Electric Cars Will Leave Lots Of 'Losers' In Their Wake, Says JPMorgan
Adoption of electric cars will happen faster than many people expect, according to the financial firm.
The shift from Internal-combustion vehicles to electric cars won't just affect automakers, according to J.P. Morgan Cazenove. Many other related businesses could be impacted as well, generating a long list of what the firm describes as "losers."
In a note to investors, J.P. Morgan said widespread electric car adoption will happen faster than many analysts expect, reports CNBC. That's largely due to an anticipated narrowing of the price gap between electric cars and internal-combustion cars, thanks to expected drops in battery prices. Concern over loss of value of internal-combustion cars may cause consumers to switch to electric cars even faster, JPMorgan said.
While automakers can pivot and replace their gasoline and diesel cars with electric models, other related businesses might not be so lucky, the JPMorgan note said. Estimated running costs for electric cars are around 10 percent that of internal-combustion cars, J.P. Morgan said, meaning less need to take them into dealerships or garages for maintenance work. Indeed, the only significant regular maintenance that really needs to be done on electric cars is replacement of tires and brake pads. Fewer moving parts means less chance of a problem that requires a visit to a mechanic.
"We see this as a meaningful risk for car dealers who rely on after-sales service for a large chunk of their profitability," the J.P. Morgan note said. "This should over time reduce the number of vehicles sold as well, in addition to other potential trends, such as automated driving and greater car utilization rates." That could include greater use of ride-sharing services.
In addition to reducing maintenance needs, the lower number of parts in electric cars also makes them less complicated to build, JPMorgan said. That means less money going to current automotive suppliers, although others may prosper. Manufacturers of semiconductors could will be in a good position, J.P. Morgan noted.
Even car finance firms could take a hit. J.P. Morgan predicts that scrap values for internal-combustion cars will drop significantly, lowering the amount of money companies can recover when they repossess and resell gasoline or diesel cars. Consumers may also keep their electric cars longer, lowering the total number of auto loans in the marketplace.
Naturally, the oil industry could be in trouble too. Passenger cars currently account for 20 percent of global oil consumption, J.P. Morgan said.
A shift to electric cars will bring a lot of changes, but the question ultimately is whether new jobs and businesses will appear to fill the void left by legacy industries. Only time will tell.