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4 Stocks to Park in Your Portfolio to Benefit From EV Boom

Rimmi Singhi
·7 mins read

The electric vehicle (EV) market is one of the hottest industries to invest in at the moment. Amid rising climate concerns, investors are intrigued by automakers that look for solutions to lower global carbon emissions for providing a cleaner energy future.

Per International Energy Agency, global EV sales in 2018 were 2.1 million units, marking a year-over-year rise of 64%. Around 2.2 million units of EVs were sold in 2019, surpassing 2018 record levels. IEA estimates electric cars to account for 3% of global vehicle sales in 2020, up from 2.6% in 2019. Per IEA, EVs on the road will increase to 36%, with about 245 million battery-powered cars by 2030. 

Future Will be Green & Competition Rife

The EV industry’s future is expected to be bright on the back of various tailwinds. Stricter emissions and fuel-economy targets are expected to boost the environment-friendly EV market. Government subsidies and incentives are expected to spur EV sales. While China is the biggest and fastest growing EV market, developed nations including the United States, United Kingdom and Germany are actively encouraging the use of green vehicles to lower carbon emissions.

Reduction of battery costs, which is one of the key components of an EV, is likely to make green vehicles more affordable. Expansion of battery manufacturing capacity and reduction in costs are likely to buoy the EV industry’s prospects. Per a Bloomberg New Energy Finance report, the cost of batteries has fallen drastically to $156 kilowatt per hour (KW/hr) in 2019 from $1,100 KW/hr. It is expected that the cost will further fall to $100 by 2023, which will make the electric cars even more competitive in the long run.

Charging availability is often a sticking point for the widespread adoption of e-mobility. Thankfully, significant development is taking place onthe EV charging front. Per IEA, the number of publicly accessible charging points for green vehicles soared a whopping 60% year over year in 2019. China is at the forefront when it comes to the rollout of publicly accessible chargers, especially fast chargers.The United States is at the third spot for most charging points, behind a combined category of "Other" countries. Notably, the United Kingdom’s EV charging points are twice the number of petrol stations. Widespread availability of charging facilities and deployment of proper charging infrastructure have been accelerating, which will make the EV ownership experience more convenient. 

With most of the EVs boasting a range of more than 250 miles on a single charge and the charging infrastructure growing rapidly, range anxiety is gradually becoming a thing of the past.

Adapting to the changing dynamics of the industry, automakers have started taking the EV revolution seriously and are investing large sums of money in the development of green vehicles and e-mobility technologies. The number of EV model launches is rapidly increasing. All in all, growing concerns over environmental pollution, favorable government policies, increasing range and charging stations, reducing battery costs, ramp up of investments by automakers, along with a wide range of offerings make the EV market’s prospects rosy.

Lately, IPO filings by green vehicle makers — including Nikola, Li Auto, Hyliion and Fisker — have been on the rise to capitalize on the EV frenzy. With major automakers, pure EV plays, and small and mid-size startups actively focusing on the development of environment-friendly vehicles, the race to EV supremacy is only going to get fiercer in the upcoming years.

Below we highlight four automakers that should be on your radar considering their ambitious electrification plans and aggressive efforts to progress toward an electrified future.

Our Choices

General Motors GM: Of late, General Motors — which currently carries a Zacks Rank #1 (Strong Buy) — has been on a spree to revolutionize the EV space. The third-generation global EV platform powered by Ultium batteries will be the heartbeat of the U.S. auto giant’s electrified future. The Ultium modular battery platform will power the automaker’s new electric cars, starting with the Cadillac Lyric model. Notably, the Detroit-Hamtramck assembly plant will be the firm’s first plant fully devoted to the development of green vehicles and start building GMC Hummer EV in the fall of 2021. A couple of months back, General Motors and EVgo announced plans to triple the size of the nation’s largest DC fast charging network over the next five years. Recent partnerships with Honda HMC, Nikola NKLA and Uber display General Motors’ ability to aggressively compete with established EV players and showcase its commitment to an electric future. You can see the complete list of today’s Zacks #1 Rank stocks here.

NIO Inc. NIO: NIO seems to be well positioned to cement a strong long-term foothold in the rapidly growing EV industry. Rising demand for ES6 and ES8 models along with the upcoming EC6 model is expected to buoy prospects of this China-based EV firm. NIO’s battery swap technology is a game changer and provides an edge to the firm over peers. The technology — which is part of NIO’s BAAS (Battery-as-a-Service) strategy — helps to save time when charging an EV and alleviates range anxieties. The firm’s strong standing with the government of China offers massive advantage. Notably, NIO delivered 10,331 vehicles in the last reported quarter that exceeded the firm’s guidance and increased 191% from a year ago. This Zacks Rank #2 (Buy) firm’s upbeat guidance for third-quarter 2020 revenues and deliveries further boosts confidence.

Tesla TSLA: How can we miss Tesla when we are talking about electric vehicles! Although electric cars occupy a small portion of the global automobile market, Tesla has acquired a substantial market share within this niche segment. With Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the EV segment.For full-year 2020, Tesla has maintained the target of exceeding 500,000 vehicle deliveries, indicating an uptick of 36% year over year, despite the recent production interruptions amid coronavirus woes. Tesla has a first-mover advantage in the EV space with high range vehicles, superior technology and software edge. Robust Model 3 demand, ramp up of Model Y production, significant Shanghai Gigafactory progress, amazing line-up of upcoming products and aggressive expansion efforts bode well for this Zacks Rank #3 (Hold) firm. 

Ford F: Ford’s big push toward the development of electric vehicles is truly commendable. The U.S. auto biggie has vowed to become carbon free by 2050 and is making considerable strides toward achieving this target. Ford is committed to spend more than $11.5 billion in investment in EVs through 2022 by introducing zero-emission versions of some of the company’s popular vehicles, including the Mustang Mach-E — which will arrive in dealerships this year — and Transit Commercial EV and fully-electric F-150, which are expected to go on sale in 2022. Ford’s alliance with Volkswagen VWAGY is likely to accelerate the execution of its EV strategy. In collaboration with Electrify America, the firm’s FordPass Charging Network provides access to DC fast chargers. Over the next three years, Ford will introduce 1,000 charging points at its plants in Europe. This Zacks Rank #2 company expects electrified vehicles to account for more than 50% of its car sales in Europe by 2022.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>

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Ford Motor Company (F) : Free Stock Analysis Report
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
NIO Inc. (NIO) : Free Stock Analysis Report
Volkswagen AG (VWAGY) : Free Stock Analysis Report
Nikola Corporation (NKLA) : Free Stock Analysis Report
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