Old vs. New Automakers: Which Should You Invest in Today?

A comprehensive look at the automakers of today and who is worth investing in for the future of electric vehicles.

electric car charging

Electric vehicle stocks were hot in 2020, as growing numbers of investors came to recognize the major shift going on in the industry, both in the U.S. and abroad. Then, the year kicked off with President Biden signing an executive order that the federal government would only buy electrical vehicles made 50% or more in the US by union workers—although those cars don’t exist yet. Tesla (TSLA) is close, they just aren’t unionized (yet).

Further below, I have a list of electric vehicle stocks that might deserve a spot in your investment portfolio. But first let’s take a look at the established big players, to see if any of them have a chance.

The Old Automakers
Ford (F) has seen quarterly revenue fall from $41.8 billion to $37.5 billion over the last two years, but that’s not bad considering the pandemic. And Ford has a chance in the electric car race. Coming this year is its all-electric Ford Mustang, which will actually be a four-door crossover that looks nothing like any previous Mustang, and coming next year is the electric F-150 pickup that will likely be a big seller. As for the stock, it’s rallied from 4 to 9 since the March bottom, but is still an underperformer in this group. The only saving grace is a dividend yield of 6.9%, but there’s no telling how long that will last.

General Motors (GM) has seen quarterly revenue fall from $38.4 billion to $35.5 billion over the last two years (similar to Ford’s slowdown), but GM has a more aggressive plan to go electric, aiming to spend $20 billion by 2025 to launch a range of EVs powered by new low-cost, lithium-ion Ultium batteries (predicted to reduce battery cell costs to under $100 per kilowatt-hour) while selling off underperforming assets around the globe (like a factory in Russia). Then there’s GMC’s newly unveiled all-electric Hummer truck, billed as the world’s first all-electric “super truck” (first year production is already pre-sold).

Toyota (TM) was the most valuable automaker in the world until last summer, in part because of its leadership in the hybrid car market. But while Toyota was working on making electricity from fuel cells, Tesla was selling cars running on batteries, and the result was that Tesla blew past Toyota in the market capitalization race last summer without even blinking. Like most of the big old automakers, Toyota suffered in the pandemic; quarterly revenues fell from $71.1 billion to $64.2 billion over the past two years. But TM doesn’t look bad, all things considered. The stock has recently hit all-time highs.

Daimler (DDAIF) saw quarterly revenues slip from $53.3 billion to $47.2 billion over the past two years, but the company is definitely heading in the right direction technically; it sold off its fuel cell assets and is now intent on catching up to Tesla by focusing on electric vehicles. In 2021, Mercedes will offer the EQS, a battery-powered counterpart to its S-class sedans, for over $100,000, and following that will come a wide range of models.

Volkswagen (VWAGY) had the best results of the big old automakers over the past two years; revenues dipped only slightly, from $70 billion per quarter to $69.6 billion. Valuation-wise, it’s still cheap, with a price/sales ratio of 0.12, and technically, its rally from 10 at the March bottom to a recent high of 21 is decent. Also, VW is actually selling electric cars in the U.S.—in small numbers.

BMW (BMWYY) is the only one of the old German automakers that has actually grown over the past two years; revenues are up from $25.2 billion per quarter to $30.8 billion. But it wasn’t because of electric cars. After an early start with the i3 and i8 in 2014, BMW retreated to the hybrid world and won’t market a pure electric car until 2025. As for the stock, despite having risen from 14 at the March bottom to a recent high of 30, it’s still not expensive; its price/sales ratio is just 0.47—and the dividend of 2.2% adds a little sweetener.

Honda (HMC) is not big enough to buy someone, so someone will probably buy it. Not that Honda is doing badly. Revenues have only dipped a bit over the past two years from $36.6 billion in a quarter to $34.6 billion. But there’s no momentum here, and no electric future, given that Honda also went down the fuel cell road. The stock has rallied from 20 at the March bottom to a recent high of 30, and that means it’s a real underperformer.

