Demand for electric vehicles is expected to boom in the coming decades – and UBS has identified an area where investors can benefit from this electrification. UBS said increasing amounts of electronic content in vehicles will lead to new supply chains as automakers increasingly work directly with semiconductor firms and new technology companies. In particular, this increasing electrification will have a profound impact on the powertrain – a critical assembly of components that generates power from the engine and transmits power to the wheels, analysts at UBS led by David Lesne wrote in a July. 20 reports. The traditional powertrain supply chain will generate annual sales of around 250 billion euros ($255 billion) as of 2021, according to UBS estimates, but is expected to grow by 150 billion euros by 2030 as production of battery-electric powertrains ramps up. Top Stock Ideas With powertrain electrification attracting “significant” investor attention, UBS has named its “most popular” stocks to provide access to the topic. One of the bank’s top picks is EV giant Tesla. The bank believes the company is likely to remain the “most successful” global EV manufacturer given its technology leadership and best-in-class battery supply chain management. According to UBS, Tesla is also poised to grow its gross margin over the coming quarters and years while meeting its guidance of 50% volume growth this year. The bank also likes Mercedes. She expects the automaker to “master the electric revolution in a highly profitable manner”. UBS says the company’s profit margin target of 12% to 14% is conservative and expects further upside in the share price once the company demonstrates its competitiveness in the high-end EV segment. Read more Wall Street is convinced these stocks will do well this quarter — and Citi gives 50% upside potential BofA thinks we’re already in a recession — and says these stocks have what it takes, they doesn’t end there and explains why the German automotive supplier Vitesco has also made it onto the UBS list. The bank sees the company as “one of the few winners” in powertrain electrification given its lead over competitors and its ability to offer the full spectrum of EV powertrain content. The bank added that much of Vitesco’s transition from supplying traditional automakers to makers of electric vehicles is complete and the company now benefits from one of the largest electrification product portfolios. Chinese battery maker Contemporary Amperex Technology (CATL) is another UBS favorite. The bank believes the company has the “capability and ambition” to strengthen its technological lead and maintain its “outstanding competitiveness” compared to its peers. “We expect CATL to maintain its leadership position in the battery industry over the next 5 to 10 years, backed by solid research and development,” said Lesne. UBS also likes Taiwanese electronics maker Delta Electronics, which it says has ahead of its peers in electric vehicle exposure due to its strong product and customer portfolio. The bank estimates that EV sales will account for more than 10% of the company’s revenue in 2025, up from 5% today to 6%. EV Outlook In a research note released last month, UBS said it expects 2026 to be a “tipping point” for electric vehicles, when the global electric vehicle market will surpass the combined market size of PCs, smartphones and servers. “We forecast that internal combustion engine vehicle production growth will remain broadly stable until its peak in 2024, after which it will decline by an average of 15% per year until 2030 [battery electric vehicles] Production should increase six-fold from 2021 to 2030,” UBS added in its July 20 report.