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Center for Automotive Research Presentation
Rod Lache
(386) 222-1083
August 2020This report is limited solely for the use of clients of Wolfe Research. Please reference to the DISCLOSURE SECTION located at the end of this report for Analyst
Certifications and Other Disclosures. For Important Disclosures, please go to www.WolfeResearch.com/Disclosures or write to us at Wolfe Research, LLC, 420
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Cash burned in 1H-2020
3
Sources:, Company Data, Wolfe Research
Entering a period of significant change for Autos,
while demand and profitability will be weaker
4
Sources: FHWA, Wolfe Research
Over the next 5 years, US Automaker earnings likely to
be well below recent peak (of 2016/2017)
• US Trend Demand likely to be in the 15.0 MM range vs
peak SAAR at 17.0 MM
• Vehicle density already approaching peak levels
• Secular trends including Work from Home & Internet
Shopping
Vehicle miles traveled by purpose
To/From Work34%
Shopping17%
Other Family/Personal
Errands20%
Social/Recreation29%
0.9500
1.0000
1.0500
1.1000
1.1500
1.2000
1.2500Vehicles/licensed driver
See fundamental demand in the 15.0 MM unit range at
current scrappage/licensed driver growth levels
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19
64
19
66
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00
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02
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12
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18
20
20E
Auto recessions Fundamental demand US LV SAAR
Electrification – Significant Growth Ahead
5Sources: Wolfe Research, EPA, IHS
• In 2019, 1.5 MM BEVs sold globally (2% of total sales).
• By 2025, that gets to 12.0 MM units (14% penetration) and 23 MM by 2030 (24%
penetration).
• Growth expected in Hybrids as well, from about 3.5 MM in 2019 to 30.0 MM by 2025
• What is this going to cost?
5.0
%
5.2
% 8.5
%
15
.0%
5.9
% 10
.5%
28
.0%
52
.0%
3.3
%
5.5
%
16
.6%
36
.5%
3.9
%
5.6
% 10
.8%
33
.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2019 2020 2022 2025
US Europe China Global
3.5 MM HEVs sold
globally in 2019
Est 8.3 MM
HEVs by 2025
Est 30.0 MM
HEVs by 2025
Global BEV Forecast Global HEV Forecast
1.4
%
2.4
%
7.5
%
12
.0%
2.2
% 5.0
%
15
.0%
30
.9%
3.5
%
3.0
%
20
.4%
33
.3%
1.7
%
2.5
%
13
.8%
23
.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2019 2020 2025 2030
US Europe China Global
1.5 MM BEVs sold
globally in 2019
Est 12 MM
BEVs by 2025
Est 23 MM
BEVs by 2030
Huge capital investments needed as the industry shifts
towards BEVs
6Sources: Company Data, Wolfe Research
BEV Capital Costs – based on recent announcements, we think high-volume BEV manufacturers
are spending ~$11-$12k/unit….
…meaning that huge investments are
needed by the industry going forward
2025 2030
Incremental BEV Units vs
2019 (mlns)11 21
x Capital/Unit $11,000 $11,000
= Incremental BEV
Capital Required ($, bns)$116 $230
Incremental Capital/Yr $23 $23
Capex Investments
Tesla M3
(Freemont/
Gigafactory)
Tesla
(Shanghai)
GM
Hamtramck
Volkswagen
Zwickau (ID.3)
Fiat Chrysler
Turin Facility
(Fiat 500 BEVs)
Typical ICE
Investment
Assembly $3,029 $800 $2,200 $1,320 $784 $1,800
Packs/Drive-Units/Cells* $4,338 $1,136 $2,300 $2,500 $491 $1,500
Total BEV Capex $7,367 $1,936 $4,500 $3,820 $1,275 $3,300
Annual Production Capacity 350,000 150,000 200,000 330,000 80,000 300,000
Est Capex/Unit $21,050 $12,905 $22,500 $11,576 $15,940 $11,000
TSLA Est Capex/Unit (Berlin, TX plant) $8,000-$9,000* ICE equivalent relates to engine and transmission assembly
Entering a period of significant change in US Autos
7
Sources: Company Data, Wolfe Research
GLOBAL CAPEX & R&D BY AUTOMAKER
$15.4
$10.2$7.5 $7.6
$6.0 $5.5 $4.7$6.2 $6.5
$2.8
$15.7
$12.8
$6.8 $7.4
$4.6 $6.4$5.0
$7.1$8.9
$2.3
13%
8%
12%
10%
9%
12%
11%
13%13%
7%
0%
2%
4%
6%
8%
10%
12%
14%
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
VW Toyota GM Ford FCA Honda Nissan BMW Daimler Hyundai/Kia
Capex R&D % of Revenues
Collective Capex/R&D on the largest OEMs is about $150 bn ($72 bn Capex / $78 bn R&D)
We think the industry will need to spend ~$23 bn/yr just on BEVs, or 32% of global Capex!
2019A, converted to USD, bns
The US remains behind the curve on Electrification
Sources: IEA Global Outlook report, Wolfe Research
Charging infrastructure:
• US remains well behind on Charging,
with just 77k available (one for every 17
EVs).
