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Equity Research
Center for Automotive ResearchAutomotive Outlook
August 2021Colin LanganWells Fargo Securities Senior Equity AnalystAutos & Mobility 212-214-8228 | [email protected]
Please see page 22 for rating definitions, important disclosures and required analyst certifications. All estimates/forecasts are as of 08/03/2021 unless otherwise stated.Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.
A Look at the Key Industry Trends
•What is the outlook for US auto sales? •What is driving electric vehicle growth? •When are we going autonomous? •How does this impact suppliers?
2
US Auto Sales Outlook
3
Welcome to a Supply Drive Auto World…
4
US Inventory Days on Hand by Automaker (6/2021)
US Inventory Days on Hand
Source: Wards Auto; Wells Fargo Securities LLC Source: Wards Auto; Wells Fargo Securities LLC
27
63
0
20
40
60
80
100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecMax/Min* 2021 Average
* excludes large outliers
4338
3330 28 28 26 23
19
27
0
10
20
30
40
50
Stellantis Daimler Ford BMW Hyundai Nissan GM Honda Toyota Total
020406080
100 Ending Month 5 Year Average
US Inventory Days on Hand by Product (6/2021)
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%
$30,000$32,000$34,000$36,000$38,000$40,000$42,000$44,000
Aug-
14
Jan-
15
Jun-
15
Nov
-15
Apr-1
6
Sep-
16
Feb-
17
Jul-1
7
Dec
-17
May
-18
Oct
-18
Mar
-19
Aug-
19
Jan-
20
Jun-
20
Nov
-20
Apr-2
1
% D
iscou
nt to
MSR
P
US A
vera
ge N
ew V
ehic
le
Pric
e
Avg New Vehicle PriceDiscount
Source: Wards Auto; Wells Fargo Securities LLC Source: Bloomberg; Wells Fargo Securities LLC
Average US New Vehicle Pricing
Semi Time Line & Outlook
5
Q2 2020 • OEMs Cancel Semi Orders During COVID
Q4 2020
• Rapid Demand Recovery Drives Global Production Up 86% from Q2
December 2020
• VW, Conti, Bosch Warn of Semi Shortage Risks
February 13th, 2021
• Texas Winter Storm Impacts Infineon & NXP Production
March 19th, 2021
• Renesas Fire
Current• Rising Panic Driving Double Ordering, Etc.
• Infineon & NXP plants 100% by April
• Renesas Naka at 100% by end of June
• Non-auto demand normalizing
Relief is on its way, but auto demand will likely exceed supply until mid 2022
Signs of Relief
Source: Wards Auto; Wells Fargo Securities LLC
Battery Electric Vehicle (BEV) Outlook
6
Battery Costs Outlook
7
$105
$70-77<$60
$0
$20
$40
$60
$80
$100
$120
$140
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
BEV Battery Cost Outlook Ending 2020 ($/kWh) BEV Battery Cost Ending 2020 vs. ICE Cost ($/kWh)
Source: Wells Fargo Securities, LLC estimates Source: Wells Fargo Securities, LLC estimates
$5,775
$2,000
$4,350
$920
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
BEV ICE
Battery Cells Battery Pack Core Engine
Transmission Emissions
$5,500
$7,775
Solid State
• Battery Cost Trending to $70-77/kWh by 2025
• Solid State Batteries Could Bring Costs Below $60/kWh
Total BEV Powertrain Cost Parity
8
E-Powertrain Cost Ending 2020 vs. ICE Cost ($/kWh)
Source: Wells Fargo Securities, LLC estimates
$5,775
$2,000
$1,700$1,050$730
$4,350
$920
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
BEV ICE
Battery Cells Battery Pack eDrive & Inverter Power Electronics
Other Core Engine Transmission Emissions
$5,500
$11,255
Inverter
Vehicle Electronics
Battery Pack
Home Charger
Battery Cells
Electric Motor & Gearbox
Power Distribution
ModuleOn Board Charger
DC/DC Converter
AC
12V DC
DC
AC
Battery Management System
BEV Powertrain Diagram
Source: Wells Fargo Securities, LLC estimates
• BEV E-Powertrain Costs Add ~$3,500 to the Total BEV Cost
• All-In a BEV is ~$5,755 most costly than an ICE…ending 2020
Cell Costs: Significant Raw Mat Headwinds
