EVs/Autonomous Driving - Tesla and the auto revolution
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2022 Outlook | November 29, 2021 EVs/Autonomous Driving Tesla and the auto revolution Yeon-ju Park yeonju.park@miraeasset.com Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
Contents I. [EVs] The road to Tesla’s Model 2 3 II. [Autonomous driving] Game changer 12 III. [Auto market] Momentum to be stronger in 1H than in 2H 24 [Conclusion] Tesla and the auto revolution 26 2 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
Upside to market • Global electric vehicle (EV) market forecasts have seen steady upward revisions, especially since the outbreak of
COVID-19, thanks to policy support in major economies and the release of attractive new models.
forecasts
• That said, we still view EV penetration forecasts for 2030—30-40% on average—as conservative.
• As Tesla-led technological innovation accelerates in 2022, we expect EVs to reach price parity with conventional
vehicles sometime around 2023, prompting further boosts to forecasts.
Tesla EV production cost est. (based on standard-range models) EV penetration outlook
(US$) (%)
Battery Non-battery materials/parts Fixed Previous Revised
35,000 60
30,000
25,000
40
20,000
15,000
20
10,000
5,000
0 0
2021F 2023F 2020 2025F 2030F
Source: Mirae Asset Securities Research Source: Mirae Asset Securities Research
3 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
1) Battery innovation: • Since 2021, Tesla’s Model 3 and Model Y manufactured in China have been running on LFP batteries. The
adoption of LFP batteries has helped the automaker increase sales by lowering production costs/ASP. Beginning
LFP batteries going
in 2022, the company will also adopt the batteries in models sold in the US, Europe, etc.
global in 2022 • The adoption of LFP batteries should help: 1) lower battery production costs; 2) encourage competition among
battery suppliers, accelerating cost reductions; and 3) ease battery shortages, which have held back Tesla’s
efforts to expand production.
• LFP battery makers have rapidly expanded capacity recently. Compared to LFP batteries, capacity expansion has
been limited for ternary lithium batteries due to the small number of producers and technological challenges.
LFP vs. ternary lithium batteries (standard-range Model Y) CATL: Battery capacity expansion plans
(GWh)
Cell-to-pack 2170
LFP battery (ternary cylindrical) 800
Energy density (Wh/kg) 125 161
600
Battery weight/kWh (kg) 8.0 6.2
Battery capacity (kWh) 60 55 400
Battery weight (kg) 480 342
200
Battery costs (US$/kWh) 110 170
Battery pack cost (US$) 6,600 9,350 0
2019 2020 2021F 2022F 2023F 2024F 2025F
Note: Battery costs are our estimates. Source: Industry data, Mirae Asset Securities Research
Source: Industry data, Mirae Asset Securities Research
4 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
1) Battery innovation: • LFP batteries cannot be used in long-range models and pickup trucks that require larger battery capacities. As
such, mass production of more powerful 4680 cells is important.
Mass production of
• 4680 cells enable smaller battery packs, as fewer cells are required per vehicle—only one-fifth the number
4680 cells required by existing 2170 batteries. (Battery packs account for a large share of production costs for cylindrical
batteries.) The higher energy density of 4680 cells also means that smaller battery capacities are needed. Overall,
4680 cells will be able to match LFP batteries in terms of cost reductions.
• Panasonic recently stated that it had resolved most of the technological issues associated with 4680 battery
production and would start test production in Mar. 2022. Mass production is expected to begin around 2023 at
Panasonic and LG Chem.
No. of battery cells per vehicle (est.) % of non-cell costs in overall battery pack costs to decline
(No.) (US$/kWh) (%)
5,000 180 Cell costs (L) Non-cell costs (R) Non-cell/pack costs (R) 40
150
4,000
30
120
3,000
90 20
2,000
60
10
1,000
30
0 0 0
2170 4680 Cylindrical (2170) Pouch-type
Source: Industry data, Mirae Asset Securities Research Source: Cairn Energy Research Advisors, Mirae Asset Securities Research
5 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
2) Production innovation: • From 2022, Tesla plans to use Giga Press machines to create front underbody castings (in addition to rear
underbody castings). The EV maker aims to eventually introduce structural battery packs that can be joined with a
Giga Castings
single-piece front/rear underbody casting.
