“Our updated EV battery supply-demand model suggests the global EV battery supply will likely hit [a] ‘sold-out’ situation between 2025-26, with its global operating rates reaching above 85%,” the report reads.
The report states that BofA expects global battery shortages to intensify further in the period between 2026 to 2030 due to a continued rise in EV penetration across all markets, reflecting an "incrementally bullish" outlook for the EV industry. BofA Global Research lifted its estimated global penetrations for all EVs, including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), to 23%, 40%, and 67% for 2025, 2030, and 2040, respectively.
BofA Global research cited a higher likelihood of more stringent regulation on CO2 emissions for regular cars by 2030, increased BEV volume targets by major OEMs over the past six months, and upward revisions to EV penetration forecasts for the U.S. market as being key reasons for its bullish view on EVs.
“We forecast the global operating rates of EV battery will rise to about 121% by 2030, based on announced capacity so far, implying another round of substantial CapEx cycles will likely kick in the next 2-3 years,” the report added.
The BofA report noted that the potential swing factors for the future of EVs in the U.S. lie in regulations and stimulus. Under the bull-case scenario, BofA’s U.S. auto team forecasts that EV penetration in the U.S. market would rise to about 25% and 50% in 2025 and 2030, respectively, compared with the base case of 7% and 20% during the same period.
The bull case assumes around $450 billion in federal stimulus, or a subsidy of $10,000 for each of 45 million EVs sold. Accordingly, this suggests that the global operating rates of EV batteries could reach nearly 83% by 2024, likely pulling forward an impending battery shortage by as much as a year compared to the base scenario, the report said.
The drop in demand for oil and gasoline throughout the pandemic coincided with significant gains for renewables, with solar and wind up by 19% and 10% respectively for 2020. This could serve as a catalyst for EV penetration, as more OEMs and other companies around the world seek to incorporate Environmental, Social, and Governance (ESG) standards in their business models and adopt electric vehicles for usage in business operations.
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV
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