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Electric Vehicle Adoption Creates Opportunity in SupplyChainSeptember  26,   2016

We view electric vehicles (EVs) as a disruptive technology benefitting from rapid improvement in battery development and cost, aswell as national policies in the U.S. and around the world designed to incentivize manufacturers and consumers to switch to EVs.As EVs comprise a growing share of new car sales, new opportunities will emerge for a wide range of high-tech manufacturersalong the EV supply chain and generate the type of sustainable growth prospects we look for across our global investmentuniverse.

 

Exhibit 1: Global New EV Sales (estimates)

Source: Deutsche Bank, Bernstein, Credit Suisse and ClearBridge analysis. Note: EVs include both battery electric vehicles and plug-in hybrids.

 

The primary components of an EV powertrain include the electric motor, battery and power semiconductor. Production ofthese parts, batteries in particular, will need to ramp up dramatically to meet demand. While Tesla Motors is taking the leadby constructing its Gigafactory, which is expected to supply batteries for 500,000 Tesla EVs by 2020, other battery producersshould also benefit from the shift to EVs. Companies like Samsung, LG Chem and Panasonic, which partnered with Tesla on itsGigafactory, as well as newer entrants in China and Taiwan that hope to leapfrog existing technology, are already growing theirlithium-ion battery business and could take advantage of this growing opportunity.

Another growth area is in on-board power semiconductors, many of which are produced by major European companies likeInfineon Technologies, Bosch and NXP. These high-tech components are vital for electric vehicles, particularly since they helpregulate battery efficiency and performance. Companies with an initial toehold in this space would also stand to benefit fromrapid global adoption of EVs.

Our full white paper also discusses other industries likely to benefit from the shift to electric vehicles.

Pawel Wroblewski, CFAPortfolio Manager25 Years experience  13 Years at ClearBridge

All opinions and data included in this commentary are as of September 26, 2016 and are subject to change. The opinions and views expressed herein areof the portfolio management team named above and may differ from other managers, or the firm as a whole, and are not intended to be a forecast of futureevents, a guarantee of future results or investment advice. This information should not be used as the sole basis to make any investment decision. The statisticshave been obtained from sources believed to be reliable, but the accuracy and completeness of this information cannot be guaranteed. Neither ClearBridgeInvestments, LLC nor its information providers are responsible for any damages or losses arising from any use of this information.Past performance is no guarantee of future results.

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