Kames Capital Disruption through Clean Energy: Electromobility€¦ · Source: CLSA U, The Future...

Kames Capital

Disruption through Clean Energy: Electromobility

November 2018

Craig Bonthron – Investment Manager

Electric vehicles don’t look good

Source: Company data. For illustrative purposes only.

2

There is a lack of choice

3

Source: Bloomberg New Energy Finance. For illustrative purposes only.

67 71 76 79 90 92 95

96 11

0

11

0

11

2

11

2 12

6

12

6

12

6

12

6

13

1

30 33 3

6 37

47 52 57 60

71

71 72

72

84

84

84

84 8

6

0

50

100

150

200

250

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Cumulative models available

BEV PHEV217

2016 2017 20192018 2020

Electric vehicles have poor performance


4

New Tesla

Roadster

$200,000

0-60mph

1.9 seconds

Tesla vs Bugatti

Source: Tesla and Buggati. For illustrative purposes only.

5

Tesla Roadster

Bugatti Chiron

101 113 122 135 150183

249

354377 383 383

414

465

579

0

50

100

150

200

250

300

350

400

450

500

550

600M

itsubis

hi i-M

iEV

Sm

art

Fo

rTw

o E

lectr

ic

Ford

Fo

cu

s E

lectr

ic

FIA

T 5

00

e

Kia

So

ul E

V

BM

W i3

Nis

san

Le

af

Tesla

Mo

del 3

Tesla

S 7

0

Ch

evro

let

Bo

lt

Tesla

X 7

5D

Tesla

X 9

0D

Tesla

X P

100D

Tesla

S 1

00

D

km

Range of popular Electric Vehicles

Affordable approx. $30k

Electric vehicles do not have enough range

Source: fleetcarma.com. For illustrative purposes only. Note: in chart green depicts good range at an affordable price.

6

Battery range will decline over time

Source: Berenberg. For illustrative purposes only.

7

Tesla actively cooled batteries retain

90% of their charge over 250k km

Nissan Leaf appears to have a steeper

decline without active cooling

Capacity retention affected by battery management

Electric vehicles are not safe

Source: Robert W. Baird; NHTSA Ratings. For illustrative purposes only.

8

0.00%

0.02%

0.04%

0.06%

0.08%

Tesla All vehicles (United States)

Likelihood of a vehicle fire (estimate)

Overall rating Frontal crash Side crash Rollover

Model S 5 star 5 star 5 star 5 star

Model X 5 star 5 star 5 star 5 star

BMW 5 Series 5 star 4 star 5 star 5 star

Audi Q5 4 star 4 star 5 star 4 star

Cadillac Escalade 4 star 4 star 5 star 4 star

0%

20%

40%

60%

80%

100%

% of single journeys <25miles, UK (UK DfT 2014)

% of daily drive patterns<50 km, key EU countries*

(EU JRC 2012)

% of daily drive patterns<65km, Italy (EU JRC

2015)

I don’t want to wait at a charging station for hours

Source: BoA Merrill Lynch. *France, Germany, Italy, Spain and UK. For illustrative purposes only.

9

Most car journeys and daily distances are very short Frequency distribution of daily driving distance, Germany, 2008

0%

5%

10%

15%

20%

25%

5

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

>1

50

km

It still takes too long to charge

10

Source: CLSA U, The Future of Li-ion Battery Technology

Charging time vs driving distance by charger type

In a survey 57% of households had

access to off street parking in the UK

What if you don’t have a driveway

11

Source: National Grid

Battery costs don’t come down fast enough

12

Source: Bloomberg New Energy Finance

Lithium-ion battery pack prices

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

US

D

Electric vehicle vs ICE3-yr total cost of ownership

Old EV cost curve Old ICE cost curve

► Electric vehicles get cheap

– Economies of scale

– Waste reduction

– Closer supply chain

– Vertical integration

– Process optimisation

► Combustion vehicles get expensive

– Taxes

– Emissions regulations

– Residual values

– Maintenance costs

– Insurance

Electric vehicles are still too expensive

13

Kames estimates

2024

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

US

D


Current EV cost curve Current ICE cost curve



– Waste reduction





– Taxes


– Residual values


– Insurance


14

Kames estimates

2020

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

US

D


Future EV cost curve Future ICE cost curve



– Waste reduction





– Taxes


– Residual values


– Insurance


15

Kames estimates

2019?

