Tesla may have kickstarted the electric vehicle market, but more and more analysts are starting to see EVs take off. There’s plenty of debate about where Tesla stands within this increased demand for electric vehicles, but what every analyst can agree on is that higher demand for EVs will translate into higher demand for EV battery materials.
EV demand expected to take off
UBS analyst Lachlan Shaw said in a note this week that his firm’s global auto team recently upgraded its sales forecast for electric vehicles after the second UBS Evidence Lab survey of about 10,000 consumers in the world’s six biggest auto markets. The survey indicated that consumers are becoming more and more interested in electric vehicles, so UBS analysts raised their sales projection for passenger EV sales to 16.5 million in 2025.
That represents a penetration rate of 16% for the auto market and is an increase from their previous estimate of 14.2 million vehicles. UBS increased its estimate due to higher demand for EVs in China and higher year-to-date sales for this year in key markets. Additionally, Shaw said they see momentum building for EVs.
Demand for EV battery materials also to pick up
Shaw carried these higher estimates for EV sales through to his models for EV battery materials and raised his estimates as well. The main EV battery materials include lithium, graphite and nickel, so he analyzed expected demand through 2025. His new model also takes into account plans for new factories and greater demand for stationary storage units.
Based on these increases, he now looks for 200GWh of demand in Li-ion batteries in 2020, an increase of 7.2%, and 1,054GWh of demand in 2025, a 12% increase. Of course, higher battery demand translates to greater demand for EV battery materials and tightens the commodity markets while supporting prices within them.
Pricing forecasts for EV battery materials increased
Based on his view of the market for EV battery materials, he updated his price forecasts for lithium, nickel and graphite.
His preferred commodity of the three is nickel because EV battery designs are being shifted toward more nickel.
As far as individual stocks for EV battery materials go, he notes that not all nickel producers are equal. He prefers sulphide and some laterite producers because they can supply battery-grade nickel. More specifically, he likes Independence Group and Norilsk, although both are Neutral-rated. He also said that Western Areas, which he lists as Sell-rated, is “favourably exposed.”
As far as graphite, he likes Syrah Resources, and for lithium, he prefers Orocobre and Galaxy Resources.