9
BEV Battery Cost Outlook Current ($/kWh)
Source: Wells Fargo Securities, LLC estimates
Source: Wells Fargo Securities, LLC estimates
50
70
90
110
130
150
170
Jun-
15Se
p-15
Dec
-15
Mar
-16
Jun-
16Se
p-16
Dec
-16
Mar
-17
Jun-
17Se
p-17
Dec
-17
Mar
-18
Jun-
18Se
p-18
Dec
-18
Mar
-19
Jun-
19Se
p-19
Dec
-19
Mar
-20
Jun-
20Se
p-20
Dec
-20
Mar
-21
Jun-
21
Weighted EV Battery Raw Material Index Price Per Cell
Source: Bloomberg; Factset; Wells Fargo Securities LLC estimates
+40% y/y
~$140
$70-77<$60
$0$20$40$60$80
$100$120$140
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Raw Mat HeadwindBase Cost Per kWh
E-Powertrain Cost Current vs. ICE Cost ($/kWh)
$7,700
$2,000$1,700$1,050
$4,350
$920
$0$2,000$4,000$6,000$8,000
$10,000$12,000$14,000
BEV ICE
Battery Cells Battery Pack eDrive & Inverter Power Electronics
Other Core Engine Transmission Emissions
$5,500
$13,180
• BEV Raw Material Costs are up over 40% Y/Y
• This adds ~$35/kWh or $1,925/vehicle in costs
• This implies ~$7,680 gap with ICE
BEV Cost Parity Math
10
BEV vs. ICE Up-Front Cost Parity Outlook
Source: Wells Fargo Securities, LLC estimates
$4,000$5,000$6,000$7,000$8,000$9,000
$10,000$11,000$12,000$13,000$14,000
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
BEV ICE
$0.20 $0.27
$0.09
$0.11 $0.05
$0.04 $0.09 $0.03
$0.00$0.05$0.10$0.15$0.20$0.25$0.30$0.35$0.40$0.45$0.50
ICE BEV
Depreciation Insurance Maintenance Fuel
$0.43 $0.45
Source: Wells Fargo Securities, LLC estimates
BEV vs. ICE Total Cost of Ownership Outlook (150k Miles)
• Regulations are driving ICE costs higher
• Estimate up-front cost parity by end of decade
• Total cost of ownership (TCO) also challenging until BEV prices (costs) come down
BEV Forecast
11
BEV Forecast by Region
Source: IHS: Wells Fargo Securities, LLC estimates
• Government is critical in pushing BEV adoption– Need Credits to Fund the Added BEV Costs – Need Funding for Charging Infrastructure– US Needs Massive Investment Around Entire Battery Supply Chain, including chemical processing
2%4% 5%
1%3.0%
8%
18%15%
3%
11.0%
16%
31%33%
6%
22%
0%
5%
10%
15%
20%
25%
30%
35%
North America Europe China Rest of World Total
2020 2025E 2030E
Autonomous Outlook
12
Level 2 vs. Level 4/5
• Level 1: adaptive cruise control; auto emergency braking (AEB)
• Level 2: lane keeping; auto park assist; advanced AEB
• Level 2+: highway driving assist; traffic jam assist; auto park; park valet
• Level 4/5: no human oversight
13
$300
$500
$1,000
$0
$200
$400
$600
$800
$1,000
$1,200
Level 0/1 Level 2 Level 2+
Note: Estimates as of June 1, 2021Source: Company reports; Wells Fargo Securities, LLC estimates
Note: Estimates as of June 1, 2021Source: Company reports; Wells Fargo Securities, LLC estimates
Estimated ADAS Content Opportunity by Level Level 1 to 2+ Autonomy Outlook
16%
6%1%
43%
17%
3%
33%
23%19%
0%
10%
20%
30%
40%
50%
L1 L2 L2+% o
f Glo
bal V
ehic
les
with
Te
ch
2020 2025 2030
Advanced Driver Assistance System (ADAS) Levels • Significant growth and content opportunities for Level 2
and Level 2+ systems
• “Scale” Level 4/5 end of decade at the earliest
Who’s Leading in Full Autonomy?
14
Autonomous Rideshare Startup Valuations
Source: Various Media Reports including CNBC, Bloomberg, Venture Beat, The Verge, and TechCrunch; Wells Fargo Securities, LLC
• Recent funding valuations for autonomous startups range from about $30bn to $1bn
• Top Autonomous Rideshare leaders likely hard to catch up to
• Shift to delivery focus
$30.0 $30.0
$13.0$7.0 $5.3 $4.0
$1.3
Waymo Cruise Aurora (UberATG)
Argo AI Pony.ai Motional Zoox
$ bi
llion
s
Date: Mar-20 Jan-21 Nov-20Jul-19 Jul-20Sept-19Nov-20
$7.7$5.2 $5.0 $3.3
TuSimple Embark Nuro PlusAI Inc.
