What are the implications of growing acceptance / prospects of EVs (Electric vehicles) on JLR is one of the most frequent questions we hear from investors.
What are the implications of growing acceptance / prospects of EVs (Electric vehicles) on JLR is one of the most frequent questions we hear from investors. An extraordinary response to Tesla 3 (~400K bookings) and an ever stricter emission norms (2020 and beyond) has raised investors’ concerns for JLR. In our view, the cost benefit trade-off for an EV is still evolving and multiple constraints need to be addressed by OEMs before EVs gain meaningful share of the overall car market.
Continuous innovation in the traditional internal combustion engine (ICE) and designs should help JLR get closer to the 2020 emission target. Thanks to the higher average selling price (ASP) of JLR’s cars, the average percentage increase in price from hybrid variants will be easier to pass to the customers than mass car buyers. Over the next three to five years we expect a lot more mini and full hybrid cars from JLR.
By then, battery and other technologies will be much more evolved; we expect JLR to not only invest on its own but also get into partnerships to acquire these capabilities. To sum up, R&D spend may remain high over the foreseeable future, but in our view, JLR may not be at a big disadvantage to peers despite its smaller scale as it is already spending c60% higher on R&D per car than its German peers and this is unlikely to reduce in the next three to four years until EV technologies standardise.