Tesla Inc (NASDAQ:TSLA) is the name on everyone’s lips when it comes to talking electric vehicles (EVs). UBS recently noted that consumer interest in electric vehicles is on the rise with its Evidence Lab survey indicating circa 10,000 consumers in the six largest car markets are interested in the breed of transport.
However, the broker also noted that Tesla’s rise to fame is likely to come at the expense of other major auto manufacturers such as BMW. Indeed, the popularity of diesel cars is falling sharply.
UBS raises long-term sales forecasts for electric vehicles
On this note, UBS has raised its sales forecasts from 14.2mln to 16.5mln vehicles in 2025, driven to a large extent by higher demand from China.
This implies an electric vehicle sales growth rate of 16% by 2025, suggesting every sixth car sold globally will be an EV. The uptake in Europe is expected to be stronger with every third car an EV.
UBS is of the view that the higher purchase price will be offset by lower fuel and maintenance costs, resulting in one in four consumers looking to buy an EV, albeit at a premium price.
Success of Tesla bad news for BMW
UBS particularly pointed out the detrimental impact these dynamics are likely to have on BMW, highlighting it is the car manufacturer likely to be most disadvantaged by the transition to electric vehicles.
On this note, UBS said: “BMW's 3-series is seen as the closest competitor to Tesla's Model 3 by consumers.
Tesla has made the biggest progress in the survey as the most credible EV brand, at the expense of all other established brands, save Mercedes.”
While the benefit of having established dealer networks should work in favour of traditional automotive brands, this should be more of a short term issue for Tesla as it gains market traction.
Early signs of market penetration should be apparent in competitor's marginns
The impact of Tesla is likely to become evident in its competitor’s margins. Other factors at play include progress that battery makers are having in moving to chemistries with higher energy density and lower costs in terms of power output.
Original equipment makers (OEMs) should benefit from scale as distribution of electric vehicles ramps up.
UBS noted recent industry commentary suggesting margin parity could be reached between 2022 and 2025.
Looking specifically at OEMs, UBS expects the margin trough to occur between 2020-23, with a gradual recovery thereafter.