{"id":196461,"date":"2024-07-31T13:32:14","date_gmt":"2024-07-31T13:32:14","guid":{"rendered":"https:\/\/ibkrcampus.eu\/?p=196461"},"modified":"2024-07-31T13:50:30","modified_gmt":"2024-07-31T13:50:30","slug":"sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/","title":{"rendered":"Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth"},"content":{"rendered":"\n

Originally Posted 29 July 2024 – Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth<\/a><\/p>\n\n\n\n

Projected growth in electric vehicle (EV) fleets is expected to contribute to a halt in oil demand growth by the decade’s end. Hamish Chamberlayne explores the impact on the oil market and bolstered investment opportunities within EV supply chains.<\/p>\n\n\n\n

\"EV<\/figure>\n\n\n\n

Despite a momentary dip in electric vehicle (EV) sales, projections indicate a significant increase in the overall fleet size to a level expected to contribute to a halt in the growth in oil demand by the end of this decade. This anticipated shift is likely to coincide with a considerable rise in oil supply, which would create an imbalance in the oil market, support the electrification of transportation, and lead to investment opportunities within the wider EV supply chain. The lull in sales, coupled with the excitement around artificial intelligence (AI), has certainly taken the spotlight away from EVs but we see it as offering meaningful long-term opportunities in the sustainable equity investing space.<\/p>\n\n\n\n

EV sales blip<\/h2>\n\n\n\n

According to the BloombergNEF (BNEF) annual Electric Vehicle Outlook (EVO), EV sales projections have been reduced by 6.7 million through 2026. Further, the EVO report noted that while the demand deceleration isn\u2019t universal across countries1<\/sup> \u2013 and EVs will be supported slightly by the resurgence of plug-in hybrids (PHEV) \u2013 only a few Nordic countries (Norway and Sweden)2<\/sup> and the state of California are on pace to eliminate passenger vehicle fleet emissions by 2050.<\/p>\n\n\n\n

BNEF analysts noted that some markets are experiencing a \u201csignificant slowdown\u201d and many automakers have pushed back their EV targets as a result, with the window for achieving net-zero emissions in road transport \u201cclosing quickly\u201d.<\/p>\n\n\n\n

However, despite the slowdown in EV sales, overall, the industry appears to be on track to deliver sustained fleet growth. In fact, six of the 10 largest EV carmakers in the US have seen sales increase between 56% (Hyundai-Kia) to 86% at Ford.3<\/sup><\/p>\n\n\n\n

General Motors seems poised to lead the surge in EV expansion in the US, with the Detroit-based carmaker having pledged to electrify several of its major models. This lineup includes an Equinox SUV priced at US$35,000 and its counterpart, the Blazer (US34,500), in addition to the Silverado (US$96,495) and GMC Sierra (US$ 99,495) electric trucks.<\/p>\n\n\n\n

Helping to fuel such growth, EVs can be more affordable than Internal Combustion Engine (ICE) vehicles over their lifetime due to lower fuel and maintenance costs with fewer engine parts to go wrong.4<\/sup> The different power train of an EV has advantages that can offset higher upfront costs.5<\/sup> A 2018 University of Michigan study found that the average cost to fuel an electric car was US$485 a year, compared to US$1,117 for a gas-powered vehicle.\u00a0<\/p>\n\n\n\n

Oil imbalance<\/h2>\n\n\n\n

The forecast growth in EV sales could ensure that oil demand growth stops by the end of the decade, with the oil market imbalance exacerbated further by a surprising amount of supply growth.<\/p>\n\n\n\n

According to the International Energy Agency\u2019s (IEA) annual medium-term outlook, global consumption will \u201clevel off\u201d at 105.6 million barrels per day \u2013 4% higher than last year\u2019s level \u2013 due to rising EV sales, and improved fuel efficiency.7<\/sup><\/p>\n\n\n\n

Running parallel to this, the IEA noted that oil production capacity continues to climb, with supply rising by a \u201cstaggering\u201d eight million barrels per day higher than demand by 2030. This may leave global oil supply with the largest level of spare output since the Covid-19 lockdowns, the IEA added.<\/p>\n\n\n\n

