The development of electric vehicles (EVs) has come to the forefront of national headlines. President Joe Biden’s new infrastructure bill will increase the gas tax and invest over $24 billion into the electric vehicle industry, dramatically increasing the demand for EVs. However, the Manhattan Institute’s Mark Mills explains that in their current form EVs would cost America billions of dollars without achieving the climate goals outlined in the bill.
What Mills missed is the rapid development EV companies are undergoing. To name a few, Ford Motors (NYSE:F) signed a 5-year deal with Albemarle (NYSE:ALB) and was able to lower the price of vehicles by $10,000 dollars. Similarly, Onsemi (NASDAQ:ON) is a semiconductor company for EVs that has rapidly increased production for more efficient manufacturing processes and innovating long-lasting batteries. EV giant Tesla (NASDAQ:TSLA) hopes to release the Tesla Cybertruck in Austin very soon.
Today, the EV market is valued at $500.48 billion and is forecasted to grow at 17.8% CAGR to $1,579.10 billion by 2030. And given the recent press and significant government support, EV companies are rapidly moving to match the rising demands.
Here are three companies that have the angles and the potential to be industry leaders in the longer term, in my opinion.
Ford Motor Co (F)
Ford Motor Co (NYSE:F) is an automotive company known for its internal combustion, hybrid cars, and trucks. Consumers have been flocking towards Ford Pro, which mainly delivers commercial vehicles, and Ford Model E, the newest fleet of EVs including the F-150 Lightning.
Ford is already in the $3 trillion automobile industry as an established brand. Recently, the company has been displaying superb financial performance after the company posted losses of $2.1 billion last year in its electric car segment. To name a few recent successes, 2023 Q1 revenue was $41.5 billion, EPS stood at $0.63, and automotive profit of $39.09 billion — these all significantly beat analyst forecasts. In fact, F stock is up roughly 28% year-to-date.
However, Ford is still maintaining a low PE ratio and a high dividend yield of 4.01%, demonstrating management’s true ability to stay profitable. As Ford converts its existing customer base to EVs, Ford’s Model E business is turning out to be a success and its grasp over the market is inevitable.
Additionally, Ford’s recent partnership with Tesla is an exciting growth catalyst that shifts the EV charging infrastructure. This partnership allows Ford to grant its EV owners access to Tesla Superchargers, and to integrate Tesla’s charging technology into Ford’s vehicles starting in 2025. Improving accessibility to Ford’s products is a top priority, particularly within the EV sector, and adapting to Tesla’s proprietary plug design speaks volumes to Ford’s capabilities. CEO Jim Farley already mentioned how Ford has been working with other automakers on transitions and engines. It is only a matter of time before rapid adoption takes place to make Ford’s products and transition into the EV market a success.
Right now, analysts are relatively bearish on F stock due to fears of F-150 Lighting’s success, having predicted a median 1-year price target of $14.09 and a range spanning from $10.50 and $22.00. However, as the company pivots further toward EVs, Ford is showing that it can compete to be an industry leader. With recent partnerships to support innovation, I think F stock is a buy for long-term success.
General Motors Co (GM)
General Motors Co (NYSE:GM) is a global automotive manufacturing company that plans to focus on EV growth and achieving carbon neutrality by 2040. Its well-known brands include Chevrolet, Buick, GMC, and Cadillac.
GM stock is up 18.8% over the past year with 20 analysts predicting a 12-month median-high price range of $44 to $89, or a 13.52% to 129.6% upside.
General Motors has been exhibiting strong financials in recent years with a YoY revenue growth rate of 23.16%. The FY22 revenue was $156.7 billion which is expected to grow at a 12% CAGR until 2025 to reach a high of $225 billion. Management demonstrates exceptional operational efficiency, as evidenced by an FCF per share forward growth rate of 28.54% beating the sector median of 4% by a 614.2% difference.
Notably, GM’s new vehicle, Cruise Origin, further fuels growth prospects with the goal of achieving $1 billion in revenue by 2025. This driverless car brand has made remarkable progress by expanding its operations in cities like San Francisco, Austin, and Phoenix with real ridership and testing. Notably, Cruise’s fleet has grown by 86% in just one quarter, covering an impressive 1.5 million driverless miles.
Another driving force behind GM’s growth is its Ultium Platform battery solution which offers enhanced efficiency by maximizing drive time and distance on a single charge, thus reducing costs. This advanced battery technology incorporates features like “long pouch cells,” which optimize space utilization, resulting in improved productivity.
Overall, General Motors’ focus on Cruise and the innovation of the Ultium Platform will significantly contribute to the company’s growth trajectory. These, along with strong financials and reasons covered above, rate GM stock as a buy.
Nio Incorporated (NIO)
Nio Incorporated (NYSE:NIO) is a multinational Chinese company leading in the development of EVs. NIO stock price is up 7.53% YTD due to its breakthroughs in technology and new Battery as a Service (BaaS) system.
Financials for Nio show that revenue from 2022 Q2 to 2022 Q4 grew over 6 billion. EPS projected for NIio ending March 31 was -$1.53 or a 104% YoY increase. FCF in 2022 was -$1.571 billion which represents a 374.18% YoY increase. NIO stock has received 75 “buy” ratings, with analysts predicting a median 12-month price target of $10.33 and the range spanning from $7.50 to $13.00.
One of the most important advantages that Nio possesses is the Chinese government’s support. Without the $1 billion investment by the Chinese government last year, Nio would likely be bankrupt. China’s intention of being the leader in the EV markets has positioned NIO strongly as the flagship of China’s numerous EV companies.
Nio’s success is due to more than just government bolstering. The company’s innovative breakthroughs set it apart from competitors. On August 20, 2020, Nio invented an industry-leading battery-swapping technology called Battery-as-a-Service or BaaS. BaaS works by having users subscribe to battery packs with various capacities and allowing consumers to uniquely spread the cost over a long period. To support this, Nio’s product portfolio currently has a diverse range of flagship SUVs which are known for supporting unmatched battery-swapping technology to consumers.
With the EV market’s projected growth rate and the Chinese government’s support, Nio holds a significant advantage in the industry. When also considering the company’s battery-swapping technology and its product portfolio of flagship SUVs, I find this stock to be an addition to portfolios.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
