Energy Prospectus

The March 5, 2018 Raymond James Energy Industry Stat focuses on this topic. If you'd like to read the full report, send an email to me at dmsteffens@comcast.net

Raymond James: "Energy Stat: Are You Concerned About EVs Burdening the Power Grid? We’d Worry More About Bitcoin"

This is our seventh annual Stat on the topic of electric vehicle adoption. Over the years, we’ve covered a wide range of topics
surrounding the EV ecosystem, and in November 2017 we took a comprehensive look at the EV value chain as part of the cross industry
“Future of Transportation” report. Today, in addition to updating our light-duty EV sales growth forecast, we will focus on
the ramifications of EV adoption for the power grid, combining U.S. and (with RJ Europe’s utility analyst) European perspectives.
Here is the big picture: just as the growth of the EV market is not going to become impactful for displacing global oil demand until
beyond 2025, EVs are not about to overwhelm electricity demand or destabilize the grid. Cryptocurrency mining, on the other
hand... that might be a different story.

The level of EV market share in the automotive sales mix shows plenty of variability from country to country, but anything above 3%
is still very unusual. Globally, light-duty auto sales totaled approximately 95 million in 2017, according to IHS Markit, which means
EVs reached 1.3% of the total. Market share is the highest in Europe, though it is nowhere near uniform. Norway keeps its place as
the undisputed leader in share, reaching 39% of 2017 sales, up from 30% in 2016. Iceland was second-ranked with 14% (in case
you’re curious, its 330,000 residents bought 2,990 EVs), followed by Sweden at 5%. The Netherlands is the only other country to
ever reach 5%, though in 2017 it was well below that. Aside from the Scandinavian theme, the numbers look much more subdued
among the top European economies: the U.K. at 1.9%, France at 1.7%, Germany at 1.6%, Spain at 0.6%, and Italy at 0.2%.

How can investors play the EV theme?

Other than Tesla – a classic example of a first-of-its-kind “story stock” (and, despite the shrinking profile of SolarCity, not quite an EV
pure-play) – it remains difficult for U.S. investors to get meaningful leverage to the EV market. There is surely ample investor
appetite for future IPOs in this space, but as things stand, the only other publicly traded EV manufacturing pure-plays are three
micro-caps, all of them pre-revenue: Adomani (school buses), Arcimoto (“fun utility vehicles”), and Electrameccanica Vehicles
(roadsters). Workhorse Group specializes in electric vans for commercial customers, though it also has non-EV operations. TPI
Composites, predominantly a supplier of wind turbine blades, is scaling up its sales of composite bodies for electric buses. To state
the obvious, EVs are still not needle-moving revenue drivers for the major automakers, though that will change over time as
companies such as Ford (with a target of 40 EV models by 2022) and Volkswagen (50 EV models by 2025) pursue their “supply-push”
approach to spurring mainstream adoption.

None of the publicly traded power storage companies have financially needle-moving exposure to EVs. For instance, Tesla’s main
supplier of battery cells, and partner in the Gigafactory, is Panasonic – not exactly a clean tech stock. There are a few derivative plays
with exposure to the EV battery market, such as UQM Technologies. When it comes to EV charging infrastructure, the only U.S.-
listed pure-play is a micro-cap: Blink Charging. Another micro-cap, Envision Solar, provides (among other things) solar-powered
charging systems. AeroVironment has an EV charging segment, though it’s a small component of the company’s overall portfolio
(which is mostly focused on defense). Finally, grid solutions providers such as Itron are supporting utility preparations for serving
growing numbers of EVs.

It is the same story in European equities: a long-standing lack of public companies with a focus on the EV theme. For example,
European players involved in the rollout of fast charging stations are diversified industrial firms supplying the equipment (e.g., ABB)
as well as major utilities (e.g., Enel, Engie, E.On, Innogy). Similarly, EV batteries comprise only a small portion of the revenue mix for
Schneider Electric, Daimler, and Saft (the latter owned by the oil supermajor Total).