U.S. President Joe Biden and the major U.S. automakers have pledged to set a target for electric vehicle sales of 50 per cent of total purchases by 2030, highlighting the steady (and heavily subsidized) trend toward decarbonized and electrified developed world economies.
The global research team at Bank of America Securities is attempting to identify the biggest corporate beneficiaries of the electrification movement, recommending stocks across industry sectors and including a significant number of Canadian companies.
BofA strategist Thomas Thornton, in a recent research note, raised his 2025 EV sales forecasts from 4.5 per cent to 7 per cent of total sales; by 2030, he now expects EVs to account for 20 per cent of total sales, up from 12.5 per cent.
These estimates, far lower than the newly announced presidential targets, are based on subsidies at current levels – US$7,500 a vehicle. B of A projects that if Congress can approve a jump to US$10,000 an EV, the 50-per-cent market penetration goal for 2030 can be achieved. In either scenario, Mr. Thornton sees General Motors Co. as the best positioned auto manufacturer as it is launching new EV models in the next four years.
EV production requires four times the amount of copper relative to internal-combustion engine (ICE) transportation, according to BofA Securities analyst Michael Widmer. He expects global copper demand will increase from 2 per cent to 2.1 per cent to 2.5 per cent to 3 per cent annually to 2030.
An increase of 1 per cent may not sound impressive at first glance but, with the International Copper Study Group predicting global demand of 25 million tonnes in 2021, each percentage point represents hundreds of thousands of tonnes of new supply necessary. This scenario points to considerable support for the commodity price and related mining-stock profit growth for the foreseeable future.
As for beneficiaries of EV-related copper demand, four of Bank of America’s top stock picks are Canadian miners. Lundin Mining Corp., Hudbay Minerals Inc., First Quantum Minerals Ltd. and Ivanhoe Mines Ltd. are joined by U.K.-based Anglo American PLC.
Mr. Thornton also provided a list of stock ideas from the U.S. electric utilities sector. I strongly suspect that Canadian investors would prefer to focus on Canadian utilities stocks as the electrification trend proceeds here. That analysis is not yet available, but I have ranked the Bank of America picks below by dividend yield as a potential starting point for income-oriented investors to begin research on this theme.
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