Citi analysts anticipate stronger electric vehicle (EV) demand over the next 12 to 18 months, particularly during the summer and spring seasons, the Wall Street firm said in a Thursday note.
Despite existing challenges, they believe the EV market will benefit from falling car prices, government incentives, and expanded charging infrastructure.
They expect government initiatives like the Inflation Reduction Act (IRA) tax credits to further close the gap between EV and internal combustion engine (ICE) vehicle payments.
Analysts believe "expectations [are] very low," and that "any semblance of stronger demand likely turns sentiment" around spring/summer 2024, citing early indications of this improvement.
The firm remains cautiously optimistic, saying it prefers “selective EV exposure in stocks having multiple paths of working, where EV adds upside optionality.” Such examples include General Motors (NYSE:GM), Ford (NYSE:F), Aptiv (NYSE:APTV), and Visteon (NASDAQ:VC), all rated Buy at Citi.
While acknowledging headwinds, Citi analysts highlighted that the U.S. market is well-placed for rapid EV adoption due to its high vehicle density and certain states already leading the way.
“Some states are already “on their way”…our simulations suggest these states can carry the next leg of growth,” Citi wrote.