There is no demand at the current price point

16

Large

Medium

Small

SUV

Tesla Model 3 1st weekend orders

($1k deposits)*

Tesla Model 3 estimated orders*

Top trade in’s Q218

– Toyota Prius

– BMW 3 Series

– Honda Accord

– Honda Civic

– Nissan Leaf

No demand at the current price point

Source: CleanTechnica

17

10 top luxury cars in USA (Jan-Sept 2018)

€ 91

€ 75

€ 22

€ 12

0

20

40

60

80

100

BMW 5 Series 530iPetrol (1,170 km

range)

BMW 5 Series 520dDiesel (1,590 km

range)

Tesla Model S 100D(579 km range)(standard tariff)

Tesla Model S 100D(579 km range)(overnight tariff)

€

€ 7.76

€ 4.75

€ 3.85

€ 2.04

0

2

4

6

8

BMW 5 Series 530iPetrol

BMW 5 Series520d Diesel

Tesla Model S 100D (standard €0.22 kW tariff)

Tesla Model S 100D (overnight €0.12 kW tariff)

€

Electric vehicles more expensive to fuel

18

Source: BoA Merrill Lynch. *Based on domestic electricity (Eurostat), diesel and petrol (both fuel-prices-Europe.info) prices, averaged across France, Germany, Italy, Spain and UK. For illustrative purposes only.

Cost of filling/charging from empty to full* Cost per 100km travelled*

19

…and that’s before you account for the cost of this

Electricity prices are also more stable

20

Source: Berenberg Thematics; World Energy Council, International Energy Agency, FRED and Edison Electric Institute. Note: CPI Index 1982-84 = 1. For illustrative purposes only.

269249

149

0

50

100

150

200

250

300

Diesel Gasoline EV

£

Nissan major service price*

999

399

299239

0

200

400

600

800

1,000

M-series 3/4/5/6-series,X3/X4/X5/X6

1/2-series, X1 i3

£

BMW service plan

Electric vehicles are more expensive to maintain

21

Source: Berenberg. For illustrative purposes only. *Servicing cost based on Nissan EV.

2,000 parts

in an ICE

powertrain

20 parts in an

EV powertrain

► By 2030 total production of these metals to rise as much as 300%

► 2030 demand is a small fraction of global known reserves

We will run out of resources for batteries

Source: BoA Merrill Lynch. For illustrative purposes only.

22

Material2016 EV battery demand

(metric tonnes)

2030 forecast for EV battery

demand (metric tonnes)

BNEF 2030 EV forecast as a

% of 2016 total global

production

BNEF 2030 forecast as a

% of known reserves

Lithium 2,647 104,000 297% 0.74%

Nickel 8,008 328,000 15% 0.42%

Cobalt 2,950 156,000 127% 2.23%

Manganese 1,708 125,000 1% 0.02%

Aluminium 8,275 326,000 1% 0.00%

Copper 7,907 295,000 2% 0.04%

Graphite 22,817 852,000 71% 0.34%

Rising cost of materials will make EVs unaffordable


23

24

Production of the batteries is dirty

Wait a minute…are you saying it is dirtier than this?

http://anthonyrobson.biz/CartoonsIndex.html


►North America = 271 tonnes of GHG per 1,000 tonnes of oil produced

►Africa = 210 tonnes of GHG per 1,000 tonnes of oil produced

►Asia/Australia = 199 tonnes of GHG per 1,000 tonnes of oil produced

…than this?

26


What about all the battery waste produced?

Source: BoA Merrill Lynch

27

‘Recently, American Manganese

announced that it had managed to recover

100% of metals used in lithium-ion

cathodes and could recover 91% of the

lithium from cells.’

We can’t build the infrastructure to cope


28



29


Source: Tesla and Google Maps. For illustrative purposes only. Statistic from Electric Vehicle Charging Association’s 2017 State of the Charge report.

30


31

Source: Visual Capitalist. For illustrative purposes only.

Gigafactory capex Estimated ~150 GWh added in 4 years

► $1.72 trillion oil market value annually

► $3.5 trillion upstream capex since 1994

► $7.9 trillion total oil and gas capex last

20 years

► $63 trillion US debt $20 trillion (8.5%)

The infrastructure will cost too much

32

Source: Visual Capitalist. Morgan Stanley, Berenberg and Bernstein historic oil capex estimate. For illustrative purposes only. *Excludes utilities and metals & mining investment.

Investment by source through 2040 ($tr)*

What about the cost of not doing it?

33

Source: NASA. For illustrative purposes only.

2017 US hurricane season $100 billion mostly picked up by US tax payers

54% of oil is consumed in transportation >40% of global oil demand on the road

It’s not just cars that use oil

Source: BoA Merrill Lynch. For illustrative purposes only.

