People will go EV because they’re proving to be a better product: analyst

Bank of America Analyst, Martyn Briggs, joins Yahoo Finance to discuss the goals of the electric vehicle industry, how EV producers are adapting around supply constraints, and the viability of Biden's plan to have 50% of vehicles produced in the U.S. be electric by 2030.

Video transcript

BRIAN SOZZI: If we've learned anything this year, it's that the push to electric vehicles is accelerating. Ford's new electric F-150 has seen surging preorders. Tesla is finally driving profits. GM is touting a barrage of new EVs. Same goes for Volkswagen.

Let's talk more about the EV outlook with Bank of America analyst Martyn Briggs who covers the industry pretty extensively. Martyn, good to see you here this morning.

Let's start in the US. The EV story is global, but let's start in the US here. You know, President Biden has come out saying that he wants half the cars sold in the US to be electric by 2030. Well, 2030 is fast approaching. Do you think that goal is achievable given where the country's infrastructure is?

MARTYN BRIGGS: Well, I mean, it's tackling that head on. It's an exciting time ahead of us with regards to new technology in the automotive industry. You've got to go back a hundred years or so before we had such a transition, ironically then from combustion engine cars to electric-- from electric to combustion cars, and now obviously we're going to be doing the reverse.

So to your question, is there going to be enough capacity, enough momentum, enough new models? Well, the early evidence shows that there will be. Several reasons for that-- you know, the car companies are going all in with regards to the models. That hasn't always been the case in the last few years. There's been a lot of talk, a lot of commitments, a lot of investment but less so on the kind of models that will be released. We're seeing now about a third of new models in the next couple of years that will have some form of a plug, be that plug-in hybrid or EV.

To your point, by the end of the decade, I mean, 50% in the US might sound bullish from where we are today, but if you look at that kind of momentum of the models that are coming out, how good they are in terms of the range, the cost declines of batteries, the improving charging infrastructure, several other factors that we can discuss, it might not be as scary as it might sound from the outset.

Now, to achieve that, you're going to need to see a lot of up-- of supply-chain shifts. Obviously a lot of manufacturing capacity, huge amounts of battery manufacturing in particular to achieve that that we can come to.

But to answer your question, you know, the policy is there. The climate crisis is real. Net-zero targets are real, and they're not going away. And EVs are an obvious low-hanging fruit to be able to transition to zero-carbon, zero-emission mobility.

JARED BLIKRE: And you have a conference, I believe, that your firm is hosting just around the corner. It's called Drive Electric, and it's going to be for-- it's a virtual event, and it's going to feature EV manufacturers. Can you tell us a little bit about this and what you hope to gain by it?

MARTYN BRIGGS: Yeah, I mean, from the bank's perspective and from what we do in research, you've seen the shift, as I mentioned earlier, in terms of the number of models that are coming to market, especially with regards to EVs. But what you might not have had a few years ago is the kind of real marketing push from the companies to push those EVs, either because the combustion-engine cars were the profit centers. And, you know, let's face it, there were not many alternatives to choose from.

What's changed now-- you know, you mentioned it with the targets earlier on about the 50% by 2030. In Europe, we've got even more aggressive targets for going EV. What we want to achieve from this is to showcase that there is now much more choice, and not only is there much more choice for electric vehicles, they are performing and proving to be far more viable when it comes to the cost, the range, the utility, and some of the issues that might not have been there in the gen one of EVs where you would have maybe had to have chosen from two or three manufacturers. Now pretty much everyone has a variant, either directly as a battery-electric vehicle or a plug-in hybrid, and that is going to be really increasing going forward.

So what we want to achieve, really, especially in times where it's still virtual to not be able to go in the old-school ways to see some of the product, is to showcase that on some of our clients' behalf and some of the companies that we work with at the bank.

BRIAN SOZZI: Martyn, where are all these EV companies going to get their batteries from? We have Volkswagen doing EVs, Ford, General Motors. We have a guest on later, Archer, that makes essentially helicopters using electric batteries too. Where are they getting all these batteries from?

MARTYN BRIGGS: Sure. I mean, well, that is one of the key concerns in terms of the volume supply constraints that lay ahead of us. I mean, to your question earlier on, I wouldn't be as concerned from a demand point of view. I think people will go EV because they're proving to be a better product.

The supply constraints, you know, we've seen it from the Suez Canal to the semiconductor shortages in the short term. Now to your point with batteries, I mean, Europe alone is going to need about a 30-fold increase in capacity to achieve the 2025 targets that are there. The US won't be far behind that and probably doubling that again to the end of the decade.

