Demand for electric vehicles is expected to grow in the coming decades – and UBS has identified a theme for investors to cash in on this electrification. UBS said automakers are increasingly working directly with semiconductor firms and new technology players as the increasing amount of electronic content in cars will lead to new supply chains. In particular, this increased electrification will have a profound impact on the powertrain — the critical combination of components that generate power from the engine and deliver it to the wheels, UBS analysts led by David Lesne wrote in July. 20 reports. The traditional powertrain supply chain generates about 250 billion euros ($255 billion) in annual revenue by 2021, UBS estimates, but is expected to grow to 150 billion euros by 2030 as battery powertrain production increases. . Top stock ideas With powertrain electrification attracting “significant” investor attention, UBS named its “most liked” stocks to study the topic. One of the bank’s top picks is EV giant Tesla. The bank believes the company will remain the “most successful” global EV manufacturer, given its technological leadership and industry-leading battery supply chain management. According to UBS, Tesla is poised to expand its gross margin in the coming quarters and years, in addition to meeting its guidance of 50% volume growth this year. Bank also likes Mercedes. He expects the automaker to “embrace the electric transition in a highly profitable way.” UBS says the company’s profit margin target of 12% to 14% is conservative and expects its share price to rise further once the company demonstrates competitiveness in the high-end EV segment. Read More Wall Street is confident these stocks will do well this quarter — and Citi is 50% positive BofA believes we’re already in a recession — and says these stocks have what it takes to beat it Goldman Sachs says “bear market” t is over yet, and that explains why German auto parts supplier Vitesco made UBS’s list. The bank sees the company as “one of the few winners” in powertrain electrification, given its head start relative to peers and its ability to provide the full range of EV powertrain content. The bank added that Vitesco’s transition from traditional car makers to EV makers is largely 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 edge and maintain an “outstanding competitive edge” against its peers. “We expect CATL to maintain its leadership position in the battery industry for the next five to 10 years, backed by robust R&D,” said Lesne. UBS also likes Taiwanese electronics maker Delta Electronics, which it believes is ahead of its peers in EV exposure given its strong product and customer portfolio. The bank estimates that EV sales will account for more than 10% of the company’s sales in 2025, up from 5% to 6% today. EV outlook In a research note released last month, UBS said it expects 2026 to be a “tipping point” for EVs, with the global EV market expected to surpass the combined market size of PCs, smartphones and servers. “According to our forecasts, internal combustion engine vehicle production growth will be broadly stable until peaking in 2024, after which it will decline at an average annual rate of 15% until 2030. Meanwhile, the number of vehicles [battery electric vehicles] output should grow sixfold in 2021-30,” UBS added in a July 20 report.