Goldman Sachs has identified an emerging opportunity in electric vehicles that is on an “uptrend” and revealed a key action to take advantage of it. The trend is outsourcing of electric vehicle manufacturing, which Goldman says will pick up pace as vehicles become “increasingly technology-driven” and simpler to build. In a Dec. According to the Jan. 1 report, the investment bank said outsourcing lowers barriers to entry, saving automakers from having to build supply chains from scratch and allowing brands to penetrate markets where they don’t have manufacturing capacity. . Goldman estimates that the EV outsourcing market will grow to $36 billion by 2025 and $144 billion by 2030. “Right now, most EVs are built in-house, but some are outsourced,” the analysts wrote, directed by Allen Chang. “We expect the EV outsourcing rate to increase from 2% in 2021 to 6% in 2025E and 10% in 2030E.” The bank says this trend will benefit one global stock in particular: Taiwan-listed Hon Hai, also known as Foxconn, the world’s biggest maker of electronics and also the biggest supplier of Apple’s iPhones. Goldman upgraded Hon Hai to buy from its previous neutral rating and gave it a base-case price target of NT$134 ($4.40), or nearly a 28% advantage. His bull case for the company, if EV shipments far exceed his expectations, is NT$200, giving him a 90% advantage. The company operates as Hon Hai in mainland China and Taiwan, and as Foxconn elsewhere. Why Goldman is bullish on Hon Hai Goldman says Hon Hai could excel in “tech content,” a growth area in electric vehicles. It is different from its competitors because it can better understand the “pain point” of consumers in technology products and is also very familiar with the technology supply chain, the bank added. “EVs have much more technological content than traditional cars: Hon Hai has the technological capability and know-how to optimize energy consumption efficiency from the design stage onwards,” the analysts wrote. The bank added that Hon Hai has a global presence, with factories in 24 countries and electric vehicle production sites in the US, Thailand and Taiwan. That’s a key advantage, Goldman noted, since EVs are clearly much larger than PCs and smartphones and tend to be produced locally for wide distribution. “Having a global presence fits the automotive industry’s requirements for localized production and, in our view, may also ameliorate some macro uncertainties such as those related to covid, geopolitical tensions and inflation,” the bank wrote. Hon Hai has also developed its own EV software platform called Mobility in Harmony, which is similar to the Android platform for smartphones, Goldman said. It offers a “unique advantage” for Hon Hai to capture growth in electric vehicle production, especially from smaller players. “Companies across the technology supply chain are looking at electric vehicles as the new growth frontier,” the bank added.
Goldman Sachs upgrades this global tech giant, saying shares could rally as much as 90%
