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The Zacks Analyst Blog Highlights General Motors, Ford , Honda, Toyota and Stellantis

For Immediate Release

Chicago, IL – August 31, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: General Motors GM, Ford F, Honda HMC, Toyota TM and Stellantis STLA.

Here are highlights from Tuesday’s Analyst Blog:

Auto Majors Bet Big to Augment North American EV Supply

With the automotive future being electric, automakers and battery firms are spending unprecedented sums of money for electric vehicle (EV) battery production in North America. As auto giants are fast changing their gears to electric and planning to introduce a lineup of green cars in the coming years, they are actively ensuring that the future models don't get held up amid a shortfall of batteries. Big players like General Motors, Ford , Honda, Toyota and Stellantis among others, are gearing up for battery production in North America.

In another indication of a new wave of investment related to EV battery production that is underway, Honda and LG Energy Solutions announced yesterday their plans to invest $4.4 billion to build a new battery production plant in the United States.

North America Emerging as a Major Battery Hub

Climate concerns, stringent fuel-economy targets and technological advancement have spurred the EV market. Automakers across the globe have been revving up their e-mobility efforts to establish a strong foothold in this domain. They are making big investments and setting ambitious targets to electrify their fleet. But while auto bigwigs are on track to roll out more environment-friendly vehicles in North America, it should be noted that battery cell production in the continent is rather limited.

Most of the battery cells for green vehicles are produced in Asia (primarily in China, Japan and South Korea). China leads the battery technology and automakers are heavily reliant on the country for EV batteries. And if there's one thing that COVID-19 has taught the auto industry is that it should not be over-dependent on one region. Automakers are still battling severe supply chain snarls because of their excessive reliance on China as a global supply chain partner over the past two decades.

In a bid to position itself to take advantage of the growing EV popularity, North America is fast emerging as a battery supply chain hub for EVs, thereby challenging China's dependence. Automakers are working toward reducing foreign reliance and localizing battery production.

Government initiatives to this end are also noteworthy. Late last year, the Infrastructure Investment and Jobs Act was signed into law by President Biden, providing funding for battery development. In May, the US Department of Energy announced the allocation of more than $3 billion toward new and upgraded battery manufacturing to help boost domestic battery supply chains.

McKinsey anticipates demand for lithium batteries to grow to about 3,500 gigawatt-hours by the decade end, implying a significant jump from 220 GWh capacity in 2019. It estimates that at least 200 new battery factories are likely to open globally in the coming years, including many in North America to support its EV production. The global consulting firm forecasts U.S. battery-cell manufacturing capacity to grow by 50% each year till 2025.

Last December, the Department of Energy's Vehicle Technologies Office issued a report listing 13 new U.S. battery projects that are expected to be completed by around mid-decade. This is set to usher in a new wave of battery production in the country. A lot of announcements have been made this year as well pertaining to battery production in North America and more are in the cards. Battery production in the nation would also enable automakers to benefit from the new EV tax credits, which encourage companies to manufacture batteries in North America.

Automakers Pouring Billions to Boost Battery Game

With batteries serving as the secret sauce for EVs, automakers are fast enhancing their investments in battery production in North America, especially the United States.

U.S. legacy automaker General Motors is building three battery cell factories in the United States, in partnership with LG Energy. The companies will jointly spend roughly $7 billion on the construction of these factories. The three factories will be located in Michigan, Ohio, and Tennessee. While production at the Ohio plant begins this year, operations at Tennessee and Michigan factories will commence in 2023 and 2024, respectively. General Motors, currently carrying a Zacks Rank #3 (Hold), intends to roll out 30 EV models by 2025-end. Its Ultium Drive system is scaling up its e-mobility prowess. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

GM's close peer Ford is building twin battery plants in central Kentucky and a technologically-advanced mega campus (for vehicle and battery designing) in Tennessee. Ford has partnered with SK Innovation, and the firms will together invest $11.4 billion (with Ford's share being $7 billion) for the same. Operations at the twin lithium-ion battery plants in Kentucky are expected to commence in 2025 and will supply Ford's North American assembly plants with locally-assembled batteries for powering the next-generation electric Ford and Lincoln vehicles.By 2030, Ford—which currently carries a Zacks Rank #3— expects EVs to account for 50% of its global sales, which will cement its position in the red-hot EV landscape.

Japan's top automaker Toyota will build its first battery factory in the United States in North Carolina to bring its EV supply chain to the country. TM plans to invest $1.29 billion in the battery plant, to be named Toyota Battery Manufacturing, North Carolina (TBMNC). The production is anticipated to commence in 2025.  The investment is part of Toyota's wider commitment to invest $3.4 billion (380 billion yen) for automotive battery development and production in the United States through 2030. To cater to the surging demand for clean energy vehicles in the United States, this Zacks Rank #3 company targets EVs to account for nearly 70% of its U.S. sales by 2030.

TM's close peer Honda has collaborated with LG Energy to invest $4.4 billion in a U.S. battery plant, but the location hasn't been announced yet. Mass production of lithium battery cells is set to begin by the mid-decade end.The plant will aim to have an annual production capacity of approximately 40 GWh. Honda currently does not have an EV offering for the U.S. market but plans to launch an all-electric Prologue SUV in 2024. The company, which currently carries a Zacks Rank #3, intends to sell only electric vehicles in North America by 2040.

Italian-American automaker Stellantis also joined forces with LG Energy to invest $4.1 billion to build an EV battery plant in Windsor, ON, which promises to be the first large-scale EV battery plant in Canada, targeting 2,500 new jobs. Production from the plant is expected to commence in the first quarter of 2024.Once fully operational, the plant is estimated to have an annual production capacity of more than 45 GWh. The new plant is part of the company's goal to achieve sales of 5 million EVs globally by 2030. It aims EVs to account for at least 40% of its sales in the United States by 2030. STLA currently carries a Zacks Rank #3.

Last Words

Vertical integration is becoming crucial for automakers with each passing day to support the production of their zero-emissions vehicles. Focusing on revving up battery production and diversifying their manufacturing sources away from China is set to enhance supply chain resilience, lessen production bottlenecks and decrease production costs. Large investments in North American battery production will only gain traction as automakers prepare to meet the soaring demand for environmental-friendly vehicles.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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