Tesla model S electric vehicle US equities climate change

On October 8, the Intergovernmental Panel on Climate Change released a report that calls for faster electric vehicle and hybrid adoption as part of the actions needed to limit the effects of climate change. The report calls for emissions to be reduced 45 per cent versus 2010 levels by 2030.

The report will be a key topic at the Katowice Climate Change Conference in December, where governments from around the world will review the Paris agreement. We think the report's conclusions could lead to governments setting stricter regulations and investing in electric vehicle charging infrastructure that would result in increased electric vehicle adoption.

We continue to see regulation as the driving force behind medium-term electric vehicle adoption. Regions with electric vehicle-specific regulations and incentives will provide a stronger push for electric vehicle adoption. China will continue to make the strongest regulatory push to increase adoption.

Tightening fuel standards in the European Union will push carmakers toward electrification over the next decade, while fragmented US policies that vary between the state and federal levels will have a mixed impact.

Over the long term, electric vehicle adoption will take off where regions combine abundant charging infrastructure with strong regulation. In China and the EU, we forecast electric vehicle adoption to reach 25 per cent and 20 per cent, respectively, of annual new light-vehicle sales by 2028.

In the US, where charging infrastructure will be less developed and regulations less stringent, we think electric vehicle adoption will lag, reaching only 12.5 per cent by 2028. Using a regional build-up, we forecast that electric vehicles will make up 15 per cent of global auto sales in 2028, above the consensus forecast for 11 per cent.

We forecast hybrids to make up 21 per cent of global auto sales in 2028, which would make electric vehicles and hybrids 36 per cent of total vehicles. Our top picks to invest in growing electric vehicle adoption include Albemarle, BMW, BorgWarner, Edison International, General Motors, and SQM.


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