Ivanna Hampton: Electric vehicles’ popularity is accelerating. Morningstar has forecast that EVs will make up 40% of new auto sales worldwide by 2030. And investors may want to look at the EV supply chain for opportunities. Morningstar Research Services’ equities strategist Seth Goldstein leads Morningstar’s electric vehicle committee.
Seth, you’re going to appear on a panel at the Morningstar Investment Conference in April. Can you give us a quick preview?
Seth Goldstein: We’re going to help investors analyze the battery electric vehicle supply chain to determine the best ways to invest in the transition to electric vehicles.
The Inflation Reduction Act and Electric Vehicle Tax Credit
Hampton: Let’s get into the news. The Inflation Reduction Act provides up to a $7,500 tax credit for buying an electric vehicle. What role do you see this tax credit playing in the transition to electric vehicles?
Goldstein: I think this will help make EVs more affordable for consumers in the U.S. and for consumers where price has been a sticking point and has caused hesitation to buy an EV, this will get people across the line. And then we’ll likely see greater EV adoption in the U.S. and help the U.S. catch up to EV sales that we’ve seen in places like China and Europe.
EV Forecast and Charging Stations
Hampton: Seth, your forecast says that 40% of auto sales by 2030, the new auto sales will be electric vehicles. Let’s talk about the public charging network. What’s being done to expand it?
Goldstein: Well, the infrastructure bill that was passed in 2021 is going to allocate billions of dollars to build roughly a half a million fast chargers along U.S. highways, which should help consumers overcome road trip anxiety where consumers fear they can’t take a road trip in an EV. And one of the big reasons why is that there’s nowhere to charge. And so, as we see more chargers getting built, that’ll help give consumers greater confidence that an EV is a suitable vehicle and can meet all their functional needs, which will likely lead to more EVs being sold.
Lithium Industry Outlook
Hampton: EV batteries need lithium. What is the outlook for the lithium industry?
Goldstein: EV lithium is one of the industries that will be most directly impacted by rising EV adoption because all EV batteries do need lithium. So, we expect lithium demand will more than triple between 2022 and 2030 from around 800,000 tons in 2022 to over 2.5 million tons by 2030, which should keep lithium prices high and create excess returns for low-cost lithium producers.
Hampton: EVs need more electrical components than gas-powered cars. What are the opportunities there for investors?
Goldstein: When we look at an electric vehicle, it needs roughly double the content of electrical components from a revenue-per-vehicle standpoint versus an internal combustion engine. So, for these electrical component suppliers, this creates a large opportunity to meet a growing end market from the transition to EVs.
Stock Picks
Hampton: And what are your stock picks?
