EV Stocks’ scenario in 2021 – – that will be the topic of this article which was written by my staff members.
It remains my position that most investors should buy more diversified funds and ETFs, but this article will explore EV stocks in some detail.
Nothing written here should be considered formal tax, financial, legal or any other kind of advice advice, and is written for entertainment purposes only.
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EV stocks refer to the stocks of the companies that manufacture Electric vehicles. Over the past few years,
If we look at the scenario in 2020, we might be familiar with the fact that the EV manufacturing industry has seen a significant surge, which was beyond expectations for most of us.
Tesla’s performance – For instance, when we see the performance of Tesla company, the year 2019 was one of the milestones for success as they became the world’s best company regarding the sales of plug-in and battery electric cars (comprising of 17% plug-in cars and 23% battery-electric cars).
Following that year, in 2020, Tesla’s sales were approximately around 500,000 (499,550 to be precise) while reached another milestone, i.e., manufacturing 1 million electric vehicles.
In comparison between 2019 and 2020, Tesla was able to see an increase of 35.8% in sales in the year 2020. This is an achievement for Tesla because it had an impact on the performance of many other companies.
This even made Elon Musk the richest person in the world for a specific period where he had a net worth of $203 billion while $145 billion only consisted of the shares from Tesla.
Nevertheless, by the time of writing this article, Elon Musk has a net worth of $145 billion making him the third richest person in the world. The first and second richest persons are ‘Bernard Arnault & family ($192.2 B)’ and ‘Jeff Bezos ($185.2 B)’.
Tesla has 4 models on sale as of now namely ‘Model S’, ‘Model 3’, ‘Model X’ and ‘Model Y’, which when combined give the name ‘S3XY’.
Tesla has a lot of upcoming plans as of now, which include a German Gigafactory, Texas Gigafactory, Tesla Roadster, Tesla Cybertruck, Tesla Semi, and many other endeavors.
Recently, Elon Musk stated that people from India would be able to buy a Tesla using cryptocurrency when their business enters the Indian markets.
On weighing the factors such as the developmental activities, upgrades, business expansions, new models, increase in the number of service centers & charging stations, etc., we can say that Tesla is and would continue to be one of the best when it comes to EV manufacturing.
EV Manufacturing Industry competition:
If we consider the recent months of 2021, we can observe that the electric vehicle manufacturing industry has become more competitive because of the increase in the number of efficient players.
Some of the rivals to Tesla, which are Nio, Xpeng, and Lordstown Motors have seen a significant amount of success in the month of May. Keeping all the positive traits of Tesla aside, its performance has fallen 15% in the same month.
NIO – If we have an in-depth analysis of NIO, we can observe that NIO has been on a successful journey, and it has been that way for more than a few months. This Shanghai-based EV maker has seen a surge in its performance when its growth has been predetermined by Citi.
Most stock analysts presume that NIO might have an increase of more than 50% in the nearby future.
NIO stated that the company was able to deliver 6,711 vehicles in the month of May, which was a tad bit less when compared to the 7,102 sales in the month of April.
By hearing the above-mentioned most would feel that the share price must decrease, but nevertheless, the price of the share didn’t have much of a decrease. By the time of writing this article, the price of NIO’s share is around $42 (approx.) which is a 9% increase compared to the previous price.
Some of the features that confirm the NIO’s success are as follows, which are said to be implemented in their vehicles before 2022.
- Switch to an iron-phosphate battery instead of using a traditional nickel or cobalt battery. This would lead to a significant reduction in the manufacturing process and then result in low costs of obtaining the vehicle.
- Battery range of more than 620 miles (approx.), which is the largest range compared to that offered by most other rivals in the respective category.
- Launch of a new sedan, which would increase the number of sales and create competition among other manufacturers.
- Even though the price of NIO stands around $42 as of now, the price was around $67 during the month of January.
- NIO has a reputation for being the best EV maker after Tesla, which makes it a preferred choice among people who want to have an EV other than Tesla.
On the downside, during the beginning of the year stock analysts of Barron’s stated that NIO stock has been a bit pricey than it should be.
There has been some recent information uploaded on the site of Barron’s regarding NIO and its performance, which is as follows.
The performance of NIO was up by 9% as discussed earlier, which is better than the average increase of the S&P 500 (0.1%) and Dow Jones Industrial Average (0.3%).
The decline in the shortage of sales was blamed on the global semiconductor shortage by NIO and the company also said that they will make up for the late deliveries this month.
We should also consider the fact that there has been a decline in microchips, which are responsible for the regulated automotive protection, and this is the scenario all over the world.