The IEA report noted that as the pandemic rebound loses steam, clean energy transitions advance, and the structure of China\u2019s economy shifts, growth in global oil demand is slowing down, with rising oil supplies potentially weighing on prices through the end of the decade.<\/p>\n\n\n\n

Global oil demand is projected to increase over the next few years, according to the IEA, with an anticipated growth of approximately 4 million barrels daily by the decade\u2019s end. This rise is attributed to economic growth in countries like India and China, alongside increased consumption by the aviation and petrochemical sectors.<\/p>\n\n\n\n

However, in developed nations, the consumption of oil is expected to continue its long-term downward trend, decreasing from last year\u2019s 46 million barrels per day to 43 million by 2030 \u2014 marking the lowest consumption level since 1991. The report also suggests that oil demand in China will level off by the decade\u2019s end, reaching around 18 million barrels daily. Further, a broadening of carbon-related taxes is expected, with emerging market economies, including China, looking to expand their respective national carbon markets.8<\/sup> If carbon prices rise as a result, oil prices could become relatively more expensive over time than electricity per mile travelled.9<\/sup><\/p>\n\n\n\n

Riding the electrification wave<\/h2>\n\n\n\n

These prevailing and converging trends offer a supportive narrative for sustainable investing, particularly within the broader EV supply chain, including mining, automotive technology suppliers, battery manufacturers, and semiconductors and system solutions providers, among others.<\/p>\n\n\n\n

Suppliers are also set to benefit from the increasing electrification of cars in general \u2013 i.e. combustion engine cars having more electric technology to make them more fuel efficient. Put simply, as electrification increases so too does the demand on suppliers\u2019 products.<\/p>\n\n\n\n

A significant transition is happening in the realm of EVs, with 31 nations having exceeded a critical threshold: the point at which EVs constitute 5% of new car sales.10<\/sup> Crossing this milestone indicates the beginning of widespread acceptance, a phase after which there tends to be a swift shift in technological preferences towards EVs, which could potentially benefit automakers and their suppliers, including companies such as TE Connectivity, Aptiv, Texas Instruments, and Infineon, among others.<\/p>\n\n\n\n

Electrification is a key theme for investors to consider and one that is at the heart our approach to sustainable investing. It is also part of a broader investment theme that we call the digitalisation, electrification, and decarbonisation (DED) nexus. This theme is in action across all parts of the global economy since we need to electrify and digitise in order to decarbonise.<\/p>\n\n\n\n

While we haven\u2019t invested in many EV manufacturers, as we see that market as being quite a crowded space with a lot of competition with many incumbents sitting alongside new entrants, we do see many interesting opportunities for investors in the value chain \u2013 the companies making the enabling technologies. Here we see attractive valuations and long-term secular growth trends that mirror those seen within areas of high performance, such as computing and AI. For these reasons, we have maintained our exposure to the broader EV value chain and remain excited about investment opportunities in this area of the market.<\/p>\n","protected":false},"excerpt":{"rendered":"

Projected growth in electric vehicle (EV) fleets is expected to contribute to a halt in oil demand growth by the decade’s end. Hamish Chamberlayne explores the impact on the oil market and bolstered investment opportunities within EV supply chains.
\nSustainable equity: Oil imbalance paves way for electric vehicle supply chain growth – Janus Henderson Investors<\/p>\n

Despite a momentary dip in electric vehicle (EV) sales, projections indicate a significant increase in the overall fleet size to a level expected to contribute to a halt in the growth in oil demand by the end of this decade. This anticipated shift is likely to coincide with a considerable rise in oil supply, which would create an imbalance in the oil market, support the electrification of transportation, and lead to investment opportunities within the wider EV supply chain. The lull in sales, coupled with the excitement around artificial intelligence (AI), has certainly taken the spotlight away from EVs but we see it as offering meaningful long-term opportunities in the sustainable equity investing space.
\nEV sales blip<\/p>\n

