money Electric vehicle push will ‘uplift’ chipmakers: Truist Managing Director
As more automakers commit to phasing out their production of combustion engine-powered vehicles over the next few decades, the ongoing microchip shortage is becoming a bottleneck for the electric vehicle (EV) transition. Truist Securities (TFC) Managing Director William Stein believes, however, that the EV push will ultimately help boost chip manufacturing capacity in the long run.
“Well, [the shift towards EV adoption is] a significant potential change for the chip makers,” Stein told Yahoo Finance Live. “There's approximately a doubling of the semiconductor content in a typical electric vehicle relative to a traditional internal combustion engine. It's a significant uplift — somewhat of a change of the major vendors — but a big uplift in semi content.”
Stein joined Yahoo Finance Live to discuss the significance of EV-focused chipmakers. Amid surging gas prices in the U.S. brought on by the Russia-Ukraine war and resulting bans on Russian oil, online search interest for EVs has risen to record-high levels.
Alongside automakers both foreign and domestic, governments are passing legislation to catalyze the adoption of EVs — Canada recently announced that it will be placing a ban on sales of combustion engine passenger cars by 2035. Canada joins the U.K. in vowing to halt sales of gas-powered vehicles through a similar timeframe.
EV manufacturing bottlenecks are also presenting themselves from a battery production standpoint, as reporting suggests that President Joe Biden is considering invoking the Defense Production Act in order to ramp up production of critical EV battery materials. The move could target minerals such as lithium, cobalt, and nickel, as well as provide key companies with funds to boost their output.
Stein said that chip manufacturers are preparing to accelerate their capacity for production in the medium and long term in spite of the current supply crunch to support updated automaker EV market penetration targets. He noted that automakers are becoming increasingly aggressive in terms of the percentage of their fleets they intend to make fully electric as well as the timing in which they expect to reach these objectives.
“So penetration, we believe, is approximately 3% of global auto production today. It's relatively modest,” he said. “About a year ago, there was an expectation for, by the time we get to 2040, perhaps 40%, 50% penetration. But that's gone up significantly in the last year, mostly because of … world government targets, but perhaps even more than that, targets established by the auto manufacturers.”
Expanding concurrently alongside the adoption of EVs has also been the push towards autonomous driving technology. However, Stein said that the outlook for market growth of autonomous vehicles and capabilities is one that looks to be more “incrementalist” than that of EVs.
“We're going to achieve [safer autonomous driving with] each year and each model and each release of the new technology,” he said. “And eventually, perhaps we’ll get to a point where we have autonomous driving [be the norm]. That approach has proven to be the more predominant one among the OEMs today, the equipment manufacturers, the companies making cars.”
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV
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