IMPORTANT POINTS:
- Morgan Stanley highlights the need to create a new supply chain for electric vehicle batteries as countries reduce their dependence on China.
- Tesla, Aptiv and Freyr are the companies best positioned to succeed in this transition, according to Morgan Stanley.
- Ford and CATL could face challenges due to geopolitical and technological concerns in trying to establish a battery supply chain in the West.
The financial firm, Morgan Stanley, has identified several stocks to invest in as electric vehicle battery manufacturing shifts to the West.
According to the Wall Street bank in a note to clients on May 12, as reported by CNBC, as countries seek to reduce their reliance on China, which currently commands 90% of the EV battery market, it will be necessary to create a new supply chain for a decarbonized future.
However, Morgan Stanley noted that rebuilding a secure national supply chain and meeting government demands will be “challenging” and predicted that only a few companies will be able to profitably produce batteries in strategic locations.
According to Morgan Stanley, EV giants Tesla, auto parts maker Aptiv and battery maker Freyr are among the best positioned to succeed under this framework, while Ford and Chinese battery maker CATL rank below.
As for Tesla, Morgan Stanley said the company is well-placed to overcome geopolitical, environmental and economic challenges. He added that the company leads the way with its advances in battery technology and is the only major automaker to make a profit on every electric car made entirely in America.
In the case of Aptiv, Morgan Stanley noted that while the company risks losing business related to parts used in internal combustion engines, it will be able to transition to electric vehicles with relatively few challenges due to its focus on manufacturing automotive computer software and platforms.
On the other hand, the Norwegian company FREYR Battery has revealed plans to build two gigafactories, the first in Norway that will run almost entirely on hydroelectric power and the second in the United States. However, it is not yet known whether this can be achieved cost-effectively.
As for Ford and CATL, Morgan Stanley noted that these companies could face challenges due to geopolitical concerns and potential technology barriers. Despite US-China tensions, Ford will collaborate with CATL on a new $3.5 billion battery plant for electric vehicles in Michigan. However, these plans have drawn criticism from US politicians due to their reliance on Chinese technology.
In conclusion, according to Morgan Stanley, Tesla, Aptiv and Freyr are well positioned to succeed in manufacturing batteries for electric vehicles in an environment where countries seek to reduce their dependence on China. However, companies like Ford and CATL could face challenges due to geopolitical and technological concerns. The transition to a secure and profitable supply chain in the electric vehicle battery sector presents challenges, but also opportunities for companies that can overcome them.
