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January 29, 2021 | Corporate Credit Views

Credit Check-In: Electric Vehicles – The Road Ahead

The transition to a low-carbon way of life continues to gain momentum despite the global pandemic. In total, 127 countries responsible for around 63% of global carbon emissions are considering or have adopted net zero targets[1]. Encouragingly, recent net zero carbon emission pledges by China, Japan and the US have put the Paris Agreement’s goal within reach[2]. We think 2021 will see more corporates join governments in unveiling net zero pledges ahead of the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November. As a result, we think the global auto industry will likely experience a faster shift toward vehicle electrification (Exhibit 1) and a potentially speedier decline in internal combustion engine (ICE) vehicle sales, as also discussed during the inaugural Goldman Sachs Research Carbonomics conference last November.

US President Biden’s climate-related spending plans entail increasing the number of electric vehicle (EV) charging stations, which can likely be achieved through the budget reconciliation process (i.e., without bipartisan support). The availability of EV charging infrastructure is something our auto research analysts are closely monitoring. In our view, electrification of mobility is creating investment opportunities across various industries including battery technology.

EXHIBIT 1: RAISED EXPECTATIONS FOR GLOBAL EV SALES

Source: Goldman Sachs Global Investment Research. As of December 3, 2020.

 

 1Source: Climate Action Tracker. As of December 2020. This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved.  Please see additional disclosures at the end of this presentation.  

2The Paris Agreement is a legally binding international treaty on climate change. Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate neutral world by 2050. Source: UNFCCC. Notable recent developments: China committed to peak carbon emissions before 2030 and achieve carbon neutrality before 2060 (Sept 2020); Japan announced it plans to become a carbon-neutral society by 2050 (Oct 2020); US President Biden unveiled climate plans that target net zero emissions no later than 2050 and the UK unveiled a 10 Point Plan for a Green Industrial Revolution (Nov 2020); President Biden signed an executive order for the US to rejoin the Paris Climate Agreement (Jan 2021). Recall: In January 2020, the European Commission unveiled Green Deal Investment Plan to bring Europe to climate-neutrality by 2050 and net zero become law in the UK in 2019.

 

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