Goldman Sachs bullish on electric vehicles; Tesla Gigafactory leading the charge

This week, Renew Economy reports on the Goldman Sachs Low Carbon Economy GS Sustain Research Report*. We delved into the 50 pages of wide-ranging clean tech research and extracted the most salient data related to electric vehicles and Tesla Motors [NASDAQ: TSLA]. And it turns out that Goldman Sachs is bullish on electric vehicles (EVs), citing the Tesla Gigafactory in the leadership position within this massive growth trend. Goldman Sachs analysts, "expect carmakers to sell 25 million hybrid and electric vehicles by 2025, 10x more than today."

So, how is this kind of growth possible? Goldman explains: "Rapidly advancing battery technology is shaping up to be a strategic linchpin for the low carbon economy. Large-scale investment is expected to bring significant cost reductions and performance improvements for lithium-based batteries. Analysts project grid-connected vehicle sales growing from $12 billion in 2015 to $88 billion by 2020, and $244 billion by 2025."

Discussing electric vehicle batteries, Goldman reports that: "technological advances play a significant role, growing economies of scale are the key driver of cost reductions. Led by Tesla and Panasonic’s 35GW Gigafactory, battery manufacturers have committed to approximately triple current production capacity over the next five years [Exhibit 36].... Autos analysts forecast the battery range for lower performance EVs to increase by over 70%, while battery costs are expected to fall by more than 60% over the next five years [Exhibit 37]."

Goldman also points out: "Benefits are increasing too as low carbon industries are growing in scale. Tesla’s plans for a battery factory [Tesla Gigafactory], for example, set off a fierce competition among five US states for the $5 billion+ investment with an estimated 6,500 jobs. Nevada, where the factory was eventually located, passed four laws and offered the company $1.3 billion in incentives, including a 20-year sales tax exemption, with a lawmaker referring to it as the biggest prize for the state since the 'Hoover Dam'."

The report also points to another competitive advantage as we move towards a future with more electric vehicles: "An EV includes only about one-third of the number of components of on board vehicles powered by a gasoline engine (see Exhibit 56)."

In addition, the report explains, "We see hybrid and electric vehicles as the technology with the greatest potential upside from government regulation. In the near term, they are likely to benefit as regulators step up the enforcement of emission rules in the wake of the VW scandal. In the medium term, we also see a growing trend towards incentivizing electric vehicles and plug-in hybrids at the expense of ordinary hybrids, something we already see playing out at the subnational level (e.g. in Beijing, London, California)." The report points to California's ZEV (zero emmission vehicle) regulation schedule [Exhibit 51] as an example...