels to electrons is going to impact a wide range of businesses in addition to the oil and gas industry. JP Morgan notes that “ironically, automakers may not be among the big losers.”
Maintenance and parts
Automakers can replace their gas and diesel cars with electric models, and this is already being done. However, there will be related businesses that will end up suffering losses. This is because electric vehicles have a much lower maintenance cost for consumers.
“EVs have 20 moving parts compared to as many as 2,000 in an ICV, dramatically reducing service costs and increasing the longevity of the vehicle,” the analysts said. This means auto parts businesses and auto dealerships who rely on “after sales-services” will be affected.
“We see this as a meaningful risk for car dealers who rely on after-sales service for a large chunk of their profitability. This should over time reduce the number of vehicles sold as well, in addition to other potential trends, such as automated driving and greater vehicle utilization rates.”
Semiconductors will shine
Good news in the transition to EVs will be seen in the semiconductor industry. “A typical EV uses two to three times the dollar value of semiconductor constituents, compared to an ICV,” say the analysts. They point out that semiconductors are also used in EV charging stations.
Another loser will be the auto financing industry. The scrap value of traditional vehicles will drop significantly. This, in turn, will lower the amount of money companies can attain when they repossess a vehicle. And EV owners will probably be keeping their vehicles longer, lowering the demand for auto loans.
A report entitled, “Rethinking Transportation 2020-2030,” from Stanford economist Tony Seba provides a detailed blueprint for the end of the oil industry, predicting the growth in oil demand will end around 2021, and that the transition away from oil will be all over by 2030.