So to achieve that, and to your point, where are they going to come from? They're not going to be able to rely on the current largely dominated Asia supply chains where about 90% of the EV batteries come from today. They're going to need to transition to local supply chains.

Now, this is why the policymakers are going, particularly with regards to industrial policy, not just to say we've got to go EV but also that it will come with support for manufacturing batteries locally-- also right down to the mines and the materials that are be used to ensure they're more sustainable and can be created in new ways, be that through direct lithium extraction and other novel ways that are not scaled up at the moment.

But in the short term, you're going to have-- already you've got the mining companies expanding capacity to achieve some of this. The big blocking point that we'll need to, of course, come at the gigawatt-hour factory and even terawatt-hour-scale factories to achieve a lot of the targets to the end of the decade.

So you've seen a lot of movement from the battery manufacturers to accommodate that in joint ventures with car companies and some also deciding to go more vertically integrated to take control of their own destiny and offset any risk to make sure that they've got that supply to the end of this decade and beyond.

JARED BLIKRE: Thinking a little bit big picture, just broadening out the discussion beyond EV and thinking about climate change in general-- I understand you're a thematic investor. Where else are you looking in this space?

MARTYN BRIGGS: Yeah, I mean, to your point, the world is much bigger than just EVs when it comes to the energy transition. You've got a kind of trifecta of the electric vehicle itself, renewable energy, and energy storage that are all playing a role here. And, you know, you can also include other alternatives, be that new sources of energy, hydrogen, as well as renewable energy that's coming into the mix.

So the bigger picture for us is that to achieve a lot of these targets and sustainability that's going to be needed to mitigate climate action, looking at things in silos such as an electric vehicle is not enough. You've also got to decarbonize the grid. You've also got to have better means of storing that energy. Renewables are obviously intermittent, so being able to increase that capacity to achieve a lot of the peak energy demands that are going to be coming and also a lot of new technologies, right, be that smart grid, vehicle-to-grid connectivity with your electric vehicle. You can give some of that power back to the grid when you're not using the power in your electric-vehicle battery.

And there's a load of other new innovations like that that can make sure that we make smart investments to be able to achieve these targets and that it doesn't maybe look as scary as it might from the outset of we've got a transition in a 10-, 20-year period. So I'd say a combination of those three or four things in particular, but it all centers around changing demographics, changing innovation, and sustainability goals are the three kind of main buckets or topics that we cover.

BRIAN SOZZI: Martyn, before we let you go, by the end of the decade, you know, how much-- you know, in terms of distance, how far is an electric car going? You know, it ranges right now go from 300 miles on a full charge to 400 miles. I think Mercedes came out this morning, teased a new SUV that goes 400 miles. That's good, but when do we hit that thousand-mile mark?

MARTYN BRIGGS: Well, I think, you know, batteries were about trade-offs, right? So you could-- to your point, you could reach a thousand-mile range if you put a particularly large battery pack in cars today, but then they're going to weigh a lot, and you're going to need to make trade-offs with regards to the other materials that are used.

So my personal opinion is that you're not going to need every single car that has a thousand-mile range. If you want to pay a premium for that, it's going to be maybe a slightly bigger vehicle, and I think that would be achievable and available for customers if they want it.

The key trend that we see more so is that there's a minimum viable range. About 200 miles of real-world range seems to be the tipping point that now is pushing the new EV product that's coming to market. To go above the 300, 400, 500 mile point, then, you know, as a consumer, you're going to need to be prepared to pay a premium for that.

Where I do see more innovation and changes is on the energy-density potential of the battery being able to reduce the cost and, secondly, the longevity. We've seen innovations announced in the last year that could even give you electric-vehicle batteries that would last for a million miles, 15, 20 years before they degrade. So, you know, you might not get the thousand-mile range that you're talking about, but you would be able to use that in a much higher utilization variant than it is in an electric car today.

So I think what we'll probably see is a diversification. You'll see entry-level city cars, cheaper batteries, maybe 100-, 150-mile range. Then you'll have the midpoint, 200, 300, and to your point, real premium cars that can do 500-plus-mile range. But they're not going to be the cheapest ones on the market, of course.

BRIAN SOZZI: Fun time to be in EVs. Bank of America analyst Martyn Briggs, good to see you. Good luck at the conference.

MARTYN BRIGGS: Thanks, guys.