According to Goldman Sachs, the EV battery market is becoming more concentrated
The electric vehicle market will continue to grow, and Goldman Sachs sees concrete opportunities in the battery market to make that happen. The electric vehicle market will see a surge in interest due to the Inflation Reduction Act tax credits, but has also been pressured by the impact of inflation, including more expensive electricity, said Goldman analyst Kota Yuzawa. Still, the long-term prospects are strong as EV penetration surges in a bid to reduce tailpipe emissions and achieve carbon neutrality, according to Yuzawa. He expects EV adoption to reach 61% by 2040. As a result, electric vehicles will capture much of the growth in the broader auto market. The EV-related profit pool is expected to grow from just $2 billion in 2020 to $133 billion in 2030, a 6550% change. In comparison, the industry as a whole will grow from $315 billion to $405 billion, a far more modest 29% growth. As the market changes, Yuzawa expects profit pools to shift by region and product. A big winner so far has been EV battery makers, he said, as pricing power has supported higher profits. “Ready to Grow” Yuzawa said batteries will continue to evolve, noting the launch of lithium iron manganese phosphate, or LFMP, batteries this year. And he said the future lies in solid-state batteries, which have higher energy densities, are safer and charge faster. “Technological innovations will be essential to overcome this type of short-term noise,” he said in a note to customers. “We believe the automotive battery market will grow significantly by 2040, with growth expected to be driven by the development of new materials and the introduction of new battery designs.” He said the battery market is becoming increasingly concentrated, with the top five battery manufacturers accounting for 83% of the market market. For comparison: The five largest car manufacturers together have a global market share of 41%. Meanwhile, Yuzawa said vehicle manufacturers are rushing to create structures and finalize joint ventures to try to move battery manufacturing and other processes in-house. Companies such as solar power installers can also play a role in charging batteries. Here are some Goldman stocks rated Buy that are said to be connected to the battery market and are traded in the US: FREYR Battery is developing battery gigafactories and should be a beneficiary of the IRA according to Yuzawa. Goldman Sachs has a $19 price target for the stock, up more than 120% from Monday’s close. One of the most well-known names in electric vehicles, Tesla, has developed battery cells and some core components such as motors itself. Goldman has a price target of $200, up 20% from Monday’s close. Tesla recently cut prices to stimulate demand. The stock has struggled with concerns over profit margins over the past year as price multiples contracted amid higher interest rates and CEO Elon Musk’s chaotic purchase of Twitter. Legacy automaker Stellantis makes battery packs and management systems in-house and plans to move battery cells in-house as well, while General Motors is also increasing its battery offering. Goldman expects shares of Stellantis and GM to rise 33% and 16%, respectively, from where they closed on Monday. GM said Tuesday it would invest $650 million in a lithium company to support its electric vehicle business. But GM also said it doesn’t expect to start producing significant quantities of electric vehicles until the second half of this year. TSLA GM, STLA 1Y Mountain Tesla Stocks Looking ahead to vehicle charging, Yuzawa is bullish on Sunrun, SolarEdge and Enphase, which are known for solar power systems and can also support EV charging infrastructure. Goldman’s price targets show that shares could rise 123%, 38%, and 79%, respectively. – CNBC’s Michael Bloom contributed to this report
https://www.cnbc.com/2023/01/31/goldman-sachs-says-ev-battery-market-is-growing-more-concentrated.html According to Goldman Sachs, the EV battery market is becoming more concentrated
