3 reasons why the recent electric vehicle stock-price correction isn’t the end of the road for the EV trend, according to the world’s largest wealth manager

2022 GMC Hummer EV 1
2022 GMC Hummer EV.

Electric-vehicle stocks have taken a hit the past few weeks amid a rotation away from highly valued tech and growth names, but that doesn’t mean it’s the end of the road for the EV boom, according to Mark Haefele, chief investment officer of UBS Global Wealth Management.

Long-term technological and environmental shifts suggest the boom should continue, while acknowledging that volatility in the share prices of individual companies argues for investors to diversify their exposure. Still, Haefele’s team said investors should consider the underlying data.

Elon Musk’s Tesla has led an incredible boom for electric vehicles over the past few years, and in 2020 alone, sales of electric cars rose 43% while overall car sales slumped 20%, according to data published on Tuesday by EV-volumes.com. The market has grown so much that these days, Tesla is just one of dozens of competitors in the rapidly-expanding industry.

In fact, Tesla’s share of the US EV market fell to 69% in February, down from 81% in the prior year, a Morgan Stanley report found.

It’s getting more crowded, too, as every major car company in the US has said they will be entering the EV market.

General Motors recently pledged to invest $27 billion to launch 30 EV models by 2025, and it has showed off new cars like an electric Hummer, which is set to be released in 2022. Ford released the Mustang Mach-E, which has taken market share from Tesla, and VW recently unveiled its plans to build six “gigafactories” in Europe by 2030 to aid with its EV business.

In China, EV players like SAIC Motor Corporation are targeting the lower-end market with cars starting at just $4,465. The company sold over 25,000 Hong Guang Minis in January alone.

Public transit is also getting a revamp from EV companies. Proterra, a company that makes electric public and school buses, inked a deal to go public via billionaire investor Chamath Palihapitiya’s SPAC Arc Light Clean Transition Corp. in January.

Read more: Buy these 30 stocks that are best-placed to benefit from the pandemic’s ‘seismic shifts’ and continue surging in its aftermath, BTIG says

Many analysts argue the EV boom is set to continue. Wedbush’s Dan Ives said in a recent note to clients that he believes the “EV party and transformation is just beginning as this industry is on the cusp of a $5 trillion market opportunity over the next decade.”

Haefele and his team agree with Ives, detailed below are three reasons why they see a long way to run for the EV boom.

  1. “Electric vehicles continue to rapidly gain market share. Electric vehicle sales have been rapidly gaining market share. The diverging paths of automakers have been confirmed during the pandemic. While the overall auto market contracted by 15% in 2020, global electric vehicle sales rose by 43%, reaching a 4.2% market share. This trend looks set to continue and will benefit pure EV makers, as well as traditional automakers that are adapting fastest to the growing consumer preference for electric vehicles,” Haefele and co. wrote.
  2. “Electrification of vehicles is still ‘The Next Big Thing’ in the automotive industry. Tighter emission regulations mean there is no alternative to the switchover from combustion to electric engines – be they battery electric vehicles (BEV), plug-in hybrid electric vehicles (PHEV), or fuel cell vehicles (FCV). This move toward electric has also been embraced by traditional automakers such as Volkswagen, which has pledged investment of over EUR 50bn in its EV strategy as it aims to catch up with Tesla,” Haefele and co. wrote.
  3. “The transformation underway in the auto sector goes beyond drive trains. We see parallel technological advances in the sector, along with a shift in consumer preferences away from ownership. On technology, progress is being made in areas such as autonomous driving, helped by the rollout of 5G networks. On the issue of ownership, increasing mobile connectivity and changing preferences among younger age groups are leading to the rise of car-sharing models. In the future, using a car will not automatically mean owning one. Overall, we foresee potential sales of some USD 400bn connected to our Smart Mobility theme by 2025, of which electrification represents more than half, an eight- to nine-fold increase on today’s figure,” Haefele and co. wrote.

Read more: An innovation ETF is crushing competitors with 40% returns this year even as tech stocks flounder. The provider breaks down its 2-part playbook for selecting moonshots – and knowing the perfect time to sell

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Tesla has ‘significant first-mover advantage’ in the electric vehicle space – but 3 smaller names are also poised to succeed as EV sales climb in 2021, CFRA says

Fisker Ocean
The Fisker Ocean.


Tesla has established a “significant first mover advantage” over new entrants in the ever-expanding electric vehicle market, but a few other smaller names stand out, according to CFRA’s Garrett Nelson.

In a note published Wednesday the senior equity analyst said Amazon-backed Rivian, Lucid Motors, and Fisker will emerge as “success stories,” as EV sales climb in 2021.

Nelson uses four categories to analyze emerging electric-vehicle manufacturers: 1) the specs (price, range, etc.) and overall attractiveness of their initial vehicle models; (2) financial considerations such as their funding sources, balance sheets, and liquidity; (3) the growth opportunity of their sub-industry; and (4) the experience and credibility of management. 

He said all three names fare well in each category. Additionally, all three automakers will be among the first to bring electric vehicles to the road, with Rivian and Lucid expected to put models on the road this year and Fisker in late 2022. 

Fisker debuted in public markets in October, while Lucid Motors announced a merger with SPAC Churchill Capital Corp. IV on Monday. Rivian is looking to go public as soon as September at a valuation of $50 billion, Bloomberg reported earlier this month. 

Nelson added that Tesla has an advantage over new entrants; citing how the company increased its US EV sales volume by over 50% last year.  

“With all the talk of increased competition from new EV models in 2020, Tesla grew its market share from an estimated ~58% share in 2019, as models like the Audi e-Tron, Jaguar I-PACE, and Nissan LEAF largely disappointed from a sales perspective,” Nelson added. 

CFRA forecasts that US EV sales will grow by over 50% to exceed 500,000 units in 2021, especially if the Biden administration passes legislation that could benefit EVs. The research firm has a “strong buy” rating on Fisker, and a “hold” rating for Tesla. 

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