Electric Cars Plugged in 2 Deutsche Bank 2009
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North America United States Consumer Autos & Auto Parts FITT Research Company Company 3 November 2009 Fundamental, Industry, Thematic, Thought Leading Deutsche Bank's Company Research Product Committee has deemed this work Electric Cars: F.I.T.T. for investors seeking differentiated ideas. In our June 2008 FITT report entitled “Electric Cars: Plugged in”, we suggested that a number of factors, Plugged In 2 including rising oil prices, regulations, and battery technology advancements set the stage for increased electrification of the world’s automobiles. We see implications not only for automakers and traditional auto parts suppliers, but also for raw material producers, electric A mega-theme gains utilities, oil demand, and the global economy. U.S. Autos Research Team momentum Rod Lache Research Analyst (+1) 212 250-5551 Global Markets Research [email protected] Dan Galves Associate Analyst (+1) 212 250-3738 [email protected] Patrick Nolan, CFA Associate Analyst Japan Autos Research Team Kurt Sanger, CFA Research Analyst (+81) 3 5156-6692 [email protected] Takeshi Kitaura Research Associate Europe Autos Research Team Jochen Gehrke Research Analyst (+49) 69 910-31949 [email protected] Gaetan Toulemonde Research Analyst (+33) 1 4495-6668 [email protected] Courtesy of: Better Place Tim Rokossa Research Analyst Korea Autos Research Team Sanjeev Rana Research Analyst (+82) 2 316 8910 [email protected] Stephanie Chang Research Associate China Autos Research Team Vincent Ha, CFA Research Analyst (+852) 2203 6247 [email protected] Deutsche Bank Securities Inc. All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 106/05/2009 North America United States Consumer Autos & Auto Parts 3 November 2009 FITT Research Electric Cars: Plugged In 2 Companies featured A123 Systems Inc. (AONE.OQ),USD19.66 Hold BMW (BMWG.DE),EUR33.60 Hold A mega-theme gains Daimler (DAIGn.DE),EUR33.04 Buy Ener1 Inc. (HEV.OQ),USD4.99 Buy Fiat (FIA.MI),EUR10.46 Buy momentum Hitachi (6501.T),¥292 Hold Honda Motor (7267.T),¥2,820 Buy Rod Lache Dan Galves Patrick Nolan, CFA Hyundai Motor (005380.KS),KRW102,000.00 Buy Research Analyst Associate Analyst Associate Analyst Johnson Controls (JCI.N),USD23.92 Hold (+1) 212 250-5551 (+1) 212 250-3738 (+1) 212 250-5267 LG Chem (051910.KS),KRW197,000.00 Buy [email protected] [email protected] [email protected] Nissan Motor (7201.T),¥650 Buy Peugeot SA (PEUP.PA),EUR23.18 Hold Renault SA (RENA.PA),EUR30.58 Buy Fundamental, Industry, Thematic, Thought Leading Samsung SDI (006400.KS),KRW137,500.00 Buy Deutsche Bank's Company Research Product Committee has deemed this work Sanyo Electric (6764.T),¥228 Sell F.I.T.T. for investors seeking differentiated ideas. In our June 2008 FITT report SK Energy (096770.KS),KRW108,000.00 Hold Toyota Motor (7203.T),¥3,570 Hold entitled “Electric Cars: Plugged in”, we suggested that a number of factors, including rising oil prices, regulations, and battery technology advancements set the stage for increased electrification of the world’s automobiles. We see implications not only for automakers and traditional auto parts suppliers, but also for raw material producers, electric utilities, oil demand, and the global economy. Fundamental: Dramatic changes in veh technology appear to be inevitable In the 18 months since we published our original thesis on vehicle electrification, the momentum behind vehicle electrification has been building. Europe and Japan have proposed automotive CO2 emission standards for 2020 that are unlikely to be achieved without significant penetration of zero emission vehicles. The U.S. has tightened and accelerated national fuel economy standards through 2016, changed regulations to disproportionately benefit electric cars, and it has effectively given California a larger role in regulating fuel economy. Industry: Incentives, costs, new business models could propel rapid growth Governments around the world have pledged to spend $15 billion over the next 5- years to help propel electric vehicles, batteries, and infrastructure. And they have dramatically increased incentive, subsidies, and other benefits to encourage consumer adoption. These external factors should help propel an industry that is already on a steep cost reduction curve, with battery prices expected to decline by 50% over the next 10 years. Alternative business models, based on the cost advantage of electricity versus gasoline driving, could also play a significant role in accelerating penetration, by dramatically lowering the price for these vehicles. Thematic: We believe the automotive market could change rapidly Based on our analysis of automakers’ product disclosures, and discussions with global suppliers, we estimate the world’s automakers will introduce at least 120 hybrid (HEV), plug-in hybrid (PHEV), and electric vehicle (EV) models onto the market by 2012, compared with 29 (mostly hybrid) vehicles on the market today, and 13 in 2008. Overall, we believe by 2020, 17% of the global automobile market could be comprised of HEVs, PHEVs, and full EVs, up from 1% today. Thought Leading: The battery is key technical enabler High energy, cost effective, long lasting, and abuse tolerant batteries are key to growth in vehicle electrification. Major advances have been made over the past 5 years, and industry participants expect a doubling of battery performance over the next 7 years. We update our forecast for the lithium ion battery market; raising our market projection to $66 billion by 2020. About a dozen co’s appear to be positioning themselves for leading roles in the burgeoning market for Automotive “Advanced Lithium Ion Batteries”, including PEVE (Toyota/Panasonic), Sanyo, A123 Systems, GS Yuasa, Hitachi, LG Chem, AESC (Nissan/NEC), Ener1, Li-Tec (Evonik/Daimler), JCI/Saft, SB LiMotive (Samsung/Bosch), Toshiba, and BYD. Within this report, we initiate coverage of two U.S. leaders: Ener1 and A123 Systems. Deutsche Bank Securities Inc. All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 106/05/2009 3 November 2009 Autos & Auto Parts Electric Cars: Plugged In 2 Table of Contents Executive summary ........................................................................... 3 Electrification of the automobile appears to be inevitable............ 6 The regulatory environment is pushing automakers toward electrification ..................................................................................... 8 The US has clearly set a new direction .....................................................................................9 US expected to reach 23% xEV penetration by 2020 .............................................................14 Europe appears poised to set standards that would be difficult to achieve without electrification...........................................................................................................................16 European demand outlook......................................................................................................21 Japan: Hybrids and other electrified vehicles could account for over half of the market by 2020........................................................................................................................................23 Japan demand outlook............................................................................................................26 China is sending signals for more significant change .............................................................30 Korea: “Green Car” program envisions 10% full EV’s by 2020 ..............................................33 Rise of the electric vehicle.............................................................. 35 A typical HEV is able to increase the efficiency of a vehicle through 3 mechanisms… ..........35 Electric Vehicle Categories......................................................................................................36