According to the BloombergNEF (BNEF) annual Electric Vehicle Outlook (EVO), EV sales projections have been reduced by 6.7 million through 2026. Further, the EVO report noted that while the demand deceleration isn\u2019t universal across countries1 \u2013 and EVs will be supported slightly by the resurgence of plug-in hybrids (PHEV) \u2013 only a few Nordic countries (Norway and Sweden)2 and the state of California are on pace to eliminate passenger vehicle fleet emissions by 2050.<\/p>\n

BNEF analysts noted that some markets are experiencing a \u201csignificant slowdown\u201d and many automakers have pushed back their EV targets as a result, with the window for achieving net-zero emissions in road transport \u201cclosing quickly\u201d.<\/p>\n

However, despite the slowdown in EV sales, overall, the industry appears to be on track to deliver sustained fleet growth. In fact, six of the 10 largest EV carmakers in the US have seen sales increase between 56% (Hyundai-Kia) to 86% at Ford.3<\/p>\n

General Motors seems poised to lead the surge in EV expansion in the US, with the Detroit-based carmaker having pledged to electrify several of its major models. This lineup includes an Equinox SUV priced at US$35,000 and its counterpart, the Blazer (US34,500), in addition to the Silverado (US$96,495) and GMC Sierra (US$ 99,495) electric trucks.<\/p>\n

Helping to fuel such growth, EVs can be more affordable than Internal Combustion Engine (ICE) vehicles over their lifetime due to lower fuel and maintenance costs with fewer engine parts to go wrong.4 The different power train of an EV has advantages that can offset higher upfront costs.5 A 2018 University of Michigan study found that the average cost to fuel an electric car was US$485 a year, compared to US$1,117 for a gas-powered vehicle. Additionally, as production volumes increase, and battery technologies mature, prices are likely to equalise with ICE vehicles.6
\nOil imbalance<\/p>\n

The forecast growth in EV sales could ensure that oil demand growth stops by the end of the decade, with the oil market imbalance exacerbated further by a surprising amount of supply growth.<\/p>\n

According to the International Energy Agency\u2019s (IEA) annual medium-term outlook, global consumption will \u201clevel off\u201d at 105.6 million barrels per day \u2013 4% higher than last year\u2019s level \u2013 due to rising EV sales, and improved fuel efficiency.7<\/p>\n

Running parallel to this, the IEA noted that oil production capacity continues to climb, with supply rising by a \u201cstaggering\u201d eight million barrels per day higher than demand by 2030. This may leave global oil supply with the largest level of spare output since the Covid-19 lockdowns, the IEA added.<\/p>\n

The IEA report noted that as the pandemic rebound loses steam, clean energy transitions advance, and the structure of China\u2019s economy shifts, growth in global oil demand is slowing down, with rising oil supplies potentially weighing on prices through the end of the decade.<\/p>\n

Global oil demand is projected to increase over the next few years, according to the IEA, with an anticipated growth of approximately 4 million barrels daily by the decade\u2019s end. This rise is attributed to economic growth in countries like India and China, alongside increased consumption by the aviation and petrochemical sectors.<\/p>\n

However, in developed nations, the consumption of oil is expected to continue its long-term downward trend, decreasing from last year\u2019s 46 million barrels per day to 43 million by 2030 \u2014 marking the lowest consumption level since 1991. The report also suggests that oil demand in China will level off by the decade\u2019s end, reaching around 18 million barrels daily. Further, a broadening of carbon-related taxes is expected, with emerging market economies, including China, looking to expand their respective national carbon markets.8 If carbon prices rise as a result, oil prices could become relatively more expensive over time than electricity per mile travelled.9
\nRiding the electrification wave<\/p>\n

These prevailing and converging trends offer a supportive narrative for sustainable investing, particularly within the broader EV supply chain, including mining, automotive technology suppliers, battery manufacturers, and semiconductors and system solutions providers, among others.<\/p>\n

Suppliers are also set to benefit from the increasing electrification of cars in general \u2013 i.e. combustion engine cars having more electric technology to make them more fuel efficient. Put simply, as electrification increases so too does the demand on suppliers\u2019 products.<\/p>\n

