It’s been a mixed year for electric vehicle (EV) stocks. While Tesla (NASDAQ:TSLA) has delivered a healthy 51.2% return year to date and the KraneShares Electric Vehicles & Future Mobility Index ETF (NYSEARCA:KARS) is up 23.8%, Chinese EV stocks have under-performed even as vehicle deliveries have proven strong. That’s evident in the near-28% YTD decline in the Global X MSCI China Consumer Disc ETF (NYSEARCA:CHIQ), which includes the stocks of a number of that country’s EV makers in its 77-stock portfolio.
The year 2021 has also been characterized by emergence of new players in the consumer and commercial EV segment. Overall, the electric vehicle sector is getting competitive. Traditional car-makers entry in the EV space has further intensified competition.
However, there is ample headroom for value creation from the sector. EV companies with a technological edge — be it batteries-as-a-service or self-driving capabilities — are likely to gain or maintain market share. Further, as companies expand globally, there is a big addressable market.
It’s also worth noting that various estimates suggest that the industry is poised for healthy growth through 2030. It’s therefore likely that EV stocks will be consistently among the attractive investment themes in the coming decade.
However, the industry is likely to witness consolidation in the next few years. My focus is on EV companies that are likely to be leaders or acquirers.
For 2022, let’s talk about seven EV stocks that a poised for a strong rally.
- Lucid Motors (NASDAQ:LCID)
- Rivian Automotive (NASDAQ:RIVN)
- Fisker (NYSE:FSR)
- Ford (NYSE:F)
- Li Auto (NASDAQ:LI)
- Nio (NYSE:NIO)
- XPeng (NYSE:XPEV)
Best EV Stocks for 2022 to Buy Now: Lucid Motors (LCID)
Among the emerging names, U.S. EV maker Lucid Motors looks attractive for 2022. The company has already commenced delivery of its first model. The initial bookings have been encouraging and Lucid has a backlog of 17,000 vehicles as of November 2021. This would imply a revenue backlog of $1.3 billion.
LCID stock surged over 100% after consolidation around $20 levels. However, there has been a correction in the recent past and it provides an attractive entry opportunity.
A key catalyst for 2022 is continued growth in vehicle deliveries as Lucid expands to Canada and EMEA. Additionally, the company is pursuing the second phase of manufacturing expansion, which will boost annual deliveries capacity to 90,000 vehicles.
Lucid also has plans to enter China in 2023. In the same year, the company will be launching its second model, a SUV. This will help in further accelerating growth.
LCID stock is among the top EV stocks to consider with the company’s focus on innovation and technology. Lucid Air, as an example, is the longest-range car rated by the EPA, at 520 miles in a single charge. (Speaking of a single charge, be sure to check out Luke Lango’s latest, The EV Charging Revolution Is in Full Swing.)
Overall, Lucid is positioned to capture market share in a fast-growing EV market. I would not be surprised if LCID stock doubles in the next 12-18 months.
Rivian Automotive (RIVN)
After surging to highs of $180, RIVN stock has cooled-off and currently trades at $96. I believe that current levels are attractive for some exposure.
The company’s R1S SUV mass delivery will commence in 2022 and there is a healthy pre-order pipeline of 71,000 vehicles. It’s also worth noting that Rivian EDV van has an order backlog of 100,000 vehicles from Amazon (NASDAQ:AMZN). During the last quarter, Rivian completed the certification process for the sale of electric delivery van.
In terms of manufacturing capacity, the Normal, Illinois plant has planned annual capacity of 200,000 vehicles. Rivian is also looking at expansion with its Georgia facility likely to have an annual capacity of 400,000 vehicles.
From a financial perspective, Rivian mopped-up $13.7 billion from the recent initial public offering. The proceeds will support manufacturing capacity expansion in both locations.
An important point to note is that the company reported negative free cash flow of $1.1 billion for third quarter 2021. This would imply an annualized cash outflow of $4.4 billion. Cash burn is likely to sustain and Rivian will need additional liquidity infusion in 2023 or 2024.
However, that’s unlikely to be a reason for the stock remaining depressed. Once vehicle deliveries accelerate, RIVN stock is likely to trend higher.
Best EV Stocks for 2022: Fisker (FSR)
FSR stock is another interesting name among EV stocks that seems positioned for a big 2022. In the last 12 months, Fisker shares have trended higher by 7%. After an extended period of consolidation, the stock seems positioned for a break-out.
The company’s first product, Fisker Ocean, is expected to launch in Q4 2022. The vehicle has already received 62,500 indications of interest. With marketing campaign initiated in the U.S. and Europe, Fisker Ocean is likely to have a healthy launch.
It’s also worth noting that Fisker plans to launch four vehicles through 2025. In this timeframe, Fisker is targeting annual volumes of 200,000 to 250,000 vehicles. With ambitious long-term plans, FSR stock looks attractive.
Recently, Fisker announced a partnership with Bridgestone to provide total after-sales services for Fisker customers in France and Germany. Collaborations are likely to help in accelerating expansion outside the United States. China is also a target market for Fisker Ocean and Project Pear.
