Increasingly, it seems as if the best EV stocks to buy have long-term tailwinds. The Kingdom of Saudi Arabia has taken notice and continues to diversify an economy that has depended almost entirely on oil revenues.
That is now affecting which EV stocks to buy.
Much of the wealth created by Saudi Arabia’s vast oil reserves is controlled by the country’s Public Investment Fund which plans to develop the country’s non-oil GDP growth.
The EV sector is an important strategic pillar in that plan and Saudi Arabia is working to bring electric vehicles into the fold.
Saudi Arabia isn’t yet an important EV manufacturer although the country does boast EV manufacturing within its borders with its first brand, Ceer.
The country’s EV investment is much broader and includes minerals, manufacturing, and more. The vast funding in Saudi Arabia means it’s looking for EV stocks to buy as manufacturing takes off.
Lucid’s (NASDAQ:LCID) stock hasn’t yet benefitted much even as it opens its first ever manufacturing plant in Saudi Arabia, and the country’s first EV plant overall.
This is one of the surprising EV stocks to buy as it has been trending lower for most of this year. Lucid has faced significant issues. However, the opening of the Saudi manufacturing plant sets the table for the company to take off in the future.
The Advanced Manufacturing Plant, AMP-2, is strategically located in Jeddah. Jeddah is located on the Red Sea and offers logistical benefits due to its location in the middle of one of the world’s most important shipping lanes.
AMP-2 will have initial annual capacity to produce 5,000 vehicles but that number is expected to reach 155,000 in the future.
It will also introduce Lucid’s high-priced vehicles to a Saudi consumer that appreciates luxury and a market proximal to Dubai and its luxury consumers.
While the move is unlikely to spike LCID prices soon, it will help over the long term. Remember, the PIF owns 60% of Lucid and that means the company has a massive advantage and despite early issues it remains well protected overall.
Tesla (NASDAQ:TSLA) looks like the next of the EV stocks to buy for Saudi Arabia’s PIF to increase its manufacturing footprint in the Kingdom.
Lucid’s PIF backing makes it a favored son of the country but that doesn’t necessarily disadvantage competitor stocks.
In fact,news outlets have recently begun reporting that Tesla and Saudi Arabia are in talks to bring one of the firm’s giga factories to Saudi Arabia. The headlines have been met with a lot of skepticism and Elon Musk has flat out denied the rumors.
Saudi Arabia, like many nations, would like to have Tesla manufacturing on its soil. Leaders are dangling cobalt resources to incentivize Tesla to say yes.
Saudi Arabia controls vast quantities of the mineral through ownership rights in the Democratic Republic of Congo. Cobalt is used in high-energy density batteries and is thus of strategic importance.
Saudi Arabia certainly has the resources financially and input-wise to sweeten the deal moving forward. It would be very easy for Tesla to justify such a move in order to diversify its manufacturing footprint. I don’t think the rumors are going to stop.
Vale (NYSE:VALE) is a major producer of the basic materials and resources necessary for manufacturing in several sectors.
That makes Vale and its stock strategically important to the EV sector overall. Saudi Arabia’s EV investment covers the entire value chain within the EV sector. That means everything from minerals in the ground all the way to final products rolling off assembly lines.
Thus, it shouldn’t surprise readers to know that Saudi Arabia has invested $6.2 billion into Vale’s base metals segment. The segment produces copper and nickel. The deal was done through Ma’aden, a state owned mining firm.
Battery metals investments are important for Saudi Arabia in the EV sector. It needs to funnel the revenues from oil resources into other commodities that promise higher growth as the energy transition continues to gain speed.
It’s also worth noting that basic materials firms like Vale make sense at the moment as investors are wary of tech valuations and Fed signals of higher rates for longer.
There’s good reason to believe Rivian (NASDAQ:RIVN) stock may soon benefit from Saudi’s emerging EV aspirations.
Jeddah-based group Abdul Lateef Jameel was one of the biggest winners from Rivian’s IPO. The company is a distributor of Toyota vehicles in the Kingdom but made $8.9 billion on Rivian’s IPO.
The group isn’t run by the state, but it is one of the biggest backers of Rivian. I can’t speak to the demand for Rivian’s vehicles in Saudi Arabia or suggest that there’s reason to believe any deal is on the immediate horizon.
Instead, I’m simply suggesting that the PIF must be well aware of how well Abdul Lateef Jameel did with its investment in Rivian. That has to have put the company into greater focus for the PIF and private investors in Saudi Arabia.
Saudi investment aside, RIVN stock is attractive from the perspective that Wall Street expects it to rise overall.
Magna International (MGA)
Magna International (NYSE:MGA) is an original equipment manufacturer (OEM) to the automotive industry and one of the tangential EV stocks to buy.
The company and stock has a long history of working with many major names in traditional vehicles and EVs. It is the manufacturer of Fisker’s (NYSE:FSR) debut Ocean SUV. That vehicle is now available as exemplifies the overall capability of the firm as a manufacturer.
Magna International may soon enter Saudi Arabia for an entirely different reason: Seats. To be more specific, ventilated seats. It’s no secret that Saudi Arabia experiences extremely high temperatures. Researchers believe that the ventilated seat market in the country will grow rapidly through 2027.
One of Magna International’s business arms is a Seating Systems Segment. MGA stock spiked in the days following the AMP-2 opening. It’s difficult to attribute the movement to the connection.
However, it poses an interesting question of opportunity. Further, Magna International is simply a diversified firm overall and has established itself as a name in the EV OEM sector. The potential is clear and it’s a reasonable investment otherwise.
Albemarle (NYSE:ALB) is another EV stock to watch as Saudi Arabia’s investment in the sector ramps up.
Like many countries globally, Saudi Arabia is worried about China’s dominance in lithium exports. If China were to choose to do so, it could choke the global supply. That’s because China processes about 60% of lithium globally.
That’s where Albemarle comes into the picture: The U.S. lithium supplier makes sense as a strategic partner to Saudi Arabia. The relationship has the potential to blossom in the future.
Currently, Saudi Arabia is working to ramp up domestic lithium processing and began domestic lithium hydroxide production this summer. That production is being refined for BMW and is part of a push to develop relationships in the area with western partners.
That suggests that Albemarle, as one of the biggest western lithium firms, develops a meaningful relationship with the Kingdom. In turn, that makes the stock one to snag as a bet that such a relationship emerges.
Nio (NYSE:NIO) is a clear stock opportunity in relation to Saudi Arabia’s investment in EVs.
The opening of Lucid’s AMP-2 factory is one of the bigger catalysts and provides high visibility to Saudi Arabia’s EV development overall. However, the opportunity will not be limited to western partners alone.
It’s very clear that Chinese manufacturers have fertile ground in the Middle East, too. Nio received a $1.1 billion investment from Abu Dhabi’s CYVN Holdings, a government run fund, in June.
That creates another use case for the region and means that Nio could easily see investment from Saudi Arabia which neighbors the UAE.
There is also potential that Saudi Arabia chooses something different entirely if it invests in Chinese EVs. Li Auto (NASDAQ:LI), XPeng (NYSE:XPEV), and BYD (OTCMKTS:BYDDF) also make sense as EV stocks to buy if Saudi Arabia chooses to champion Nio’s competitors.
The Nio/Abu Dhabi investment materialized in 3 weeks from start to finish so if any similar news emerges the opportunity could come and go very quickly. Investors should be ready to move quickly.
On the date of publication, Alex Sirois 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.