A significant transition is happening in the realm of EVs, with 31 nations having exceeded a critical threshold: the point at which EVs constitute 5% of new car sales.10 Crossing this milestone indicates the beginning of widespread acceptance, a phase after which there tends to be a swift shift in technological preferences towards EVs, which could potentially benefit automakers and their suppliers, including companies such as TE Connectivity, Aptiv, Texas Instruments, and Infineon, among others.<\/p>\n

Electrification is a key theme for investors to consider and one that is at the heart our approach to sustainable investing. It is also part of a broader investment theme that we call the digitalisation, electrification, and decarbonisation (DED) nexus. This theme is in action across all parts of the global economy since we need to electrify and digitise in order to decarbonise.<\/p>\n

While we haven\u2019t invested in many EV manufacturers, as we see that market as being quite a crowded space with a lot of competition with many incumbents sitting alongside new entrants, we do see many interesting opportunities for investors in the value chain \u2013 the companies making the enabling technologies. Here we see attractive valuations and long-term secular growth trends that mirror those seen within areas of high performance, such as computing and AI. For these reasons, we have maintained our exposure to the broader EV value chain and remain excited about investment opportunities in this area of the market.<\/p>\n","protected":false},"author":1432,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[12,153,148,7],"tags":[],"contributors-categories":[],"class_list":{"0":"post-196461","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-securities","7":"category-stocks","8":"category-text-articles","9":"category-traders-insight"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\nSustainable equity: Oil imbalance paves way for electric vehicle supply chain growth<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.eu\/campus\/wp-json\/wp\/v2\/posts\/196461\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth\" \/>\n<meta property=\"og:description\" content=\"Projected growth in electric vehicle (EV) fleets is expected to contribute to a halt in oil demand growth by the decade's end. Hamish Chamberlayne explores the impact on the oil market and bolstered investment opportunities within EV supply chains. Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth - Janus Henderson Investors Despite a momentary dip in electric vehicle (EV) sales, projections indicate a significant increase in the overall fleet size to a level expected to contribute to a halt in the growth in oil demand by the end of this decade. This anticipated shift is likely to coincide with a considerable rise in oil supply, which would create an imbalance in the oil market, support the electrification of transportation, and lead to investment opportunities within the wider EV supply chain. The lull in sales, coupled with the excitement around artificial intelligence (AI), has certainly taken the spotlight away from EVs but we see it as offering meaningful long-term opportunities in the sustainable equity investing space. EV sales blip According to the BloombergNEF (BNEF) annual Electric Vehicle Outlook (EVO), EV sales projections have been reduced by 6.7 million through 2026. Further, the EVO report noted that while the demand deceleration isn\u2019t universal across countries1 \u2013 and EVs will be supported slightly by the resurgence of plug-in hybrids (PHEV) \u2013 only a few Nordic countries (Norway and Sweden)2 and the state of California are on pace to eliminate passenger vehicle fleet emissions by 2050. BNEF analysts noted that some markets are experiencing a \u201csignificant slowdown\u201d and many automakers have pushed back their EV targets as a result, with the window for achieving net-zero emissions in road transport \u201cclosing quickly\u201d. However, despite the slowdown in EV sales, overall, the industry appears to be on track to deliver sustained fleet growth. In fact, six of the 10 largest EV carmakers in the US have seen sales increase between 56% (Hyundai-Kia) to 86% at Ford.3 General Motors seems poised to lead the surge in EV expansion in the US, with the Detroit-based carmaker having pledged to electrify several of its major models. This lineup includes an Equinox SUV priced at US$35,000 and its counterpart, the Blazer (US34,500), in addition to the Silverado (US$96,495) and GMC Sierra (US$ 99,495) electric trucks. Helping to fuel such growth, EVs can be more affordable than Internal Combustion Engine (ICE) vehicles over their lifetime due to lower fuel and maintenance costs with fewer engine parts to go wrong.4 The different power train of an EV has advantages that can offset higher upfront costs.5 A 2018 University of Michigan study found that the average cost to fuel an electric car was US$485 a year, compared to US$1,117 for a gas-powered vehicle. Additionally, as production