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Peugeot E-2008 full electric SUV. The ongoing transformation of the auto industry will likely lead to more consolidation. (Keystone)

Sustainable Investments Stellantis debut highlights growth in EV industry and others

19 January 2021, 10:08 am CET, written by Andrew Thompson

Shares of the Italian-American and French auto group Stellantis debuted in the and Paris stock markets on Monday and will start trading on the NYSE on Tuesday after completing a USD 52bn merger. The global automotive sector will need to invest billions of dollars over the coming years in the electrification of vehicles, which will likely lead to further consolidation. But the accelerated adoption of new technologies in the wake of the coronavirus pandemic and the growing awareness of environmental and health topics will likely also create significant opportunities beyond the auto sector.

The new Stellantis group, which brings together (PSA) and Automobiles (FCA) with combined annual sales of roughly 8.1 million vehicles, will be the third biggest global automotive player after Volkswagen and , ahead of US rivals GM and Ford. With 14 brands under its helm, Stellantis is set to play a key role in the industry’s jump into the era of electrification. Competition among mass manufacturers is heating up. Volkswagen plans to invest about EUR 50bn in its line-up over the coming years. BMW has said it aims to double its sales of fully-electric vehicles this year, and targets a 50% increase in sales of electrified vehicles including plug-in hybrids in 2021. Meanwhile, has said it would invest some USD 800mn to convert its CAMI assembly plant in Canada into the country’s first large-scale commercial electric vehicle manufacturing site.

Regardless of who comes out on top in the 's ongoing transformation, we see significant opportunities for investors arising from the growing global awareness about environmental and health issues, which should have significant effects on the automotive industry as well as other sectors.

Smart mobility: We expect that around USD 400bn in revenue could be generated in the smart mobility arena. More than half of this revenue is attributable to electrification – an eight or nine-fold increase over today – whereby the share of pure For UBS marketing purposes

electric is expected to rise to around one quarter in the same period. Other future trends also include autonomous driving and sharing. We advise investors in smart mobility to invest in a broadly diversified selection of stocks in order to minimize company and technology-specific risks. Positions in automotive sector stocks should also be reviewed, as these could be impacted as a whole by a far-reaching shift. For further details, please see our report on "Smart Mobility".

Greentech: With its new target to reduce greenhouse gas emissions by at least 55% by 2030, the EU intends to significantly increase the share of renewables in its energy mix, which should especially benefit investments in solar and wind energy. Electricity produced from renewable energy suppliers will also be used in future for other technologies, such as electric cars and hydrogen production. "Green" hydrogen will no doubt evolve into a key technology in the coming decades. The EU's hydrogen strategy envisages the installation of at least 40 gigawatt of renewable hydrogen electrolyzers by 2030. You can find more on this topic in our report "Investing in Europe's greentech leaders". For more on how to invest in "The Next Big Thing" click here.

Sustainable investing: Sustainable portfolios performed well in the last market setback and are likely to continue doing so in future. As a way out of the crisis, governments worldwide are increasingly investing in green projects. The EU is forging ahead with its European Green Deal, whereby it has earmarked around one third of the total budget of EUR 1.8 trillion for direct investments in climate protection. Meanwhile, President-elect Joe Biden has declared that his administration plans to rejoin the Paris Agreement and while it is unlikely that the Democrats' narrow majority in the Senate will enable them to pass the initially announced USD 2tr climate change plan, we expect continued regulatory, legislative, and fiscal support for environmentally related themes. All of this should have a significant impact on sustainable investments. You can find more on this here.

While the transformation of the automotive industry is currently grabbing headlines, we see also great potential in other areas and industries dealing with environmental and health topics as well as in sustainable investments. The pandemic shows in our view that this is no short-term phenomenon, but a long-term trend that investors should exploit.

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