• Single-piece castings (Giga Castings) allow simpler and cheaper underbody production and help reduce fixed
costs by improving yields.
• The use of lightweight aluminum should also help improve driving range and reduce battery costs.
Tesla’s aluminum alloy vs. ultra-high-strength steel: Strength and
Tesla’s Giga Castings (rear underbody)
body weight comparison
(x, kg)
300 Ultra-high-strength steel Tesla’s aluminum alloy
250
200
150
100
50
0
Strength-to-weight ratio (x) Body weight (kg)
Source: Tesla Battery Day, Mirae Asset Securities Research Source: Limiting Factor, Mirae Asset Securities Research
6 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
2) Production innovation: • Structural battery packs are designed to make batteries a structural component of a vehicle, thus reducing
overall weight and simplifying production processes.
Structural battery packs
• With this new battery architecture, Tesla is aiming for a 7% reduction in battery costs and a 10% reduction in
weight.
• Reducing overall vehicle weight helps save costs by creating room to pack more LFP batteries or enabling a
reduction in battery capacity.
Existing battery pack vs. structural battery pack Chg. in Tesla’s EV architecture and its effects
Battery costs 7% reduction
Range 14% improvement
No. of parts 370 fewer parts
Weight 10% reduction
Source: Tesla Battery Day, Mirae Asset Securities Research Source: Tesla Battery Day, Mirae Asset Securities Research
7 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
Road to the Model 2 • We estimate that Tesla’s technological innovations, if successful, will allow the firm to cut battery costs by roughly
25% (lighter vehicle weight, less battery consumption) and fixed costs by around 50% (stemming from sales
volume growth and architecture changes). As such, Tesla may achieve its US$25,000 target price for the Model 2.
• Cost competition will likely intensify in the EV industry as the Model 2 moves closer to production. The broader
adoption of LFP/4680 cells across the industry and increasing sales volumes should allow automakers to enjoy
economies of scale. Of note, Volkswagen is highly anticipated to introduce its next-generation Scalable Systems
Platform (SSP) earlier than planned; the new platform is designed to markedly improve production yields.
• EVs are forecast to achieve price parity with conventional cars around 2023 (starting with Tesla).
Tesla EV production cost est. (based on standard-range models) Volkswagen SSP: Cost reduction through integration
(US$)
Battery Non-battery materials/parts Fixed
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2021F 2023F
Source: Mirae Asset Securities Research Source: Volkswagen, Mirae Asset Securities Research
8 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
Implications: • Tesla is forecast to sell 1.3-1.4mn units in 2022. However, we see ample room for growth, assuming the Berlin
and Texas factories go online.
1) Tesla’s sales volume
• Notably, sales volume could increase sharply once Tesla begins to roll out LFP battery-powered models in global
growth to surprise to the markets, such as the US and Europe. In China, EV sales jumped following the adoption of LFP batteries.
upside • Over the medium term, Tesla should be able to maintain its competitive edge over rivals. While battery
technology innovations should gradually spread across the industry, major architectural changes, such as Giga
Castings, do not seem easy for rivals to adopt due to a lack of alloy technology or equipment/machinery.
Tesla Giga Shanghai: Sales volume trends Tesla’s China sales volume (by anode material)
('000 units) ('000 units)
Domestic Exports 2020 Jan.-Sep. 2021
60 120
100
50
80
40
60
30
40
20
20
10
0
Model 3 Model Y Model 3 Model Y
0
1/21 4/21 7/21 10/21 NCM LFP
Source: CPCA, Mirae Asset Securities Research Source: Tesla, Mirae Asset Securities Research
9 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
I. [EVs] The road to Tesla’s Model 2
Implications: • As cost competition intensifies, automakers may cut prices to compete against Tesla, delaying EV profitability.
