Morgan Stanley’s Katy Huberty Says $7 Trillion Investment Needed to Transform EV Battery Supply Chain to Meet Decarbonization Goals

May 19, 2023

Morgan Stanley

by James Hyland, MiningIR

The transition from conventional petrol and diesel cars to electric vehicles is causing a significant transformation in the automotive industry, which in turn has important implications for Western auto supply chains. According to Morgan Stanley’s Managing Director and Global Head of Research, Katy Huberty, the EV battery supply chain will require substantial investment to undergo a complete “re-wiring” in the context of a multipolar world. Huberty’s research team predicts that by 2040, around $7 trillion will be needed for this purpose.

“Our global Autos team led a broadly collaborative analysis that revisited the investment implications of the EV battery supply chain, which they first explored in November 2021 (The New Oil: Investment Implications of the Global Battery Economy). A key enhancement in their new work: They viewed the battery supply chain through the lens of a Multipolar World. They conclude that if the West wants to drive EV adoption to meet decarbonization goals, while also mitigating national security concerns, a radically new battery supply chain will need to be created, with developments in battery chemistry having the potential to widen the menu of technologies available to meet climate goals. They estimate that total investment of $7 trillion would be needed in the EV battery supply chain by 2040, a figure that assumes an array of targeted regulations and policies to facilitate an onshore, decarbonized battery supply chain. They think it may require more than a decade to achieve industrialization and standardization, gated by a host of geopolitical, environmental, and economic considerations.”

Katy Huberty, Managing Director and Global Head of Research at Morgan Stanley

Shifting the EV battery supply chain from Asia to the Western world will necessitate a massive endeavor involving both governments and corporations. To capture market share from China, which currently dominates 90% of the global EV battery supply chain, trillions of dollars will need to be invested.

While the US Inflation Reduction Act has provided incentives for relocating critical EV supply chains, Western countries face a significant challenge in restructuring the battery supply chain to reduce dependence on China. This effort is crucial for achieving clean energy targets in the transportation sector by the mid-2030s. However, realizing a greener future also requires a substantial increase in nuclear power generation capacity. Failing to do so could result in unreliable power grids resembling those found in less developed nations.

Morgan Stanley is an American multinational investment bank and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in 41 countries and more than 75,000 employees, the firm’s clients include corporations, governments, institutions, and individuals. Morgan Stanley ranked No. 61 in the 2021 Fortune 500 list of the largest United States corporations by total revenue.

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MiningIR hosts a variety of articles from a range of sources. Our content, while interesting, should not be considered as formal financial advice. Always seek professional guidance and consult a range of sources before investing.
James Hyland, MiningIR