Looking at the whole landscape, high growth in the electric vehicle (EV) industry is likely to sustain beyond a decade. Thus, it’s not surprising that competition has been intensifying significantly as of late; Everyone wants a share of the pie. However, a few years down the line, the EV industry is likely to witness consolidation. There are bound to be winners and losers even in a high-growth segment. Investors, therefore, need to be careful while selecting EV stocks.
To further elaborate on the competition, there were 86 electric vehicle models in 2015. As of 2020, the number of EV models had increased to 370. With pure-play electric vehicle companies and traditional automakers launching new models, these numbers will continue to increase.
That being said, there will be leaders in the EV race. Companies with a high focus on research and development are likely to retain an edge.
With that in mind, these four EV stocks have the potential to be big performers in 2022. I also believe that these EV companies are positioned to survive and increase their market share in 2022 and beyond via a handful of catalysts.
Now, let’s dive in and take a closer look at each one.
Hot EV Stocks: Nio (NIO)
Nio stock has been an underperformer in the last 12 months. During this period, the stock has declined by nearly 25%. However, I believe that Nio is positioned for a strong reversal in 2022.
Recently, Morgan Stanley opined that Nio is undervalued as compared to its peers. In turn, the brokerage has a price target of $70 for NIO stock. And this jump would imply an upside of 101% from current levels of $34.80.
Moreover, by 2022, Nio plans to deliver three new electric cars on its Nio Technology Platform 2.0. So with new launches, vehicle delivery growth is likely to remain robust in 2022 and 2023. And this is one reason to be bullish.
Additionally, Nio has plans for expansion in more than one European country in 2022. In turn, this is another catalyst for vehicle delivery growth.
From a financial perspective, Nio is well-positioned to pursue aggressive expansion. As of the third quarter of 2021, the company reported cash and equivalents of $7.3 billion. And Nio raised $2 billion in a recent at-the-market offering.
It’s also worth noting that as vehicle deliveries increase, Nio is positioned to deliver higher vehicle margins. With operating leverage, the stock is likely to trend higher on EBITDA margin expansion.
Tesla (TSLA)
For 2020, Tesla had a market share of 79.5% in the EV segment in the United States. For the current year, the market share is expected to shrink to 66.3%. This was bound to happen with intensifying competition.
However, I believe that Tesla will remain a global market leader. I also think that Tesla might regain some lost market share in 2022.
How? One reason is the potential commencement of production in the giga-factory in Europe. This will help in boosting local presence and serve as a catalyst for deliveries growth. At the same time, Tesla might be contemplating a giga-factory in India.
Furthermore, I am also bullish on TSLA stock considering the impending launches. According to Elon Musk, Model S Plaid is expected to launch in China in March 2022. Additionally, Cybertruck is scheduled to commence deliveries next year.
Additionally, Tesla has ambitious plans beyond 2022. In particular, the company plans a $25,000 electric vehicle that’s fully autonomous. This can be game-changing in terms of capturing mass market share.
From a financial perspective, Tesla reported $16.1 billion in cash and equivalents. And for Q3 2021, the company reported $1.3 billion in free cash flow. So with a strong cash buffer, the company is positioned to invest in manufacturing expansion and innovation.
Hot EV Stocks: XPeng (XPEV)
XPEV stock is another name among EV stocks that’s likely to be a performer in 2022. With strong fundamental developments, the stock is worth holding for the long term.
Recently, XPeng unveiled a new SUV that’s aimed at international markets. The SUV, G9, will be launched in China during Q3 2021 and will include Xpilot semi-autonomous driving system. XPeng has already made its first move in the international markets. With the new launch, the company will be well-positioned to increase market share.
I also like XPeng for the fact that the company has made big investments in research and development. It’s expected that the company will launch its robotaxi business in 2022. This is another potential catalyst for stock upside.
As of Q3 2021, XPeng reported $7 billion in cash and equivalents. With three more models to be launched between 2023 and 2025, the company is in a great spot from a financial perspective.
From a long-term perspective, XPeng is also exploring the flying vehicle segment. Recently, the company’s urban air mobility affiliate, HT Aero, raised $500 million from investors.
Overall, XPeng is likely to continue gaining market share with a focus on innovation. And with plans to expand into more European countries in 2022, the outlook is bright.
Lucid Group (LCID)
Over the last six months, LCID stock has jumped nearly 70%. That said, most of the rally has been come in the past month, and has been backed by fundamental developments.
First, Lucid announced that it already has more than 17,000 bookings for its first model. This implies a revenue backlog of $1.3 billion. Furthermore, the company’s Lucid Air received an official EPA rating of 520 miles range, which is the longest-range EV ever rated by the EPA.
Moreover, it’s worth noting that the company already has a production capacity of 34,000 vehicles annually. The company has already initiated phase two of the expansion, which will boost capacity to 90,000 vehicles.
With a strong initial response coupled with plans for international markets, Lucid is positioned to gain market share in 2022 and beyond. The company already has market teams in the United States, Europe and the Middle East.
Once vehicle delivery gains traction in 2022, LCID stock is likely to witness a renewed rally. On the flip-side, though, there is likely to be equity dilution. Nonetheless, if vehicle deliveries remain robust, the stock will remain in an uptrend.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock-specific articles with a focus on the technology, energy and commodities sectors.
