Driving into 2025: The Future of Electric Vehicles | Global Research Live | J.P. Morgan


Ryan:
Hi thanks for tuning in. I’m Ryan Brinkman US Automotive Equity Research Analyst for
J.P. Morgan and I’m here with Natasha Kaneva, Head of Metals Research and Strategy for J.P.
Morgan Global Commodities Research. We’re here to discuss a report recently released
by global research regarding the outlook for the global electric vehicle market. Natasha,
could you help to explain it high level the vehicle electrification model that we have
created and what does it encompass? Natasha:
Thank you Ryan. The underlying idea behind the report was that the average answer from
a group of people is always more precise than an answer from each individual separately
so from by definition the larger the group of participants in a particular project and
the more diverse this group is then the lower the margin of error. So with that in mind
the report leverages the work of fourteen different JP Morgan teams. For starters we
used the feedback or the numbers given by us from five different auto equity teams regional
teams one from the US Europe China Japan and South Korea so those numbers then were adjusted
by battery chemistries by three different regional teams from our chemicals and battery
chemicals teams and then those numbers were further utilized by five different regional
mining teams and the global commodity team to derive the demand numbers for metals. So
the main conclusion from that report is that considering all the inputs into the models
were completely independent the idea behind that was that because of that the main output
from the model is unbiased for any particular sector any particular commodity or in a particular
region so with that in mind actually the pulled number from the model showed a global EV penetration
rate by two thousand twenty five or below eight percent. This number is slightly more
optimistic than the previous number published by J.P. Morgan on the global scale. The number
is still quite conservative with what we are seeing from other sell side research banks.
This number we’re pegging at around fourteen to ten to fourteen percent penetration rate
so we are quite conservative from our estimates. Ryan:
That’s great thanks, and the U. S. team that I lead contributed to the model by estimating
the transfer vehicle electrification in the North America region. Our thought process
is that with the US administration’s proposed relaxation of corporate average fuel economy
standards effectively capping them at twenty twenty one levels instead of growing aggressively
through twenty twenty five as was previously planned under the earlier administration that
there may be less of an increase in battery electric vehicles in the North American market
than might have been previously imagined but at the same time perhaps more growth in lesser
degrees of electrification. For example, hybrids plug-in hybrids, that also increased efficiency
of vehicles but not as much and in a more cost effective way. I’m curious what trends
you were able to identify outside of the North America market where our battery electric
vehicles for example are expected grow, the most quickly, which country in the world is
expected to have the greatest concentration of these vehicles.
Natasha: Correct. So I think one of the conclusions
is that it’s inevitable what’s coming so I think there’s no arguing about that but at
the same time this the pace of penetration will most likely be gradual and we see this
gradually in China, that’s a very good example. The number that’s showing by two thousand
twenty five still eighty four percent of all the cars sold in China actually not going
to be in any form electrified so there will be internal combustion engines but at the
same time we see enough of regional variants and so on the other side of the spectrum is
of course Europe where our forecasts of calling them by two thousand twenty five there will
be no internal combustion engine vehicle sold at all. At the same time I think what is interesting
to point out is that while we still see a relatively low electrification rate coming
out of China at the same time the better electric vehicle penetration will be very high just
given the scale of production but given the propensity of the Chinese automakers towards
a smaller battery packs this does not does not necessarily. Result in higher materials
used in those battery packs. Ryan:
I see and with regard to the battery specifically obviously a very important component in battery
electric vehicles, what are the metals that are used most in in the vehicles and which
metals are expected to increase the most going forward?
Natasha: And so what we’re saying is it’s a very strong
tendency from the battery producers since the technology is moving very very fast towards
higher nickel, higher nickel chemistries in the battery packs at the expense, at the cost
of the cobalt so A, it gives them a higher energy density for sure but at the same time
it allows the battery maker sits to move away from cobalt, which is a metal considered with
a problematic supply chain. Ryan:
I see. Which of the metals that you see as having the most demand in two thousand twenty
five? Natasha:
Considering our quite conservative penetration rate towards two thousand twenty five and
when we feed all those models into our supply demand models the answer is, clearly gives
enough opportunity for the space to grow from a from just from the demand for electric vehicles
but at the same time the number so I would have to say relatively light compared to consensus.
So in terms of the biggest usage out there we still see lithium for example we see this
year balanced market but going forward we don’t see any shortages in lithium until at
least mid of next decades. Very similar conclusions and cobalt it’s a very well supplied market
at least until two thousand twenty three. Nickel is an interesting market because it
sparks a lot of interest out there we do see is that the demand will increase almost ten
times between now and two thousand twenty five we do believe that the prices will have
to respond post two thousand twenty and then there are metals which are not used in the
battery so but at the same time there they have to be employed if we’re going to develop
the sector. For example, to charge the electric vehicles we need to charging stations which
are extremely copper intensive and the cars have to become lighter that’s aluminum away
from steel so the PGM sector will get affected very strongly. The biggest loser in our opinion
would be most likely platinum and palladium will be the winner.
Ryan: I see and as you mentioned a lot of industry
observers believe that vehicle electrification is inevitable. Does it matter though how quickly
the industry transitions to electrification for the metals market and how much and how
quickly do you think that the industry does electrify?
Natasha: On yes absolutely. So again the conclusion
from the report was that it’s gradualism. Yes it’ll happen gradually, we do believe
that the inflection point will be passed two thousand twenty five. One of the points made
during the process of coming up with the research was that we intentionally decided to make
the cut off date at two thousand twenty five, why, because we have very little visibility
beyond two thousand twenty five. So if we had extended it towards two thousand certainly
most likely would have like a hockey stick type of a penetration rate post two thousand
twenty five which we decided not to do for now. So, as far as, as long as we assume the
inflection point is past two thousand twenty five the minors still have plenty of time
to react and to come up with more supply to satisfy the demand if we assume that it’s
moving closer to us for example two thousand twenty, two thousand twenty one then there
is no time for them to react because looking just the capital expenditure and the space
it peaked in two thousand thirteen and it has not increased since then so pretty much
what that means is that there will be shortages and the prices would have to respond accordingly.
Ryan: That’s great. Thank you very much Natasha
and thank you everyone else also for tuning in. To learn more visit JPMorgan.com.