According to a new in-depth report from Bernstein, electric vehicle investors are positioned for some huge returns over the long term. Unfortunately, it may take up to 40 years for electric vehicles to gain 60 percent of the global auto market share.
Despite all the publicity that the General Motors Co. (NYSE: GM) Chevy Bolt and the Tesla (TSLA) Model 3 have gotten, Bernstein estimates that battery-powered electric vehicles represented less than 1 percent of total global auto unit sales in 2016. However, analyst Toni Sacconaghi Jr. says government policy, improving economics, technological development and growing mainstream appeal will all help fuel the rise of electric vehicles in coming decades.
Bernstein estimates it will take between 30 and 40 years for electric vehicles to make up 60 percent of the total cars driven in the world. Sacconaghi says electric vehicles will represent 60 percent of all global new vehicle sales by 2050.
One of the major factors holding back widespread adoption of electric vehicles is cost. Tesla touted its Model 3 as an affordable vehicle with mass appeal. But customers who want Tesla’s high-powered battery option, premium upgrades and enhanced autopilot capabilities are still paying more than $57,000 for the Model 3.
Sacconaghi says falling costs of electric vehicle technology coupled with rising costs associated with more stringent emissions standards should completely close the price gap between electric vehicles and their internal combustion engine counterparts within 10 years.
For investors that don’t want to wait up to 40 years for electric vehicles to gain the edge in the auto market, Sacconaghi says the Model 3 could jump-start the transition.
“Empirically, disruption often happens faster than incumbents and investors think and is often triggered by a breakthrough new offering – in this case, Tesla’s Model 3,” Sacconaghi says. Historically, disruptive new products tend to reach 70 to 80 percent penetration rates within a 15-to-20-year period, he says.
Surprisingly, Bernstein is not recommending Tesla stock as the best way for long-term investors to play the electric vehicle trend.
“On net, we are…
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