2) Profitability to vary • Also, profitability could vary widely among automakers, depending on their scale, dedicated platforms, etc.
across automakers • Accordingly, companies may deploy various strategies in an effort to secure cost competitiveness, sharing EV
platforms (Volkswagen and Ford) and/or outsourcing components production or part of manufacturing.
Volkswagen vs. Toyota: 2019 sales volumes and 2030 EV sales targets Volkswagen and Ford share MEB platform
('000 units)
2019 sales volume 2030 EV sales target
12,000
10,000
8,000
6,000
4,000
2,000
0
Volkswagen Toyota
Note: Volkswagen targeting 50% EV share in 2030 sales; Toyota targeting over 1mn EV sales Source: Ford, Mirae Asset Securities Research
Source: Volkswagen, Toyota, Mirae Asset Securities Research
10 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchI. [EVs] The road to Tesla’s Model 2
Implications: • The EV supply chain has seen valuations steadily expand alongside end-market growth. We expect EV stocks’
multiple premiums to widen around 2023 as market forecasts are further revised upward.
3) Multiple expansion
• Meanwhile, lithium supply will likely tighten further, driven by faster-than-expected demand growth and wider
and lithium supply adoption of LFP batteries. Supply growth will be limited over the next two to three years, due to limited new
crunch investments amid plummeting prices in 2018-20. Furthermore, LFP batteries require more lithium per kWh than
ternary lithium batteries due to their lower energy density.
Lithium price trends Lithium supply/demand growth outlook
(US$/tonne) (%)
30,000 100 Demand growth Supply growth
80
20,000
60
40
10,000
20
0 0
12 14 16 18 20 22 21F 22F 23F 24F
Source: Korea Resources Corp., Mirae Asset Securities Research Source: Industry data, Mirae Asset Securities Research
11 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Autonomous driving • We view autonomous driving software as a game changer for the auto industry. Indeed, we think software
competitiveness (rather than EV hardware) will be the key re-rating driver for auto stocks, as we see greater
software to be a game
upside (in terms of profit growth and multiple expansion) in automotive software than in EV manufacturing. Also,
changer the widening technological gaps among industry players could bring major changes to the competitive
landscape.
• We expect the auto industry to undergo a transformation like the one brought about by smartphones. As mobile
phones evolved from simple calling devices to handheld computers, the mobile device industry’s profits
expanded sharply. Subsequently, multiples expanded as software services began to contribute to profits.
• Nokia (no. 1 feature phone vendor) had a market cap of W175tr in 2007. In 2020, Apple’s exceeded W2,000tr.
Nokia vs. Apple: Market cap comparison Apple: Services revenue contribution and P/B
(US$bn) (%) (x)
2,500 25 Contribution of services revenue (L) 40
P/B (R)
2,000 20
30
1,500
15
13x 20
1,000
10
500 10
5
0
Nokia (38% M/S) Apple (14% M/S)
0 0
2007 2020 11 12 13 14 15 16 17 18 19 20
Source: Bloomberg, Mirae Asset Securities Research Source: Bloomberg, Mirae Asset Securities Research
12 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Level 2+ autonomous • As cars evolve into computers on wheels, the industry’s profits and valuation multiples are likely to expand
sharply. Tesla is leading this evolution, with Level 2+ autonomy expected to play a pivotal role.
driving
• Tesla’s Level 2+ subscription service (US$199/month) still requires the driver to monitor the vehicle at all times,
but it helps reduce fatigue and improve safety. Its benefits will become even greater once urban autonomous
driving becomes commercially available.
• Assuming 40% of vehicles adopt Level 2+ subscription services globally over the medium term, the auto industry’s
profits and market cap are estimated to grow 4x and more than 20x, respectively.