The most possible answer for this is the inefficiency in the production of microchips by the manufacturers due to the ongoing pandemic outbreak.
NIO’s speculations for the deliveries in the second quarter of 2021 remain unchanged, which is an average of 21,000 to 22,000 vehicles. This lets us assume that they will deliver at least 8,200 cars approximately in this month.
If they can deliver 8,200 cars this month, then it would be their monthly record. Additionally, the increase in deliveries would also imply that the problem of decline in semiconductors worldwide has been answered.
To increase the positive influence on NIO, an analyst of Citigroup ‘Jeff Cheung’ anticipates that the stocks of NIO are best for people who want to buy and hold their investments.
Nevertheless, the analyst sets a target price of $58, which is not exactly the highest price for the company’s shares as they reached $67 in the past.
Due to this upgrade by Citi, around 68% of the analysts rate this stock as a Buy, while the average Buy rating ratio for the stocks of S&P is around 55%.
Having discussed NIO in a comprehensive manner, we will also have a look at some other EV stocks that are thought to have significant growth in the future.
Other EV stocks to watch:
Even though Tesla has been the king of EV shares so far, EV manufacturers are in a race to the top trying to give it strong competition. Let us have a look at some of the best EV stocks that are in the race to become one of the best EV manufacturing companies.
Xpeng – Along with NIO, we have another contender from China, which is none other than Xpeng. When compared with NIO, Xpeng had a more efficient delivery report in the month of May.
By delivering over 6,700 vehicles, NIO was only able to have an increase of around 95% compared to the previous year. In contrast to that, Xpeng was able to deliver 5,686 smart EVs, which is a significant 483% increase year-on-year.
Not only that, but Xpeng also had a 10% increase in the deliveries compared to its deliveries in the month of April, which is yet another aspect that is better while comparing with NIO.
The main reason for the increase in the deliveries is due to the high demand for Xpeng’s P7, which is a stylish sleek sedan launched during last spring season.
Additionally, when we look at the first-quarter results of Xpeng, the company had a surge of 487% by reaching 13,340 deliveries from 2,271 deliveries in the previous year.
This has resulted in an increase in income, which is around 616.1%, i.e., $450.4 million. Thanks to the deliveries of P7, all this was made possible. To make it sound more interesting, Xpeng speculates to have a brighter future.
Li Auto – The third EV maker that needs attention while discussing the best EV stocks to pay attention to is Li Auto, which is another Chinese EV maker.
Recently, the company declared that it was able to deliver 4,323 ‘Li ONEs’ in May, which represents a 101.3% of the year-over-year increase. Based on its most recent earnings in the first quarter, the revenue was at $545.7 million, exceeding the agreed-upon estimates of $522.5 million.
Just like other Chinese EV companies mentioned in this list, Li Auto is positive about the deliveries in the second quarter and most probably overcome the top end of their guidance range.
The stock price of Li Auto has also experienced a surge of 20% compared to the previous month, which makes it clear that it is soon expected to have a comeback.
Based on the research we’ve gathered, the company will start deliveries for an updated version, i.e., ‘Li ONE SUV’, this month. Additionally, the company is working on increasing its sales by the end of this year.
Ford Motors – The next best EV maker on our list is ‘Ford Motors’, which is one of the reputed automobile companies and known to many people reading this article. Some of you might even own one of your cars.
The company is trying to expand its business and has set an investment target of $30 billion by the year 2025. This is not just a big deal for the company, but it is also great news among the automobile manufacturing industry.
One of the major aspects that need to be taken into consideration is that Ford’s Mustang Mach-E had record-level sales in Norway, which is greater than any sales of Tesla models individually.
From the beginning of this year, Ford stocks have been on the rise with profits of around 70% and more than 150% compared to its performance last year.
Adding to that, an electric pickup truck ‘F-150 Lightning’ has made its debut, which is going to be another huge factor for Ford’s success apart from the Mustang Mach-E.
Jim Farley, the CEO of Ford, tweeted that their company received more than 44,500 reservations within a time span of 48 hours, which implies that it is going to play a huge part in the company’s success.
This can be justified as this model happens to be the robust model of F-150s that has been manufactured so far.
Lately, Ford collaborated with another automobile giant BMW and is planning on starting a solid-state battery startup called ‘Solid Power’.
Additionally, Ford is planning to double the investment in the EV wing this year by investing $22 billion.
By considering all the factors and aspects that we discussed, Ford can be said as a company that is going to provide huge competition to other EV makers and is among the EV stocks that are worthy of investing (long haul).
