The war between Ukraine and Russia has the potential to accelerate the structural changes in the electric vehicle industry, according to an analyst at Morgan Stanley.
"Some of these changes were already in the works but may have been "pulled forward" by a decade or more," analyst Adam Jonas said in the note.
Here are some of the trends that will see accelerating adoption, according to the analyst:
JIT To Be Revamped: The automotive industry had long back embraced the supply chain management concept of "just-in-time-inventory" to keep a lid on inventory costs. JIT refers to the procuring of raw materials just in time for production schedules.
With supply constraints stopping production at several automakers, the JIT automotive supply chain could be in for an overhaul, Jonas said.
Critical Component Manufacturing To Be Brought Onshore: Geopolitical tensions such as the Ukrainian crisis are reminders that vertically integrated manufacturing is important to keep operations going. Most EV makers rely on batteries manufactured by either Korean and Chinese companies. China's CATL is the world's largest EV battery manufacturer. Sanctions against nations have the potential of disrupting supplies from these countries.
Heavy Stockpiling Of Critical Components: A few weeks into the Ukrainian war, automakers are already feeling the pinch of component shortages. Nickel, a key metal used in batteries, has seen a price spike, putting into disarray the well-thought-out strategies of EV makers.
Jonas also sees nationalism focus on supply chain security, even up to the mining and refining level.
Related Link:EV Sales Are On The Rise, But Tesla's Global Market Share Is Shrinking: Analyst
Higher Prices: The sub-$25,000 EV promised by market leader Tesla, Inc. (NASDAQ:TSLA) could now be a pipe dream. Fragmentation of supply chain and increased security will in turn mean higher EV prices for end consumers, Jonas said.
Battery Innovation Gains Ground: Rather than relying on metals, battery manufacturers will rev up innovation. The focus, Jonas said, will be on solid state, thermal, software, alternative cathode chemistry, structural pack, cell design and more.
Accent On Renewables: Manufacturers that consume energy more efficiently could find a greater market opportunity, Jonas said. The analyst sees share gains for energy efficient companies with expanded access to capital.
Tesla Expands Dominance: Jonas said Tesla will expand its "relative dominance," given it is an integrated innovator with a secure supply chain.
Zero-Sum game: Morgan Stanley sees the EV arena becoming a "zero-sum" game. Companies relying on ICE business to fund EV goals may not achieve their targets, he added.
Acceleration In Grid-Level Storage: The firm sees an acceleration in grid-level storage, especially in the European Union. FREYR Battery (NYSE:FREY) is well positioned on this front, Morgan Stanley added.
