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Morningstar | EV Sales in China and the EU Will Accelerate, Driving Above-Consensus Global Adoption Rates

Over the next decade, battery electric vehicles will reach cost parity with internal combustion engines as battery costs decline. Additionally, battery innovations will increase driving range and shorten charging times such that EVs will no longer be an inferior product versus ICEs.

Charging infrastructure, which dictates range capabilities, will be the regional wild card that will either spur or limit EV adoption. Through a massive investment by its SOEs, China plans to build the world's largest EV charging network. The EU, through a combination of public grants and private networks, will have the second-largest charging network. U.S. charging infrastructure will be fragmented. Along both U.S. coasts, infrastructure will be comparable to the EU; however, it will be sporadic in the rest of the U.S. and range anxiety will continue to limit EV adoption.

Regulation will be the driving force behind medium-term EV adoption. Regions with electric vehicle-specific regulations and incentives will provide a stronger push for EV adoption. China will continue to make the strongest regulatory push to increase adoption. Tightening fuel standards in the EU will push automakers toward electrification over the next decade, while fragmented U.S. policies that vary between the state and federal levels will have a mixed impact.

Over the long term, EV adoption will take off where regions combine abundant charging infrastructure with strong regulation. In China and the EU, we forecast EV adoption to reach 25% and 20%, respectively, of annual new light vehicle sales by 2028. In the U.S., where charging infrastructure will be less developed and regulations less stringent, EV adoption will lag, reaching only 12.5% by 2028. Using a regional buildup, we forecast that EVs will make up 15% of global auto sales in 2028, above the consensus forecast for 11%. Our top picks to invest in growing EV adoption include Albemarle, BMW, BorgWarner, Edison International, General Motors, and SQM.

For more information, please see our Electric Vehicle observer titled "Electric Vehicle Sales in China and Europe Will Leave U.S. in the Dust, Driving Above-Consensus Global Adoption Rates" published on Sept. 24, 2018.