$ bi
llion
s
Date: Jul-21 Nov-20Mkt Cap 8/3/2020 May-21
Autonomous Delivery Startup Valuations
Source: FactSet; Various Media Reports including CNBC, Bloomberg, Venture Beat, The Verge, and TechCrunch; Wells Fargo Securities, LLC
Autonomous Rideshare Economics are Challenging
15
• The math behind the savings of autonomous rideshare is more challenging than most realize.
• AV delivery economics easier since the driver is part of the cost
• Smart way to prove out the technology earlier
Operating Cost Per Mile of Taxi Today
Estimated Autonomous Rideshare Cost Per Mile Today
Note: Analysis as of June 1, 2021Source: Nunes Driverless Taxi Cost Study; Wells Fargo Securities, LLC estimates
Note: Analysis as of June 1, 2021Source: Nunes Driverless Taxi Cost Study; Wells Fargo Securities, LLC estimates
$0.36
$1.58
$0.67
$0.00$0.20$0.40$0.60$0.80$1.00$1.20$1.40$1.60$1.80
Cost ExDriver,
Dispatch, &Medalion
Finance Cost Tele-Ops Profit 52%Utilizatoin
PersonalOwnership
Autonomous Delivery Economics Today
$2.55 $2.02
$3.95 $3.29
$2.09 $1.81
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
Heavy Heavy AV Medium Med AV Light Light AV
Note: Analysis as of June 1, 2021Source: Wells Fargo Securities, LLC estimates
Tough Outlook for Traditional Suppliers
16
$13,723
$14,786
$314
$188 $11
$565
$405
$1,334
$638$202
$472
$12,500
$13,000
$13,500
$14,000
$14,500
$15,000
2021E Raw Mat Interiors Body Electronics ICE Adds Other ICE EV Cells EV Packs Other EV 2031E
What Parts of the Vehicle Will See Growth?
17
Content Per Vehicle 10 Year Outlook
Note: Analysis reflects estimates as of June 1, 2021Source: Company reports; Wells Fargo Securities, LLC estimates
• The market opportunities are shrinking for traditional suppliers
• Most part of the vehicle under pressure from pricedowns
• E-Powertrain and Electronics still growing
E-Powertrain Competition Very Tough
18Source: Company Reports; Wells Fargo Securities, LLC estimates
Content Per Vehicle Valeo Bosch Vitesco
(Conti) BWA MGA LG Electronics
Hyundia Mobis Hitachi Denso Aisin Mitsubishi
Electronic ZF Melrose Nidec
Electric Motor $700 *
Electric Gear Box $400 *
Inverter $600 * ** LG has assembled these in the past but some of the design work was done by customers; Melrose partners with Delta Electronics on interters
Content Per Vehicle Valeo Vitesco
(Conti) BWA LG Electronics MGA Denso Mahle Hanon APTV TEL Yazaki Sumitomo Leoni LEA
Climate RelatedPTC Heater $150
Electric AC $200
Wiring RelatedHV Wiring $200
Charge Cord $150
Content Per Vehicle Valeo Bosch Vitesco
(Conti) BWA MGA LG Electronics
Hyundia Mobis Hitachi Denso TEL Mitsubishi
Electronic Sumitomo Hella APTV VC LEA
BMS $200 *
On-Board Chargers $400
DC/DC Converter $150 *
PDM $300 *
* Will largely be supplied though JV with LG Electronics
• Over a dozen major suppliers looking at E-Powertrain
• High in-sourcing risk
• Need breadth of technology as e-powertrain systems consolidate
• Need scale to make the economics work
Major Suppliers E-Powertrain Products
Similarly Tough in Auto Electronics
• Largest Global Suppliers Already Dominating ADAS Market
• Infotainment & Other Segments Relatively Fragmented
• Core Technical Competences Different
19
Bosch Continental
Valeo Aptiv
Magna / Veoneer ZF
Leading Global ADAS Suppliers
Source: Company reports; Wells Fargo Securities, LLC
Disclosures
21
Disclosures
22
Disclosures
23