General Motors – Just like Ford, General Motors is yet another company that is famous and is getting ready for the EV market. To most people’s surprise, General Motors already has an exquisite line of EVs such as Chevrolet Bolt and Chevrolet Volt.
An important fact is that these two models are affordable when we compared them with the models of Tesla. General Motors is going to invest $27 billion for the development and manufacturing of their EV vehicles over the next 5 years.
General Motors also made use of the Super Bowl for gaining more audience and is now being mainstreamed as an all-American car choice.
The center of this company’s business endeavors is its Ultium battery platform, which is used to power mass-market vehicles to high-performance vehicles.
As for the company’s developmental strategy, it recently joined hands with Lockheed Martin for developing a rover, which is going to be used by astronauts of NASA’s Artemis project to roam on the moon.
Others – By becoming conscious about the EV boom, most other companies such as ‘Fisker’, ‘Canoo’, ‘Lordstown’, etc., which are startup companies, are trying to make their mark and start competing with the existing companies.
Some other companies such as ‘Rivian’ aren’t publicly traded and other companies like ‘Lucid’, ‘Faraday Future’, etc., are still under the process of closing their blank check deals.
Some other stocks that are worth watching are ‘Volkswagen’, ‘Ferrari’, ‘Magna’, etc. However, these stocks might not be able to meet the already existing competition of Tesla and other big players.
Billions of dollars are being invested into the EV industry and moreover, we must also consider the aspect that American President Biden has allocated $174 billion for subsidies and charging stations in America.
This makes it clear that there is no stopping the rush of EV stocks. Let us have a quick overview of some of the trending aspects in the EV industry.
- Amazon invested $700 million into the EV startup Rivian and by the month of January, the fundraising process of Rivian was able to collect $8 billion as investments.
- US Postal Service made a 10-year contract with Oshkosh Defense for manufacturing thousands of electric mail trucks.
- United Airlines ordered a fleet of electric air taxis worth a whopping $1 billion.
There are some other interesting factors to consider, but nevertheless, the information provided above is enough to make it clear that the EV industry is booming in the US and all over the world.
Negative side – Some of the reputational automobile companies like Ford, Volkswagen, etc., are outperforming EV startups over the past few months, which is not entirely because of investors supporting cheap stocks.
The past few months have been an utter disappointment for those predicting that electric vehicles will boom in the automobile industry. That doesn’t mean that the people who invested in large automobile companies (fuel-based) can relax.
Recently, the shares of traditional companies that have been in the automobile industry for a significant amount of time have outperformed the stocks of startup companies (especially EVs) that wanted to take their place.
When we observe closely, the 17 biggest non-Chinese preferred companies have seen a surge of around 11% in the last three months based on equal weight, especially guided by a 36% profit for the preference shares of Volkswagen.
At the same time, the shares of around 19 EV companies have decreased 15%, together with Tesla (12% decline). This situation is regardless of the surge in the recent two weeks, inclusive of all the considerable profits.
This significant rise of the value in the traditional auto stocks partially concentrates a broad stock-market exposure towards the value stocks being seen as a foundation for coping with inflation as well as higher interest rates.
This leads the exposure away from the more speculative endeavors, which performed very well in the previous months.
When we consider the performance for one year, most EV makers or startups have made excellent profits. For instance, Tesla’s stock value has seen a lot of increase.
This is the case for many EV makers, but not all of them. For example, ‘Canoo’, which is a Californian startup EV maker went public during the end of 2020 with the help of a special-purpose acquisition vehicle, yet it is under the SPAC’s $10 launch price, while surprising investors through changes made to their business plan.
The increase of value in the incumbents (preferred stocks) is understandable according to the general theory of dynamics related to vehicle manufacturing.
The value of scale, which was a huge factor in the 20th century auto industry that was vulnerable at a certain time in the favor of EVs is strengthening.
Traditional automobile manufacturing plants in Detroit and Germany would still be required to take the guarantee of the upcoming competition seriously.
As consumers would always love to experiment/try new things related to technology, the top-end market of China has been jolted by advanced companies like NIO and Xpeng.
Some U.S. luxury EV startups also have a chance of overseeing success as well. Nevertheless, it is a tad bit hard to outperform the companies that already have a strong fanbase and the vehicles are on the roads.
Moreover, the usual story of silicon valley disruption isn’t happening in the auto industry as people expected at some point.
With the help of their big batteries, EV makers are picking up the pace to become industrial service providers that profit from the kind of industrial-scale through which the traditional car makers are already reaping benefits.
This benefit may not be as plausible as the software-based automotive technologies that concentrate on the features such as vehicle internet and automated driving. However, we are not going to discuss that because we are talking about the EV makers altogether.
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