Why This Analyst Just Raised US EV Penetration Forecast To 7% By 2025, 20% By 2030

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Electric vehicle stocks have been all the rage on Wall Street in the past couple of years.

On Monday, Bank of America auto analyst John Murphy updated his long-term EV penetration forecast for the U.S. market. He now sees EV penetration happening much more rapidly than he previously expected.

The Numbers: After updating his internal combustion vehicle and EV technology cost outlooks, Murphy raised his U.S. EV penetration forecast from 4.5% to 7% by 2025. Looking all the way ahead to 2030, Murphy is now projecting 20% EV penetration, up from his previous target of 12.5%.

“Besides updated component cost estimates/forecasts and updated current/forward estimates for gas prices, miles driven, and other factors, the most significant agent of change in our cost/price parity and EV penetration estimates versus our prior projections is US regulation under the new Biden administration,” Murphy wrote in a note.

In his base-case scenario, Murphy assumed the $7,500 per-vehicle federal EV subsidy remains in place. In a bull-case scenario, he said federal EV tax incentives are raised to $10,000 per vehicle and U.S. EV penetration hits 50% by 2030.

Murphy estimates the bull-case scenario would require at least $450 billion in federal stimulus.

Related Link: Lordstown Motors Analysts React To Going Concern Warning: 'These Conditions Raise Substantial Doubt'

How To Play It: In addition to government stimulus, Murphy said one of the drivers of EV adoption will be falling costs. Today, he estimates the current total incremental parts cost of an EV at about $8,700 more than an ICE vehicle.

Over time, he forecasts the cost of EV battery and powertrain components will continue to fall, while ICE vehicle component costs rise slightly. Murphy said ICE and EV vehicles will likely reach cost parity sometime in the mid-to-late 2020s.

Bank of America has the following ratings and price targets for U.S. automaker stocks:

  • Ford Motor Company F: Buy rating, $17 target.
  • General Motors Company GM: Buy rating, $80 target.
  • Tesla Inc TSLA: Neutral rating, $700 target.

Benzinga’s Take: The global transition from ICE to EVs is inevitable and is a major opportunity for investors who play the trend correctly. The major questions that remain are how long will the transition take, how much long-term growth is already priced into EV stocks and whether or not legacy automakers can maintain their dominant positions in the industry in the face of new competition from next-generation companies.

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Posted In: Analyst ColorPrice TargetAnalyst RatingsBank of Americaelectric vehiclesEVsJohn Murphy
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