Currently, FSR stock has short interest of over 20%. I believe that the stock is likely to witness a short-squeeze rally in 2022. Further, swelling of pre-orders is likely to be another catalyst for upside.
Ford (F)
Ford is among the traditional carmakers that’s making big investments in the electric vehicle segment. F stock has surged by over 100% in the last 12 months. Yet, at a forward price-to-earnings-ratio of 10.3, the stock remains attractive.
Ford CEO Jim Farley recently estimated that the company is likely to increase EV production to 600,000 vehicles by 2023. This will make the company the second-largest U.S. producer of electric vehicles.
With the Mustang Mach-E, F-150 Lightning and E-Transit electric vehicles in the pipeline, Ford is well positioned to make inroads in the EV segment.
Ford and South Korea’s SK Innovation plan to invest $11.4 billion in production of a new EV plant and three battery manufacturing facilities. The advanced lithium-ion battery production will commence in 2025.
A key point to note is that Ford reported adjusted free cash flow of $7.7 billion for Q3 2021. The company has annualized cash flow potential of $30 billion. This provides ample financial flexibility for big investment in the electric vehicle segment.
Ford also has ambitious plans for several new EV models in China. This will help in accelerating the sales transformation from conventional to EV.
Overall, F stock looks attractive and is positioned for further rally in 2022 with EV developments being the catalyst. It is the third-largest holding in the KARS exchange-traded fund, mentioned above. It has a 5.31% weighting of the assets in the 71-stock portfolio.
Best EV Stocks for 2022: Li Auto (LI)
Chinese EV stocks have under-performed in the last 12 months. I believe that LI stock is attractive at current levels and poised for a rally relatively soon.
For Q3 2021, Li Auto reported vehicle deliveries of 25,116. On a year-on-year basis, deliveries surged by 190%. For the same period, revenue increased by 199.7% to $1.15 billion.
Besides the headline numbers and the strong growth, there are two important reasons to like Li stock.
First and foremost, the company’s vehicle deliveries growth has been driven by just one model, Li ONE. With a more diversified portfolio in the next few years, deliveries are likely to remain robust.
Furthermore, the company reported free cash flow of $180.8 million for Q3 2021. This would imply an annualized FCF of nearly $800 million. Even at an early growth stage, Li Auto has been delivering healthy operating and free cash flow. With robust financial flexibility, the company is positioned to make big investments in innovation and expansion. As of Q3 2021, the company reported cash and equivalents of $7.6 billion.
Li Auto also made research and development expense of $137.9 million for the most recent quarter. On a y-o-y basis, R&D expense increased by 165.6%. These investments will translate into innovation driven growth.
Nio (NIO)
Nio stock has been on a steady decline. For year-to-date 2021, the stock is lower by 38%. However, I believe that the stock is oversold at current levels. A sharp rally in 2022 seems very likely.
One reason to be bullish on Nio for 2022 is the launch of new models. The electric vehicle maker plans three new models on its Nio Technology Platform 2.0. This is likely to ensure healthy growth in vehicle deliveries over the next 24-months.
Global expansion is another catalyst for growth. Nio plans to enter Germany, Netherlands, Sweden and Denmark in 2022. The company has already established presence in Norway. Europe is another big market for EV, which is at a tipping point.
Nio is well positioned for aggressive international expansion from a financial perspective. As of Q3 2021, the company reported cash and equivalents of $7.3 billion. An at-the-market offering in November 2021 helped Nio raise $2.0 billion.
The company therefore seems fully financed for the next 12-24 months. With growth in vehicle deliveries coupled with vehicle margin expansion, Nio stock is likely to trend higher. NIO stock, at 5.72% of assets, is the largest EV maker holding in the CHIQ exchange-traded fund.
Best EV Stocks for 2022: XPeng (XPEV)
Among Chinese EV stocks, XPEV stock has been the best performer in the last 12 months. Returns have been marginally positive during this period. With strong growth in deliveries and new product pipeline, XPeng is likely to break-out to the upside.
In November 2021, XPeng unveiled a new model that’s targeted toward international markets. The G9 SUV will be launched in China in Q3 2022. This launch will support deliveries growth in 2023. It’s worth noting that G9 will feature Nvidia (NASDAQ:NVDA) chips, lidar technology and semi-autonomous driving system. The car is likely to be “tech-heavy” and will attract global attention.
It’s also worth noting that the company launched XPeng P5 smart family sedan in October 2021. This is the third production model for the company. Growth in P5 deliveries will have a positive impact on revenue through 2022.
XPeng has witnessed a healthy increase in vehicle margin to 13.6% for Q3 2021 as compared to 3.2% for Q3 2020. With sustained growth in deliveries, it’s likely that margin expansion will continue.
Like other Chinese EV companies, XPeng has also strengthened its balance sheet for aggressive growth. At the end of September 2021, the company reported $7.0 billion in cash and equivalents.
Overall, XPEV stock is among the best EV stocks to consider for 2022. With product launch, global expansion and margin improvement, there are ample catalysts. It is among the top 10 holdings in both the KARS (2.8%) and the CHIQ (3.08%) exchange-traded funds.
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 modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
