In the investment world, EV stocks continue to play an important role in many growth investor portfolios. The companies operating in the EV sector have proven to be innovative, and many have shown sustainable growth. In the global push for clean energy initiatives and a sustainable future, this is certainly a sector investors can feel good about joining.
That said, the EV sector is so much more than just Tesla (NASDAQ:TSLA) — though, for years, it seemed like that was the only way to play this space.
Competition is increasing, and there is now a myriad of options for investors looking to play in this space. In this article, I’m going to discuss two overlooked Chinese EV players and one “picks-and-shovels” way to play the EV sector that I think are worth considering.
BYD Co. (BYDDF)
Chinese electric vehicle manufacturer BYD Co. (OTCMKTS:BYDDF) seeks to establish a factory in Mexico to enhance its global presence. CEO Stella Li is expected to announce a site for the plant, which would have a capacity to produce 150,000 cars annually, by year-end. The move follows BYD’s global EV sales surpassing Tesla in Q4 2023, signaling potential competition for U.S. automakers.
Concerns have arisen over the impact of low-cost Chinese cars on the U.S. auto sector. However, BYD continues to emphasize its focus on local sales as it explores factory locations in central and southern Mexico.
Moreover, the company emerged as the leading electric car manufacturer, surpassing Tesla in global sales. With 3.02 million new energy vehicles produced in 2023, including hybrids and battery-only cars, BYD continues its strong growth trajectory. While Tesla maintains dominance in battery-only car production, BYD’s expansion into international markets, including Europe, solidifies its position as a top long-term investment in the EV sector.
Li Auto (LI)
Li Auto (NASDAQ:LI) surged nearly 19% after a robust Q4 earnings report on Monday, followed by three analysts raising their price targets. By Tuesday morning, shares climbed an additional 9.7%.
Although many have cited a weaker forecast as reason to be cautious with Li, optimism remains due to increasing Chinese EV demand and ongoing product and tech enhancements. While its valuation seems attractive, and the company boasts substantial cash reserves, challenges like the EV price war and slowing demand in China could impact its performance. Li’s Q1 delivery forecast suggests a slowdown, which could affect short-term investor sentiment despite its long-term potential.
That said, it appears many investors are focused on the bigger picture. The company recently unveiled enhanced specs for the Li Auto Mega MPV, which launched in early March. The top model includes Nvidia Orin chips, Hesai LiDAR, triple screens and advanced air suspension. I have to say, I like what the company is putting out, and if Li can turn its business model into a global one, the race could be on for market share. At 25 times earnings, LI stock is among the most attractively valued in the space right now.
Panasonic Holdings (PCRFY)
By 2031, one of the things Panasonic Holdings (OTCMKTS:PCRFY) wants to achieve is four global factories that can produce 200 gigawatt-hours and enhance energy density. While it might be an overwhelming target, the company is confident it can accomplish the goal, with its $4 billion lithium-ion factory in Kansas showcasing the company’s sustainability and innovation.
In September 2023, Panasonic Holdings introduced PanasonicWELL, a new global innovation division focused on promoting family well-being. Led by CEO Yoky Matsuoka, the team aims to develop solutions for mental and physical wellness, leveraging existing products and new technology.
Currently, PCRFY stock boasts a favorable forward price-earnings ratio of only 6.4 times and a 2.43% dividend yield. Thus, fundamentally speaking, that could be the best way to play the EV boom. As a “picks-and-shovels” pick for the sector, Panasonic may be my preferred way to play this space.
Anticipating EV industry recovery, some analysts predict the stock could potentially double. Panasonic plans to quadruple battery capacity by 2031, aiming for 200GWh and targeting 2.5 trillion yen in battery sales. Innovation plans include enhancing EV battery energy density by 25% and introducing solid-state batteries by 2029, promising strong growth over time.
On the date of publication, Chris MacDonald did not hold (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.