• Significant investment needed.
Assuming EVs in operation increase to
5.4 MM units by 2025 from 1.0-1.5 MM
currently, would need 540k public
chargers.
• New administration and changes in
Congress would likely meaningfully
address this issue.
• States are also stepping up (NY, FL)
67
8
4
10
19
China Germany France Netherlands UK US
Recommended
minimum of 1 charger
for every 10 EVs
# of EVs per public charger: US at just 1 charger for
every 19 EVs on the road, well behind other countries
38 43 5577
540
0
100
200
300
400
500
600
2016 2017 2018 2019 20258
US currently has about 77k public chargers available;
needs about 540k by 2025 to support demand
How does the U.S. Stack Up?
Sources: Wolfe Research, EPA, IHS
5.0
%
5.2
% 8.5
%
15
.0%
5.9
% 10
.5%
28
.0%
52
.0%
3.8
%
5.5
%
16
.6%
36
.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2019 2020 2022 2025
US Europe China
9
Huge Hybrid growth expected in Europe
& China, less so in the US
64.4
81.5
48.5
71.5
40.4
47.0
50.6
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2006 2010 2015 2018 2020 2025 2030
China Europe Japan US
Global passenger vehicle MPG standards
Expect significant European BEV and PHEV launches over the next 2
years…. but see only 3 major US BEV launches in 2020 and 5 in 2021
4 6 5
19
33
22
95
10
24
49
23
2016 2017 2018 2019 2020 2021
BEV Model Launches PHEV Model Launches
What will the Electric landscape look like?
10
Sources: Wolfe Research, Wards
Passenger Car
Market Share
Today:
U.S.: 26%
Japan: 47%
Pickup Truck
Market Share
Today: 14%
U.S.: 93%
Japan: 7%
How does the U.S. Stack up?
11
Situation looks even worse if we remove Tesla production
73%
6%
10%
11%
2019: 456 gwh
China Europe US Other
72%
16%
8%5%
2024: 1,587 gwh
China Europe US Other
70%
17%
9%4%
2029: 2,398 gwh
China Europe US Other
80%
6%2%
12%
2019 Ex Tesla
China Europe US Other
75%
16%
4% 5%
2024 Ex Tesla
China Europe US Other
75%
16%
4% 5%
2029 Ex Tesla
China Europe US Other
Implications
for energy
security as
well, as Li-
Ion is key
tech for
Renewables /
Energy
Storage
Sources: Wolfe, Benchmark Intelligence
• Automotive Lithium-Ion Battery Production expected to grow 5x in next 10 years, just based on announcements
• BUT the US continues to lag, along. Likely in Motors, Power Electronics, Precursor Materials as well.
Traditional vs New Entrants… Capital disadvantage
12
Traditional OEMs
• Sell through
dealerships (giving up
margin, maintaining
x000s of inventory)
• New product
advantage tough to
maintain
• Long development
lead times
• Cautious/ slow to
innovate
• Complex supply
chains
New Entrants
• Sell direct to
consumers (no need
for inventory, better
customer experience)
• Ability to constantly
iterate & maintain
advantage
• Free from innovators’
dilemma
• License to lose
money as they build
businesses
• Greater vertical
integration
Sources: Wolfe Research, EPA, IHS
TSLA GM F
Equity Raise $10,000 $10,000 $10,000
Market Cap $307,395 $36,922 $26,706
% Dilution 3.3% 27.1% 37.4%
Much easier for Tesla to raise cheap capital
compared to Ford and GM
Est Annual Capex & R&D for BEVs, 2020-
2025
$4,400
$7,517
$2,200
$4,033
$2,875$2,333 $2,534
$1,667
85.0%
28.5%
20.0%25.0%
19.8%18.2%
14.1%6.9%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
$0
$1,500
$3,000
$4,500
$6,000
$7,500
$9,000
Annual Capex/R&D % of Total Capex / R&D
What does their spending imply?
Sources: Company Data, Wolfe Research
Target Est Spend* % of 2025 BEV Mkt
TSLA (est) 3.4 MM $24 bn 28%
VW 3.0 MM $45 bn 25%
GM 1.0 MM ~$14 bn 8%
Hyundai/Kia 1.0 MM ~$15 bn 8%
Total 8.4 MM 69%
Daimler (est) 0.5 MM 4%
Toyota 0.5 MM 4%
Rivian 0.5 MM 4%
Volvo 0.3 MM 3%
NIO (est) 0.2 MM 2%
Rest of Industry 1.6 MM 13%
Will the BEV market be big enough? By 2025, volume expectations from the 4 largest imply >8.0
MM, 69% of est total mkt
* Refers to cumulative 2020-2025 Capex & R&D related to BEVs, based on OEM disclosures and our
estimates
Long list of
“others”:
Nissan, Ford, BMW,
Renault, PSA, JLR,
BYD, Byton, Xpeng
Motors, Li Auto,
Fisker, and more!
14
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