Tesla: Breakdown of software-based service business Level 2+ subscription service market size and market cap estimates
Category Units Estimates
Category Notes
Annual sales mn units 97
ASP US$‘000 25
Autonomous
Level 2+ Full Self-Driving (FSD) option (US$10,000) Annual market size US$bn 2,425
driving
Conventional
Avg. OP margin % 6
vehicles/EVs
Avg. OP US$bn 146
Infotainment upgrade (US$2,500)
Infotainment P/S x 0.5
Premium connectivity (US$1,000)
Market cap US$bn 1,213
No. of vehicles in
mn units 1,500
Performance operation globally
Acceleration boost (US$2,000)
upgrade
Subscription service
% 40
penetration
Insurance Launched in California; further expansion likely Level 2+ Annual fee US$/unit 2,388
subscription
service Annual revenue US$bn 1,433
Robotaxi Ride-hailing service (scheduled to launch)
OP margin % 40
Platform Platform service operating on in-house-developed OS OP US$bn 573
P/S x 20.0
Other Charging, maintenance, gaming, etc.
Market cap US$bn 28,656
Source: Mirae Asset Securities Research Source: Mirae Asset Securities Research
13 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Market size forecasts • In addition to the Level 2+ subscription service, Tesla offers various software-based services, including premium
connectivity, acceleration boost, and insurance. Once autonomous driving technology reaches Level 5, the firm’s
robotaxi and automotive OS-based platform services will also gain ground.
• Volkswagen projects its auto revenue to grow to EUR5tr in 2030 (from EUR2tr in 2020), with software contributing
EUR1.2tr.
Medium/long-term robotaxi market forecasts Volkswagen: Auto market outlook
Units Est.
No. of vehicles in operation globally mn units 1,000
Adoption rate % 40
No. of robotaxis in operation mn units 400
Annual revenue per vehicle US$ 10,512
Annual miles driven Miles 35,040
Utilization % 20
Distance/hour Miles 20
Revenue per mile US$ 0.30
Annual revenue US$bn 4,205
OP margin % 30
OP US$bn 1,261
Source: Mirae Asset Securities Research Source: Volkswagen, Mirae Asset Securities Research
14 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Competitiveness gap to • The shift from hardware to software in the auto industry should widen the competitiveness gap among players.
widen • The proliferation of smartphones led to significant advances in hardware and software technologies.
• Of note, key software (including OS) segments came to be dominated by just two players, Apple and Google, due
to technological barriers and network effects. The two firms reap an outsized share of smartphone profits.
• As for smartphone hardware suppliers, Samsung Electronics (SEC) gained market share and profits thanks to its
partnership with Google. However, Nokia and Motorola lost ground as they wasted time trying to develop their
own OS.
Cell phone (hardware) M/S trends after smartphone revolution Smartphone OS M/S breakdown (2020)
(%)
40 Apple SEC Nokia LGE Motorola
iOS, 15.9%
30
20
10
Android,
84.1%
0
05 07 09 11 13 15
Source: IDC, Mirae Asset Securities Research Source: IDC, Mirae Asset Securities Research
15 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Competitiveness gap to • In order to generate software-based revenue, automakers need to work on developing more centralized
architectures (allowing centralized vehicle control/operations) via integrated OS, the consolidation of
widen
engine control units (ECUs), etc.
• Going forward, we expect technological difficulty and funding needs to increase sharply (no. of code lines to
jump from 100mn to more than 500mn).
• Volkswagen channeled significant human/financial resources into building a partially integrated architecture
(VW.OS 1.1), but software issues caused problems in early mass production. The firm plans to invest W30tr to
strengthen its software competitiveness.
Electrical/electronic architecture evolution
Source: Yole, Mirae Asset Securities Research
16 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Competitiveness gap to • Given automakers’ lack of experience in software development, it remains to be seen how successful they will be
in securing advanced software technology. In the case of smartphones, companies decided to partner with tech
widen firms in light of technological difficulties, long development times, and the importance of network effects.
• Furthermore, not all automakers have the means (both financial and technological) to develop their own
software. Indeed, companies selling a small number of cars will not be able to enjoy scale and network effects.
For these reasons, some will likely choose to partner with tech firms (as Daimler did with Nvidia).
• Given the time required for software development, we think strategic decisions that will be made over the next
couple of years could significantly affect competitive dynamics over the medium/long term. We also believe the
automotive software market will be more oligopolistic and create add more value than the hardware market.