34

Other12.2%

Power7.1%

Industry7.3%

Construction 7.7%

Chemicals 11.7%

Transport 54.0%

Road42.2%

Other0.8%

Sea5.0%

Air6.0%

Nuclear +20%

Coal

Gas

Solar -72%Wind -47%

0

20

40

60

80

100

120

140

160

180

2009 2010 2011 2012 2013 2014 2015 2016 2017

$ / M

Wh

Levelised cost of energy

Renewable are too expensive

Source: Lazard estimates. Levelised Cost of Energy (unsubsidised). Primarily relates to North American alternative energy landscape, but reflects broader/global cost declines. Cartoon source: Anthony Robson


35


The grid is mostly dirty coal power…what’s the point?

36

Source: IEA and WEO. For illustrative purposes only.

IEA solar estimates have been 9% too low every year for 23 years

Sustainable technologies are at adoption tipping points

37

Sources: Bloomberg New Energy Finance, Earth Policy Institutes. Kames estimates. For illustrative purposes only.

How much space needed in solar panels to power the world?

38

…does the ‘levelised’ cost of coal include this?

Fine…but the grid will be overloaded

39

And cars can work as batteries too

40

And home charging will take place at night

BoA Merril Lynch

41

EV energy consumption vs charging times

I still think adoption will be a slow burn


42

Comparison of global EV penetration estimates EV penetration estimates: 2017 vs 2016

This is all just hype, it never happens that quickly

Source: BlackRock. For illustrative purposes only.

43

Adoption of technology in the US (1900 to present)

Ok…but I think hybrids will ultimately win

Source: Berenberg. For illustrative purposes only.

44

Sub-optimal layout due to transmission ‘tunnel’ Wider and longer with no transmission ‘tunnel’

But do electric vehicles make their owners happy?

Source: Consumer reports. For illustrative purposes only.

45

Tesla tops 2018 Consumer Report’s customer satisfaction survey

RankBrand

Owner

Satisfaction2018 2017

1 - Tesla 90%

2 - Porsche 85%

3 NA Genesis 81%

4 4 Chrysler 78%

5 2 Audi 76%

6 1 Mazda 76%

7 3 Subaru 76%

8 3 Toyota 76%

9 3 Honda 75%

10 2 Lincoln 75%

Remember, the world will be different in 5 years

46

For illustrative purposes only

Cheap renewables Affordable storage

Innovative businessesDeath of fossil fuels and

traditional power networks

IT ALWAYS IS

For Professional Clients only and not to be distributed to or relied upon by retail clients.

Opinions expressed represent our understanding of the current and historical positions of the market and are not an investment recommendation or advice. Any securities and related trading strategies referenced may or may

not be held/used in any strategy/portfolio. Any Opinions and/or example trades/securities are only present for the purposes of promoting Kames Capital's investment management capabilities. Sources used, both internal and

external, are deemed reliable by Kames Capital at the time of writing.

This document is accurate at the time of writing and is subject to change without notification.

All data is sourced to Kames Capital unless otherwise stated. The document is accurate at the time of writing but is subject to change without notice.

Data attributed to a third party (“3rd Party Data”) is proprietary to that third party and/or other suppliers (the “Data Owner”) and is used by Kames Capital under licence. 3rd Party Data: (i) may not be copied or distributed; and

(ii) is not warranted to be accurate, complete or timely. None of the Data Owner, Kames Capital or any other person connected to, or from whom Kames Capital sources, 3rd Party Data is liable for any losses or liabilities

arising from use of 3rd Party Data.

Kames Capital Investment Company (Ireland) plc (KCICI plc) is an umbrella type open-ended investment company with variable capital, registered in the Republic of Ireland (Company No. 442106) at 25-28 North Wall Quay,

International Financial Services Centre, Dublin 1. Board of Directors: M Kirby and B Wright (both Ireland), A Bell (UK). KCICI plc is regulated by the Central Bank of Ireland. Kames Capital plc is the investment manager and

promoter for KCICI plc. Kames Capital plc is authorised and regulated by the Financial Conduct Authority.

Aegon Asset Management Pan Europe B.V. (AAMPE) is an appointed promoter for the Company in Germany, Austria and Switzerland. AAMPE has its statutory seat in The Hague, the Netherlands. AAMPE is registered with

and supervised by the Dutch Authority for Financial Markets (AFM) and is licenced to conduct investment advice, reception and transmission of orders and investment research. It is registered at the Chamber of Commerce at

The Hague, the Netherlands, registration number 66075734 and VAT number NL8563.85.499 B01. Through its branches, AAMPE provides introductions to Aegon Asset Management manufacturing entities that provide

pooled vehicles and segregated investment management services. AAMPE Germany branch is registered and supervised by the AFM in the Netherlands and supervised based on home host country by BaFin in Germany.

Important information

47

FPID: 2017/4470

Date post:	27-Jul-2020
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

Kames Capital Disruption through Clean Energy: Electromobility€¦ · Source: CLSA U, The Future...

Documents