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The Future Is Electric Auto Suppliers And The Emergence Of EVs

Highlights

- The rate of adoption of electric vehicles (EVs) will be determined by tightening emissions regulations and the level of government incentives, battery costs, range anxiety, and infrastructure suitability.

- We expect the transition to EVs will occur at a faster rate in Asia, followed by Europe and then by the United States.

- Hybrids sales are and will continue to provide a cost effective way for automakers to comply with tougher fuel economy standards.

- EV sales could reach roughly 10% of global light-vehicle sales by 2025. How well-positioned traditional automaker and suppliers are to participate in this emerging market will increasingly have credit implications.

- Rising research and development costs at auto suppliers will pressure earnings for the next couple of years, but will be partly mitigated by cost sharing efforts with original equipment manufacturers.

Feb. 21 2019 — The transition of the global light vehicle fleet (car parc) from internal-combustion-engine (ICE) vehicles to that of pure electric vehicles (EVs) is still in its early stages. How quickly the adoption of zero-emissions vehicles will proceed, though, will largely be determined by the level of government support for policies that reduce CO2 emissions to combat climate change and enhance energy security. Governments, of course, can mandate changes in emissions reduction but they also need to play a role in making EVs more attractive in terms of economics and performance if they are to bring about mass adoption.

As the global car parc becomes larger, emission standards for many countries have become stricter and continue to converge. For instance, China has put in place regulations that limit average fleet CO2 emissions to 117 grams per kilometer; the U.S., 119 grams per kilometer; and Europe, 95 grams per kilometer by 2021.

Besides CO2, increasing fears around the consequences of exposure to nitrogen oxides (NOX) penalized the share of diesel in new sales in Europe, thus further accelerating the shift towards other engines, petrol in the first instance but also hybrids.

Still, while tightening emission requirements around the world are a necessary force in promoting EV adoption, they are not sufficient in themselves. This article will review the obstacles to mass adoption, the role of government incentives in removing these obstacles, the expected rates of adoption by region, and an update on how rated global suppliers are positioning themselves as judged by the breadth of their electrified product portfolios, stated strategies, and projections of future business.

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