Daimler to launch centralized architecture (2024) in partnership
Nvidia: Automotive pipeline
with Nvidia
Source: Bloomberg, Mirae Asset Securities Research Source: Nvidia, Mirae Asset Securities Research
17 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Competition to intensify • With the introduction of Dojo (Tesla’s AI training supercomputer) in 2022, autonomous driving will likely capture
increased attention due to rapidly advancing technology.
• Dojo is designed to facilitate the development of self-driving technology. With Dojo, the speed of learning will be
several times faster than that achieved by rivals relying on existing supercomputers.
• At Level 2 autonomy (self-driving under limited conditions, such as highways), Tesla’s technological advantages
do not stand out much. Once autonomous driving in urban environments becomes available, however, the
adoption of self-driving subscription services—and the consumer preference for Tesla—should rise sharply,
further strengthening the automaker’s earnings performance and competitiveness over the medium/long term.
Training tiles of Dojo Dojo road map
Source: Tesla AI Day, Mirae Asset Securities Research Source: Tesla AI Day, Mirae Asset Securities Research
18 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Competition to intensify • Tech giants such as Apple are expected to make inroads into autonomous driving, given: 1) their strength in
software; and 2) the market’s huge upside.
• As deep learning helps advance autonomous driving technology, securing real driving data is becoming
increasingly important. Moreover, securing an early lead in the market is also crucial due to network effects. As
such, we think tech firms need to make haste in their push into autonomous driving.
Key to deep learning lies in data quality Bloomberg report on the Apple Car
Source: Sumo Logic, Mirae Asset Securities Research Source: Bloomberg, Mirae Asset Securities Research
19 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Competition to intensify • The overall performance of autonomous driving is improving with advances in AI technology and computing
power.
• In 2021, Mobileye disclosed footage of its test vehicles navigating New York City streets using only cameras,
showing significant improvements in performance. GM Cruise’s robotaxis have also reported major progress in
performance. Indeed, increasingly sophisticated deep learning algorithms and computer performance upgrades
are facilitating advancements in self-driving technology.
• Accordingly, we expect to see autonomous commercial vehicles in 2022-23, with some limitations (Level 3
autonomy under certain conditions only; Level 2 with more sophisticated functions).
Nvidia: Performance of autonomous vehicle platforms Commercial operation plans for autonomous vehicles (2022-23)
Company Plans
GM Commercial robotaxis in San Francisco (2022): Five
Cruise robotaxis between 10pm and 6am at speeds of up to
48km/h
Google Level 4 robotaxi business in Arizona since 2018;
Waymo commercial operation of driver-supported robotaxis in
San Francisco (2022)
Driverless commercial robotaxis in Las Vegas in 2023, in
Motional
partnership with Lyft (pilot operation to expand in 2H22)
Aurora Horizon (2023), a truck subscription service;
Aurora Aurora Connect (2024), a subscription-based ride-hailing
service
Source: Sumo Logic, Mirae Asset Securities Research Source: Press reports, Mirae Asset Securities Research
20 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
• Addressing edge cases is essential to the validation of autonomous driving technology. Deep learning algorithms
Tesla’s competitive are used to train AI to handle edge cases.
advantages • Tesla collects vast quantities of real-world driving data from its fleet of camera-equipped vehicles and uses the
data to train its autonomous driving AI. For this process, it is essential to accumulate large quantities of quality
data, design AI neural networks that can accurately handle such large amounts of data, and improve AI-training
supercomputer performance.
• Key factors differentiating Tesla from rivals include scalability (thanks to the relatively low cost of its camera-
based autonomous driving system) and vertical integration across hardware (EVs) and software (AI training).
Notably, the Dojo supercomputer (set to be operational in 2022) should markedly speed up the training of AI.
Tesla’s autonomous driving AI Tesla’s AI neural network architecture that processes driving data
Source: Tesla, Mirae Asset Securities Research Source: Tesla, Mirae Asset Securities Research
21 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Implications: • Just as the rise of smartphones drove dramatic profit/valuation re-ratings in the mobile phone sector, we expect
the auto industry’s shift to software (e.g., autonomous driving) to drive up profit potential and multiples across
1) Tesla’s valuation
the sector.
