Is it a bubble or a genuine paradigm shift? The electric vehicle (EV) market that initially emerged out of eco-centricity and panicking calls for renewable energy – is now being stoked by an almost forced sector momentum. Sure, Tesla has been around for some time now, but up until recently, the Palo-Alto company acted as the dark knight of EVs – an enigma in an otherwise tepid industry.
What happens though when market momentum outweighs fundamentals? Micro-economic analysis starts to give way for long-term speculation, IPO’s are surrounded by incessant retail hype, and inevitably, when the curtains close and the dust settles, companies retreat as quickly as they rose. The EV market is the current crux of automobile gossip; so let’s pick apart the unruly claims, look beyond the flashy vista of ‘what could be’, and outline what EV stocks might be the most reliable picks for 2022.
One of the most anticipated IPO’s of the year, Rivian’s (NASDAQ: RIVN) November public trading debut attested to nothing more than a flurry of short-lived buyers. Yet whilst everyone was biting their nails at the opening bells, it was 11% investor Ford (NYSE: F) who was waiting patiently in the wings for a $7B windfall. Now, looking at Rivian in a little more detail – it’s difficult to see what is so special about the overly-hyped truck manufacturer.
The companies unique ‘skateboard’ technology isn’t as homogenous as was initially thought. Ford realized this when the company found the ‘skateboard’ architecture to not be compatible with Ford’s software – a problem that could be commonplace amongst a long line of manufactures – rendering Rivians USP…a little too unique.
Ford however looks to be in good stead for 2022. Still relishing a $7B windfall, Ford has also announced they expect to be the world’s second-biggest electric vehicle manufacturer within the next two years; boasting an annual production capacity of nearly 600,000 EV’s.
Rivian’s truck also doesn’t seem so bold alongside Ford’s new F-150 lightning pickup – an EV that has already surpassed 200,000 in reservations, with the F-Series line of trucks remaining US’s best-selling pickup for 43 years running. Bearing all this in mind, and the fact that Rivian dropped to all-time lows today after production issues – sometimes it’s beneficial to turn to the old dogs.
The King of Market Share
It’s rare that you’ll see an EV article that isn’t singing the praises of Tesla – the undisputed market king. That’s because as difficult as it may be to point to cracks in Tesla’s business model, people look to Tesla as not just an example, but more dangerously, a precedent. There is a trend emerging where everyone is waiting for the next Tesla – looking to IPO’s like Rivian, the flashy exterior of Lucid, and the trendy Lordstown Motors for ‘to the moon’ price action; glazing over the all-important fundamentals.
Tesla stock has seen a pullback recently, offering reward-worthy buying opportunities as the company loses 20% of its stock price and market cap dips below $1T. Tesla still poses ambiguously for long-term strategists and is often sidestepped due to the stock’s extreme volatility – not helped by the Twitter-touting Elon Musk.
“We look ahead to FY22 with expectations of strong automotive profitability, but increasingly difficult comps and potential narrative changes that may challenge conventional expectations about the EV strategy. If you must own stocks in this industry, please be very selective.” Adam Jones, Morgan Stanley.
Although vulnerable to volatility, Tesla will still remain the largest EV manufacturer in 2022, with some expectations stating the company has the ability to snap up half of what could be a $5T market.
Toyota’s Big Plans
A manufacturer that has long embraced hybrid technology, Toyota has recently emerged from the woodwork with huge plans for 2022 – plans that could propel the Japanese company into Tesla’s market share territory. In a defiant resilience to emerging EV manufacturers, Toyota’s plans involve the unveiling of 15 new EV’s set to hit the market.
Furthermore, Toyota hopes to establish its electric mark by setting ambitious 2030 goals; including the sale of more than 3.8M EV’s per year. If Toyota sticks to its ambitious plans, there isn’t any reason that they won’t have access to a respectable portion of the ballooning market share. Time is of the essence here, and as we know with companies like Lucid, actions speak much louder than rosy-looking words. Once again, it’s the long-standing industry leaders like Ford and Toyota that get the long-term vote, simply due to firm foundations, recognizable fundamentals, and an absence of retail hype.
A Battle For Momentum
There are many others that haven’t quite made the list. GM, NIO, Lucid, Lordstown Motors, and more are equally fired up and poised for a potential move. This being said, it might be beneficial for investors to stop dreaming about the ‘next Tesla’. I’m not splitting hairs when it comes to the shiny new EV companies, but I can’t help but have some reservations surrounding profit, earnings, and orders that are often muddied by oversight. The EV market is dictated by momentum; while the battle is growing stronger on the surface, there is still a lot to be proven.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.