Four Stocks to Watch If You Believe Electric Cars are the Future
By Space Coast Daily // November 13, 2020
Gasoline has been powering cars for generations. Because of this, it can be hard to imagine buying anything else. However, thanks to advances in battery technology, electric cars aren’t just here – they may soon replace ICE vehicles.
Within a decade, electrics will make up an increasing share of vehicles. In some countries, you won’t even be able to buy gas cars. In the UK, the government will ban the sale of ICE vehicles by 2030. Prior to this year, they planned to bar them by 2040. Momentum is building against gas-powered cars.
By even conservative estimates, the electric car market will grow significantly over the next decade. Below, we’ll talk about four stocks making a splash in today’s EV market.
NIO Limited (NYSE:NIO)
China has much at stake in the EV race. Having a profitable electric automobile industry, while desirable, is not their biggest motivator. Oddly enough, the environment is. While the world’s most populous nation has become Earth’s workshop, it has come at a cost.
To power its industry, China green-lit the construction of hundreds of coal plants. At the same time, rapid urbanization led to an explosion in automobile demand. Because of this, China regularly competes with India for the worst air quality on the planet.
According to a 2007 World Bank report, air pollution was responsible for up to 400,000 premature deaths per year in China. Despite being an authoritarian country, this dire situation has triggered civil unrest.
And so, the Chinese government has prioritized the reduction of carbon pollution. In their most recent five-year plan, they have imposed a hard cap on fossil fuel emissions.
Consequently, this move has boosted its domestic electric car industry. As recently as 2018, the nation sold 1.2 million EVs – three times America’s sales figures.
Among Chinese-based companies, NIO has benefited most from these developments. Founded in 2014, NIO has already sold tens of thousands of its models domestically.
Already, they’re looking beyond China to the international market. In California, they have secured an “Autonomous Vehicle Testing Permit.”
Eventually, executives have plans to sell their level 3/4 autonomy vehicles internationally. That possibility makes NIO stock a tempting buying opportunity. Even if they sell domestically for longer than planned, China’s enormous consumer market means they’ll still make serious bank.
We rate NIO to be a buy.
Tesla, Inc. (NASDAQ:TSLA)
When most of us think of electric cars, Tesla comes to mind. Because of Elon Musk’s infamous 100-hour work weeks, this company went from long shot to EV innovator in a decade.
But, it almost didn’t happen. Tesla put quick points up on the board with the Tesla Roadster, but they needed a $40 million loan to avoid bankruptcy in 2008. The lack of widespread EV infrastructure, entrenched competitors, and high price points have all worked against Musk & Co.
Model 3 was Tesla’s “sink or swim” moment. If it didn’t sell well, it could have wrecked the company. In fact, during the Model 3 production run, Tesla’s cash reserves dwindled to the point where bankruptcy was a month away.
Musk went to work for free and moved resources from Solar City to cope. In the end, everything worked out. As of the writing of this article, Tesla has pulled off five consecutive profitable quarters. With sales of Model 3s and Model Ys escalating, as well as Tesla’s energy systems (the Powerwall), TSLA has never been on such a firm footing.
But is it still a buy? At a lofty 417 USD, this stock has more than quadrupled in value YoY. To be frank, low-information retail investors drove much of this year’s gains.
Yes, Tesla’s sales in America are improving. But, soon, the money Tesla is making from selling regulatory carbon credits will start drying up. Combine that with tepid overseas sales, and we see headwinds in 2021 for TSLA.
If you already own TSLA, hold onto it. If you don’t, though, buying now appears to be a bad play.
Nikola Corporation (NASDAQ:NKLA)
Tesla isn’t the only non-Big 3 EV automaker in America. Recently, a firm known as Nikola has been making waves. Born in 2014, this Salt Lake City-based company has focused mostly on creating electric and hydrogen-powered trucks.
Recently, they set the imagination of the American public on fire with the Nikola Badger – their prototype for an electric pickup truck. Unlike the polarizing Tesla Cybertruck, the Nikola Badger looks like a streamlined version of existing gas-powered pickups.
Not all is well, though. While Nikola has created buzz for its products, their recent behavior has gotten them into legal trouble. In a video promoting the Nikola One (their hydrogen-powered tractor-trailer), the vehicle moved using gravity, not by using its propulsion system.
Founder Trevor Milton later admitted to the deception, but claimed his company hadn’t committed fraud. Nonetheless, he resigned as executive chair in September 2020.
Is Nikola a fraud, or were they just playing a game of “fake it ‘til you make it”? To be honest, this stunt reeks. If we held NKLA, we would have cut our losses weeks ago. If you don’t hold NKLA, however, it’s an intriguing gamble.
GM is still bringing Nikola’s pickup to market. If it proves popular, NKLA could see a resurgence.
Workhorse Group (NASDAQ:WKHS)
Long before consumer EVs became popular, the B2B/government vehicle market began electrifying. After buying Workhorse Custom Chassis in 2012, AMP Electric Vehicles changed its name to the Workhorse Group and began creating electric delivery vehicles.
Demand has been brisk, as their plant in Indiana churned out 60,000 vehicles last year, But, does the future look bright for WKHS? With the online shopping industry ramping up, we only see demand for Workhorse’s vehicles rising.
We rate WKHS a buy.
The Electric Vehicle Revolution Is Here
Smart investors will make serious money in EVs over the next decade. By following the advice above, we’re confident you’ll do the same over the next quarter.