volumes increase, and battery technologies mature, prices are likely to equalise with ICE vehicles.6 Oil imbalance The forecast growth in EV sales could ensure that oil demand growth stops by the end of the decade, with the oil market imbalance exacerbated further by a surprising amount of supply growth. According to the International Energy Agency\u2019s (IEA) annual medium-term outlook, global consumption will \u201clevel off\u201d at 105.6 million barrels per day \u2013 4% higher than last year\u2019s level \u2013 due to rising EV sales, and improved fuel efficiency.7 Running parallel to this, the IEA noted that oil production capacity continues to climb, with supply rising by a \u201cstaggering\u201d eight million barrels per day higher than demand by 2030. This may leave global oil supply with the largest level of spare output since the Covid-19 lockdowns, the IEA added. The IEA report noted that as the pandemic rebound loses steam, clean energy transitions advance, and the structure of China\u2019s economy shifts, growth in global oil demand is slowing down, with rising oil supplies potentially weighing on prices through the end of the decade. Global oil demand is projected to increase over the next few years, according to the IEA, with an anticipated growth of approximately 4 million barrels daily by the decade\u2019s end. This rise is attributed to economic growth in countries like India and China, alongside increased consumption by the aviation and petrochemical sectors. However, in developed nations, the consumption of oil is expected to continue its long-term downward trend, decreasing from last year\u2019s 46 million barrels per day to 43 million by 2030 \u2014 marking the lowest consumption level since 1991. The report also suggests that oil demand in China will level off by the decade\u2019s end, reaching around 18 million barrels daily. Further, a broadening of carbon-related taxes is expected, with emerging market economies, including China, looking to expand their respective national carbon markets.8 If carbon prices rise as a result, oil prices could become relatively more expensive over time than electricity per mile travelled.9 Riding the electrification wave These prevailing and converging trends offer a supportive narrative for sustainable investing, particularly within the broader EV supply chain, including mining, automotive technology suppliers, battery manufacturers, and semiconductors and system solutions providers, among others. Suppliers are also set to benefit from the increasing electrification of cars in general \u2013 i.e. combustion engine cars having more electric technology to make them more fuel efficient. Put simply, as electrification increases so too does the demand on suppliers\u2019 products. A significant transition is happening in the realm of EVs, with 31 nations having exceeded a critical threshold: the point at which EVs constitute 5% of new car sales.10 Crossing this milestone indicates the beginning of widespread acceptance, a phase after which there tends to be a swift shift in technological preferences towards EVs, which could potentially benefit automakers and their suppliers, including companies such as TE Connectivity, Aptiv, Texas Instruments, and Infineon, among others. Electrification is a key theme for investors to consider and one that is at the heart our approach to sustainable investing. It is also part of a broader investment theme that we call the digitalisation, electrification, and decarbonisation (DED) nexus. This theme is in action across all parts of the global economy since we need to electrify and digitise in order to decarbonise. While we haven\u2019t invested in many EV manufacturers, as we see that market as being quite a crowded space with a lot of competition with many incumbents sitting alongside new entrants, we do see many interesting opportunities for investors in the value chain \u2013 the companies making the enabling technologies. Here we see attractive valuations and long-term secular growth trends that mirror those seen within areas of high performance, such as computing and AI. For these reasons, we have maintained our exposure to the broader EV value chain and remain excited about investment opportunities in this area of the market.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus EU\" \/>\n<meta property=\"article:published_time\" content=\"2024-07-31T13:32:14+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-07-31T13:50:30+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/07\/GettyImages-1519871883-4800x3200-1.jpg\" \/>\n<meta name=\"author\" content=\"Hamish Chamberlayne\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Hamish Chamberlayne\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\n\t \"@context\": \"https:\\\/\\\/schema.org\",\n\t \"@graph\": [\n\t {\n\t \"@type\": \"Article\",\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/#article\",\n\t \"isPartOf\": {\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/\"\n\t },\n\t \"author\": {\n\t \"name\": \"Hamish