• In the automotive software market, high technological requirements, robust data collection/processing
capabilities, and network effects could give rise to a winner-takes-most scenario.
• Tesla has been leading the industry’s transition and should maintain its competitive advantage over the medium
term, justifying its lofty valuation. We see further upside to its valuation, depending on how much and how
quickly autonomous driving technology advances.
Earnings and valuation comparison: Nokia vs. Apple Tesla’s autonomous driving business value projections (2030F)
(US$bn) (x)
Base case Bear case Bull case
300 Revenue (L) GP (L) P/S (R) 10
Cumulative sales (‘000 units) 61,010 61,010 61,010
8
Adoption (%) 60 30 100
200 FSD price (US$) 25,000 15,000 35,000
6
Monthly subscription
(depreciated over eight- 260 156 365
year period, US$)
4
Revenue (US$bn) 114 34 267
100
P/S (x) 20 20 20
2
Value (US$bn) 2,288 686 5,338
0 0 Present value (US$bn) 1,182 355 2,759
2007 Nokia (38% M/S) 2020 Apple (14% M/S)
Note: Discount rate of 8.6% was derived by applying risk-free rate of 1.1%, beta of 1.6x, and
Source: Bloomberg, Mirae Asset Securities Research expected market return of 5.7%
Source: Mirae Asset Securities Research
22 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchII. [Autonomous driving] Game changer
Implications: • New players find it relatively easy to enter the EV market thanks to the low barriers to entry. Of note, EV start-ups
are more agile than legacy automakers in responding to consumer needs and gaining market share. Recently,
2) Start-ups vs. Tesla
Rivian and Lucid have delivered robust share performances thanks to their compelling product features.
• Although EV start-ups are likely to grab a certain share of the market from legacy automakers, we think that
software competitiveness will assume greater importance than EV manufacturing in the medium term. In
particular, Tesla’s accumulated driving data and superior software technology will make it difficult for
competitors to catch up in the near future. As such, we prefer Tesla over EV start-ups.
2023F sales volume and market cap by EV maker Tesla: Est. market cap breakdown by business unit (12-month forward)
Market 2023 sales Market cap/
Company cap volume sales volume Services (other)
(US$bn) (‘000 units) (‘000 US$/units) 11% Hardware
17%
Tesla (total) 1,114 2,300 484
Tesla
446 2,300 194
(only hardware)
NIO 73 300 243
XPeng 44 400 110
Li Auto 33 300 109
Services
(autonomous
Rivian 107 200 534 driving)
72%
Lucid 86 90 959
Note: Based on the assumption that hardware accounts for 40% of Tesla’s corporate value Source: Mirae Asset Securities Research
Source: Sumo Logic, Mirae Asset Securities Research
23 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchIII. [Auto market] Momentum to be stronger in 1H than in 2H
Surge in demand vs. • In 2021, global auto demand has rebounded more sharply than expected, as high consumer savings (following
the pandemic-driven contraction in spending on services, such as travel) have supported spending on durable
limited supply
goods, including cars. Meanwhile, production has not kept up amid chip shortages, leaving supply/demand tight.
• Despite increased fixed costs arising from lower utilization, automakers have defended margins by expanding
the revenue mix of high-end segments and cutting sales incentives.
• We expect auto demand to remain solid in 2022, as: 1) global demand is still lower than normal; and 2)
inventories remain significantly low due to supply disruptions in 2021 (supply failing to meet demand by 7-8%).
US consumer expenditure by category US avg. new car price and incentives
(1/00=100) (US$) (US$)
280 Total Durable goods Nondurable goods Services 45,000 Avg. new vehicle transaction price (L) 6,000
Avg. incentive/unit (R)
5,000
42,000
240
4,000
39,000
200 3,000
36,000
2,000
160
33,000
1,000
120 30,000 0
19 20 21 19 20 21
Source: Bloomberg, Mirae Asset Securities Research Source: JD Power, Mirae Asset Securities Research
24 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchIII. [Auto market] Momentum to be stronger in 1H than in 2H
2022F momentum: • Auto market to be solid in 1H22 and weaken in 2H22: In the event the pandemic eases toward the middle of 2022,
we expect consumption to shift from durables to services in 2H. We also anticipate increased supply with the
Stronger in 1H than in 2H
operation of new capacity by chipmakers.
