Electricity supply: Forging the EV supply chain

The September Frankfurt Auto Show was a platform for the major German automakers to flesh out plans for electric vehicle (EV) investment.

• Volkswagen will launch 80 new electrified models by 2025, and will have electric options on all 300 models by 2030.
• BMW will produce 12 all-electric models by 2025, and will have electrified versions of all models by 2020.
• Mercedes will produce electric versions of all models by 2022, with EVs reaching cost parity with traditional cars by 2025.

Until recently, Tesla has had it all its own way in the long-range EV market. Over the next several years though, the mainstream industry is getting serious. As the chart below highlights, 2018-2020 will see a proliferation of products on the market in the all-important 300km+ range.

This range is crucial for most families to feel comfortable using an EV for 95% of their journeys. This product availability, along with much greater consumer awareness and government support programmes, looks certain to kick-start the long awaited EV transition.

EV product plans of major global manufacturers 

Source: Company reports, automotive trade press, Exane BNP Paribas estimates.

Having made so many big, long-range projections for EV sales, the major manufacturers are now entering a race to secure supply. The required capacity of lithium, cobalt, cathodes and other battery components & assembly plants, all needs to be ramped up significantly to meet demand. Such scarcity of capacity is creating a “sellers market”.

Incumbent suppliers in each of these industries have a tough decision on how fast to expand themselves. If they are too cautious, pricing will be good for now but they risk competition from new entrants who will be attracted to the industry. We have long believed this inflection point would come, and that it would be powerful for the valuations of well positioned suppliers.