Chamberlayne\",\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.eu\\\/campus\\\/#\\\/schema\\\/person\\\/2f511054d3da946b2ff4acf2863216ec\"\n\t },\n\t \"headline\": \"Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth\",\n\t \"datePublished\": \"2024-07-31T13:32:14+00:00\",\n\t \"dateModified\": \"2024-07-31T13:50:30+00:00\",\n\t \"mainEntityOfPage\": {\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/\"\n\t },\n\t \"wordCount\": 1090,\n\t \"commentCount\": 0,\n\t \"image\": {\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/#primaryimage\"\n\t },\n\t \"thumbnailUrl\": \"https:\\\/\\\/ibkrcampusdev.wpengine.com\\\/wp-content\\\/uploads\\\/sites\\\/3\\\/2024\\\/07\\\/GettyImages-1519871883-4800x3200-1.jpg\",\n\t \"articleSection\": [\n\t \"Securities\",\n\t \"Stocks\",\n\t \"Text Articles\",\n\t \"Traders' Insight\"\n\t ],\n\t \"inLanguage\": \"en-US\",\n\t \"potentialAction\": [\n\t {\n\t \"@type\": \"CommentAction\",\n\t \"name\": \"Comment\",\n\t \"target\": [\n\t \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/#respond\"\n\t ]\n\t }\n\t ]\n\t },\n\t {\n\t \"@type\": \"WebPage\",\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/\",\n\t \"url\": \"https:\\\/\\\/www.interactivebrokers.eu\\\/campus\\\/traders-insight\\\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\\\/\",\n\t \"name\": \"Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth - 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Hamish Chamberlayne explores the impact on the oil market and bolstered investment opportunities within EV supply chains. Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth - Janus Henderson Investors Despite a momentary dip in electric vehicle (EV) sales, projections indicate a significant increase in the overall fleet size to a level expected to contribute to a halt in the growth in oil demand by the end of this decade. This anticipated shift is likely to coincide with a considerable rise in oil supply, which would create an imbalance in the oil market, support the electrification of transportation, and lead to investment opportunities within the wider EV supply chain. The lull in sales, coupled with the excitement around artificial intelligence (AI), has certainly taken the spotlight away from EVs but we see it as offering meaningful long-term opportunities in the sustainable equity investing space. EV sales blip According to the BloombergNEF (BNEF) annual Electric Vehicle Outlook (EVO), EV sales projections have been reduced by 6.7 million through 2026. Further, the EVO report noted that while the demand deceleration isn\u2019t universal across countries1 \u2013 and EVs will be supported slightly by the resurgence of plug-in hybrids (PHEV) \u2013 only a few Nordic countries (Norway and Sweden)2 and the state of California are on pace to eliminate passenger vehicle fleet emissions by 2050. BNEF analysts noted that some markets are experiencing a \u201csignificant slowdown\u201d and many automakers have pushed back their EV targets as a result, with the window for achieving net-zero emissions in road transport \u201cclosing quickly\u201d. However, despite the slowdown in EV sales, overall, the industry appears to be on track to deliver sustained fleet growth. In fact, six of the 10 largest EV carmakers in the US have seen sales increase between 56% (Hyundai-Kia) to 86% at Ford.3 General Motors seems poised to lead the surge in EV expansion in the US, with the Detroit-based carmaker having pledged to electrify several of its major models. This lineup includes an Equinox SUV priced at US$35,000 and its counterpart, the Blazer (US34,500), in addition to the Silverado (US$96,495) and GMC Sierra (US$ 99,495) electric trucks. Helping to fuel such growth, EVs can be more affordable than Internal Combustion Engine (ICE) vehicles over their lifetime due to lower fuel and maintenance costs with fewer engine parts to go wrong.4 The different power train of an EV has advantages that can offset higher upfront costs.5 A 2018 University of Michigan study found that the average cost to fuel an electric car was US$485 a year, compared to US$1,117 for a gas-powered vehicle. Additionally, as production volumes increase, and battery technologies mature, prices are likely to equalise with ICE vehicles.6 Oil imbalance The forecast growth in EV sales could ensure that oil demand growth stops by the end of the decade, with the oil market imbalance exacerbated further by a surprising amount of supply growth. According to the International Energy Agency\u2019s (IEA) annual medium-term outlook, global consumption will \u201clevel off\u201d at 105.6 million barrels per day \u2013 4% higher than last year\u2019s level \u2013 due to rising EV sales, and improved fuel efficiency.7 Running parallel to this, the IEA noted that oil production capacity continues to climb, with supply rising by a \u201cstaggering\u201d eight million barrels per day higher than demand by 2030. This may leave global oil supply with the largest level of spare output since the Covid-19 