• We expect the stocks of domestic automakers to be range-bound, given: 1) elevated earnings expectations; and 2)
the dissipation of momentum from new model releases. Accordingly, we think medium/long-term strategies and
multiple expansion are needed in order to see meaningful share price growth.
• Risks: An earlier-than-expected Fed rate hike could lead to a slowdown in emerging market auto demand.
HMC: 12-month forward EPS and adj. share price US money supply (M1) and inflation trends
(W) (W) (US$tr) (%, YoY)
40,000 12FM EPS (L) Adj. share price (R) 300,000 25 US M1 (L) US PPI (R) US CPI (R) 10
8
20
30,000
6
200,000
15
4
20,000
2
10
100,000
0
10,000
5
-2
0 0 0 -4
06 08 10 12 14 16 18 20 22 17 18 19 20 21
Source: Mirae Asset Securities Research Source: Bloomberg, Mirae Asset Securities Research
25 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research[Conclusion] Tesla and the auto revolution
• Cell phones evolve from calling devices to handheld computers
2007 • Hardware/software sophistication leads to higher revenue/profits; 2020
Nokia Apple
software-based service revenue leads to multiple expansion
• Technological difficulty and network effects rising profit share for
no. 1 player
• Cars evolving from a mode of transportation to computers on wheels
• Hardware/software sophistication to lead to higher revenue/profits
2021 2030
• Software-based service revenue (self-driving) to lead to multiple
Auto expansion
• Technological difficulty and network effects rising profit share for
Auto 2.0
market no. 1 player
26 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities ResearchAPPENDIX 1 Important disclosures and disclaimers Disclosures As of the publication date, Mirae Asset Securities Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding. Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Securities”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Securities, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Securities except as otherwise stated herein. Disclaimers This report was prepared by Mirae Asset Securities, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Securities makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. 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The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Securities may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views, and analytical methods of the analysts who prepared them. Mirae Asset Securities may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Securities and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making, or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Securities. 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This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. India: This report is being distributed by Mirae Asset Capital Markets (India) Private Limited (“MACM”) in India to the customers based in India and is personal information only for those authorised recipient(s). MACM is inter alia a Securities and Exchange Board of India (“SEBI”) registered Research Analyst in India and is not registered outside India. MACM and Mirae Asset, Korea are group entities. MACM makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The user assumes the entire risk of any use made of this information. This report has been provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipient must read the entire Appendix 1 to the report carefully for Important Disclosures & Disclaimers. All other jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Securities or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Securities and its affiliates to any registration or licensing requirement within such jurisdiction. 27 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
Mirae Asset Securities International Network Mirae Asset Securities Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. One-Asia Equity Sales Team Units 8501, 8507-8508, 85/F 41st Floor, Tower 42 Mirae Asset Center 1 Building International Commerce Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 1 Austin Road West Kowloon London EC2N 1HQ Korea Hong Kong United Kingdom Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000 Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building New York, NY 10019 Los Angeles, California 90071 Vila Olimpia Sao Paulo – SP 04551-060 USA USA Brazil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100 PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC District 8, Treasury Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52-54 Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City Jakarta Selatan 12190 Vietnam Indonesia Tel: 62-21-5088-7000 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office Mirae Asset Capital Markets (India) Private Limited 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building Unit No. 506, 5th Floor, Windsor Bldg., Off CST Road, Kalina, 100 Century Avenue, Pudong New Area 91 Pasteur St. Santacruz (East), Mumbai – 400098 Shanghai 200120 District 1, Ben Nghe Ward, Ho Chi Minh City India China Vietnam Tel: 86-21-5013-6392 Tel: 84-8-3910-7715 Tel: 91-22-62661336 28 | [2022 Outlook] EVs/Autonomous Driving Mirae Asset Securities Research
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