UBS put out a report which is compelling to say the least. All 95 pages of. heres some snippets..
Executive summary
Tearing down the world's first mass-market electric car
We are more convinced than ever that electric cars are about to reach the tipping
point in the penetration curve in the next few years. This new generation of
electric cars has far-reaching implications for the global autos industry, but also for
many other sectors, such as capital goods, chemicals, mining, technology, and
energy. The only way to better understand these implications was to tear down
the first vehicle of its kind, piece by piece. So, that is what we did. We tore down
the Chevrolet Bolt, which we consider the world's first real mass-segment electric
vehicle (EV). The Bolt combines a $37k price tag ($30k including US government
subsidies) with an EPA-estimated range of 238 miles on a single charge, which
surpasses competitors by at least 30% in this price segment. Moreover, the Bolt
has a price tag and range similar to the upcoming Tesla Model 3, which is Tesla's
long-awaited entry into the mass market.
Q: When will EVs reach consumer cost parity,
and what will be the impact on EV sales?
- Europe is first in 2018E but still at a loss for the OEMs;
true cost parity (5% OEM margin) is reached in 2023E.
- Raising forecasts by ~50% to 14% global sales
penetration (30% in Europe) by 2025E.
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Q: What is different in an EV like the Chevy
Bolt, compared to an equivalent ICE car?
- Much less mechanical complexity, far fewer moving and
wearing parts.
- EV powertrain $9k more expensive today, going down to
$4k by 2025E.
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Q: How profitable are EVs like the Bolt and the
upcoming Tesla Model 3?
- Bolt: $7k EBIT loss per car 2017E, going to $6k profit in
2025E, holding price stable.
- Tesla Model 3: $2,800 loss per car today on base version,
but well-equipped versions should be profitable. We
estimate $41k is the break-even point.
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Q: What is the impact on the auto industry?
- OEMs: EVs become profitable sooner; more CO2 benefit,
particularly for EU OEMs. Finco risk is the key downside.
- LG as a new entrant has ~56% content share in the Bolt.
- Mixed picture for "traditional" tier-1 suppliers and longterm
threat in aftermarket.
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Q: How are global commodities markets
influenced by the shift to EVs?
- Highest impact on markets for aluminium, copper,
battery active materials, rare earths (all positive) and
platinum group metals (negative).
- Largely no impact on steel demand.
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Q: How much more electronics and semi
content is in an EV, and who is set to benefit?
- $3k more electr(on)ic content (ex battery).
KEY BATTERY
COMMODITY
THEMES
Q: Can battery raw materials supply a total EV revolution?
Below is projected EV-related commodity demand assuming 100% of passenger vehicles (approx. 100mn units)
are EV, as per Bolt specifications. Relative to today's market size, Lithium and Cobalt demand increase by factors
of 29x and 19x, respectively. Rare Earths & Graphite demand lifts by factors of 5x-6x, while Nickel demand
doubles. In a world of full EV penetration, the battery raw material supply chain needs to expand dramatically.
Commodity demand change – 100% EV – source UBS
CHEMISTRY
SUBSTITUTION
Q: Are substitutes available to displace current Li-ion chemistries?
There are many competing battery chemistries with variable raw materials in the cathode, anode and electrolyte,
offering variable performance. Higher raw material prices may see changes in chemistry, hence substitution. For
example, high Cobalt prices should reinforce changing NMC chemistry ratios of 1-1-1 (nickel-manganese-cobalt)
to 8-1-1 by early next decade, resulting in cobalt demand likely growing less quickly than overall EVs.
GRID
RENAISSANCE
Q: How will electricity grids change to support the EV revolution?
EVs need to be fuelled with electricity, preferably from low carbon sources such as renewable (hydro/solar/wind)
or nuclear, for there to be a carbon dividend from migration from combustion engines. This should lead to a stepchange
investment requirement in the grid and also for charging stations. While not analysed in this report, this is
likely to be materially positive for copper and aluminium demand, above and beyond the estimates above.
NICKEL
HYDROXIDE
Q: Is the world's Nickel chain ready to feed EV battery growth?
Most mine supply growth and investment in the past five years has been in low-grade nickel laterite ores, which
are processed into a nickel-pig-iron product of 3-10% Ni and 85-90% Fe as stainless steel feed. This source is not
suitable for battery use, which uses Nickel Hydroxide. Producers of Nickel Hydroxide may stand to benefit and
receive premium prices.
LITHIUM
PROJECT
RISKS
Q: Is Lithium supply as easy to ramp up as it is abundant?
Lithium is relatively abundant. Yet successfully designing, building, commissioning and maintaining output from
brine and hard-rock deposits is more technically challenging than many other mineral commodities. A shortage of
experienced knowhow, lengthy development timelines, process plant issues and quality differentials present
challenges likely to result in more gradual supply growth than developers may wish for.
GRAPHITE
QUALITY
Q: How important is graphite quality?
Graphite too is relatively abundant. Battery anode manufacturers currently have a preference for high-quality
synthetic graphite that features near-zero impurities, as impure graphite in anodes leads to safety and
performance issues. Graphite producers need to convince battery customers of the merits of their product, often
through a qualification process lasting many month/years.
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