lockdowns, the IEA added. The IEA report noted that as the pandemic rebound loses steam, clean energy transitions advance, and the structure of China\u2019s economy shifts, growth in global oil demand is slowing down, with rising oil supplies potentially weighing on prices through the end of the decade. Global oil demand is projected to increase over the next few years, according to the IEA, with an anticipated growth of approximately 4 million barrels daily by the decade\u2019s end. This rise is attributed to economic growth in countries like India and China, alongside increased consumption by the aviation and petrochemical sectors. However, in developed nations, the consumption of oil is expected to continue its long-term downward trend, decreasing from last year\u2019s 46 million barrels per day to 43 million by 2030 \u2014 marking the lowest consumption level since 1991. The report also suggests that oil demand in China will level off by the decade\u2019s end, reaching around 18 million barrels daily. Further, a broadening of carbon-related taxes is expected, with emerging market economies, including China, looking to expand their respective national carbon markets.8 If carbon prices rise as a result, oil prices could become relatively more expensive over time than electricity per mile travelled.9 Riding the electrification wave These prevailing and converging trends offer a supportive narrative for sustainable investing, particularly within the broader EV supply chain, including mining, automotive technology suppliers, battery manufacturers, and semiconductors and system solutions providers, among others. Suppliers are also set to benefit from the increasing electrification of cars in general \u2013 i.e. combustion engine cars having more electric technology to make them more fuel efficient. Put simply, as electrification increases so too does the demand on suppliers\u2019 products. A significant transition is happening in the realm of EVs, with 31 nations having exceeded a critical threshold: the point at which EVs constitute 5% of new car sales.10 Crossing this milestone indicates the beginning of widespread acceptance, a phase after which there tends to be a swift shift in technological preferences towards EVs, which could potentially benefit automakers and their suppliers, including companies such as TE Connectivity, Aptiv, Texas Instruments, and Infineon, among others. Electrification is a key theme for investors to consider and one that is at the heart our approach to sustainable investing. It is also part of a broader investment theme that we call the digitalisation, electrification, and decarbonisation (DED) nexus. This theme is in action across all parts of the global economy since we need to electrify and digitise in order to decarbonise. While we haven\u2019t invested in many EV manufacturers, as we see that market as being quite a crowded space with a lot of competition with many incumbents sitting alongside new entrants, we do see many interesting opportunities for investors in the value chain \u2013 the companies making the enabling technologies. Here we see attractive valuations and long-term secular growth trends that mirror those seen within areas of high performance, such as computing and AI. For these reasons, we have maintained our exposure to the broader EV value chain and remain excited about investment opportunities in this area of the market.","og_url":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/","og_site_name":"IBKR Campus EU","article_published_time":"2024-07-31T13:32:14+00:00","article_modified_time":"2024-07-31T13:50:30+00:00","og_image":[{"url":"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/07\/GettyImages-1519871883-4800x3200-1.jpg","type":"","width":"","height":""}],"author":"Hamish Chamberlayne","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Hamish Chamberlayne","Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/#article","isPartOf":{"@id":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/"},"author":{"name":"Hamish Chamberlayne","@id":"https:\/\/ibkrcampus.eu\/campus\/#\/schema\/person\/2f511054d3da946b2ff4acf2863216ec"},"headline":"Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth","datePublished":"2024-07-31T13:32:14+00:00","dateModified":"2024-07-31T13:50:30+00:00","mainEntityOfPage":{"@id":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/"},"wordCount":1090,"commentCount":0,"image":{"@id":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/#primaryimage"},"thumbnailUrl":"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/07\/GettyImages-1519871883-4800x3200-1.jpg","articleSection":["Securities","Stocks","Text Articles","Traders' Insight"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/","url":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/sustainable-equity-oil-imbalance-paves-way-for-electric-vehicle-supply-chain-growth\/","name":"Sustainable equity: Oil imbalance paves way for electric vehicle supply chain growth - 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