What Will The Auto Industry Look Like In 2025? Goldman Sachs Has The Answer

Goldman Sachs analyst Kota Yuzawa took a look 10 years into the future this week in a new report about the auto industry. Yuzawa discussed Goldman’s projections for how the industry will look in 2025 and mentioned some non-traditional auto focus stocks.

Emissions
Goldman expects global emissions regulation to play a big role in shaping the auto industry between now and 2025. In particular, there will likely be a continued push toward CO2 reduction via thermal efficiency, lithium ion batteries, and fuel cells.

Battery power
According to Yuzawa, hybrids, plug-in hybrids and electric vehicles will make up 25 percent of auto sales in 2025, five times their 2015 share. In the meantime, the focus will be on making lithium ion batteries cheaper and more efficient. Tesla Motors Inc TSLA is targeting up to a 40 percent cost reduction from the opening of its Gigafactory.

Fuel cells
Although Goldman forecasts only a 0.5 percent share of the 2025 auto market for fuel cell vehicles, these hydrogen-powered (rather than carbon-powered) vehicles remain a wildcard in the industry. Toyota Motor Corp TM is targeting 2020 for the release of its next model of fuel cell vehicle.

The future is not here just yet
Although the industry is clearly shifting toward exciting new technology, the traditional auto industry will still be alive and well in 2025. “While electrification is a major theme, we expect 95% of vehicles sold in 2025 will use gasoline or diesel engines for at least part of their power,” Yuzawa explains.

Focus stocks
The report includes some non-traditional focus stocks to play the evolution of the auto industry, including turbo charger manufacturers Honeywell International Inc HON and BorgWarner Inc BWA.

Goldman also includes lithium producer FMC Corp FMC on its auto focus list.