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Hybrid Vehicles Are Gaining Speed

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Behind the scenes at Goldman Sachs, thought-provoking insights are bubbling up each day. This space is for a few nuggets we think are worth sharing. From macroeconomics to the genome medicine revolution to the rise of digital gaming, these stories from around 200 West show you how top-level views can impact your life (and maybe even shape the way you think about money).

If you think you’ve been hearing a lot of noise around electric vehicles for a while now, it’s likely because you have. 

Over a decade ago, the federal government started giving electric vehicle owners a tax credit. Hype around EV soon followed then eventually swelled before electric vehicles got slapped with the ‘fad’ label. 

The biggest obstacle to mass adoption has been an affordable battery (more on that later). It’s the main reason that expectations for EV have been curtailed since 2017. And, according to Goldman Sachs Research, the industry could be another 5-10 years away from overcoming this hurdle with better technology that makes for smaller, faster-charging batteries. 

Until then, Goldman Sachs Research thinks we’re about to see an uptick in hybrid vehicles (part electric, part gas). In fact, they expect hybrid, or electrified, vehicles to account for 35% of global auto sales by 2030. 

While the electrification of vehicles in the US could slow due to rollbacks in environmental regulations and efficiency standards, other parts of the world are seeing a different story unfold.

For a granular look at where and how hybrids are expected to take off, check out this The Long & Short of It video and Briefly… Q&A. 

Otherwise, here are a few highlights.

Adoption of hybrids in Europe is likely to accelerate

Europe recently tightened their already-strict environmental regulations, with new targets for reducing CO2 emissions starting next year. Automakers will face big fines if their fleets can’t meet these new CO2 regulations. 

And for some manufacturers, it’s a very real concern: average industry emissions are well-above new targets, fueling aggressive investment in vehicle electrification in the region.

China is pushing ahead with its new energy vehicle policy

The country is the world’s largest electric vehicle market and its government is enforcing adoption of a new energy vehicle (NEV) policy by reducing current purchase subsidies for plug-in hybrids and fully electric vehicles, according to Yuzawa. 

“So instead of offering the subsidies as a ‘carrot,’ the government is moving to a ‘stick’ approach with regulations that require automakers to sell a certain number of EVs – even if they lose money – or get hit with penalties,” Yuzawa said.

Further proof that China is serious about this? The country has license plate quotas intended to limit the number of new vehicles on the road. The Chinese government did away with that quota for NEVs.

But what about the batteries?

According to Goldman Sachs Research, the cost of batteries will need to fall below $100 per kWh for fully electric vehicles to gain broader consumer adoption. 

Even then, there could be concerns about both future battery deterioration and the effect on supply/demand conditions for natural resources used to make those batteries (lithium, cobalt and nickel). If the prices of those raw materials doubled, the cost of a battery could jump by 15%.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.