Subaru (FUJHY) is the smallest of the Japanese automakers, and the good news is that its revenues have grown over the past two years, from $6.9 billion per quarter to $7.2 billion. The bad news is the stock is quite soft, having rallied only 25% from its March low to its recent high. Subaru has no electric car offerings today but is hoping to partner with Toyota to make some.

FiatChrysler (FCAU) has no electric cars, but just last year announced that it will build an electric Ram pickup truck. Before then, though, it’s going to merge with Peugeot. The good news here, aside from the merger, is that the stock is cheap, with a price/sales ratio of 0.29, and revenue growth was actually up over the past two years, from $27.5 billion per quarter to $30.3 billion. As for the stock, it’s up from 6 at the March bottom to a recent high of 19, a rather impressive recovery.

Nissan (NSANY) has been making electric cars for 10 years. Nissan hasn’t parlayed that early start in the electric vehicle world into any kind of success. Quarterly revenues have fallen from $27.8 billion to $18.2 billion over the last two years, and the company has lost money in the past three quarters. As for the stock, it’s rallied from 6 to 10 since the March bottom, but remains in a long-term downtrend.

Tata Motors (TTM) has now owned the Jaguar and Land Rover brands for 12 years—but the past two years have been rough at the company (which also sells plenty of cheaper, more utilitarian vehicles in India), with revenues falling from $12.6 billion per quarter to $7.4 billion. Both of the company’s iconic brands have dabbled in electric models, but the world has barely noticed. Still, the stock is cheap, selling at a price/sales ratio of 0.30—and the stock is up from 4 at the bottom to a recent high of 13, rather strong.

The New Electric Vehicle Stocks
Tesla (TSLA) is the company that every automaker is trying to emulate today in some way. In 2020, the company delivered nearly 500,000 vehicles, up 36% from the year before. Over the past two years, quarterly revenues have swelled from $7.2 billion to $8.8 billion. Earnings continue to boom. And the company continues to raise cash, which enables the production of new Gigafactories (in Austin, Berlin and China), which will enable continued production growth. So fundamentally, all is well at the company. The problem for me lies with the stock, which is up more than 2,000% from its 2019 low and more than 700% since the start of 2020. The result is a market capitalization of $700 billion and a price/sales ratio of 25, which is a sign of how much investors love this stock today. And as all investors know, stocks bottom when they are least loved, and top when they are most loved. I’m not saying it should be sold; I also know that trends can go farther than expected. Those who have owned Tesla stock since late 2011 know the trend has been very good to them. So for long-term investors with big profits, my rating today is still hold.

Nio (NIO) makes “premium smart electric vehicles” for the Chinese market. Quarterly revenues have grown from $500 million to $666 million over the past two years, and even though there are no profits yet, the company has a market capitalization of $150 billion, a sign of very great expectations. (That’s a price/sales ratio of 82, even higher than Tesla’s!) As for the stock, it was very hot through the second half of 2020, hitting a peak of 57 in late December and correcting minimally since.

BYD (BYDDF) is the number two Chinese automaker by market capitalization ($81 billion) but number one by revenues; quarterly revenues over the past two years have grown from $4.8 billion to $5.4 billion. The company’s vehicles include internal combustion and hybrid vehicles, but there’s no question the company is pushing hard to serve the market for electric cars. And the market likes what it sees, as the stock is very strong, and the price/sales ratio is just 5, fairly reasonable in this group.

Li Auto (LI) is young; the company only started making electric cars in China in late 2019. But by the end of 2020, it had delivered 30,000 vehicles, and third-quarter revenues were $370 million, signifying a good fast start. With a market cap of $29 billion, LI is pricy, but the chart is healthy, currently on a normal correction after hitting a high of 48 two weeks ago.

Xpeng (XPEV) started before LI but has made slower progress, which is one reason the stock is cheaper, with a market capitalization of “only” $18 billion. That’s a price/sales ratio of 33; third-quarter revenues were $293 million. The chart is young—only public since August—but it’s healthy, currently on a normal pullback after hitting a high of 75 in late November.

Workhorse (WKHS) was born from an old GM business unit, taken over by Navistar, and then acquired by AMP Electric Vehicles, which changed the name. The company is currently manufacturing electric delivery vans (in small quantities) in partnership with Ryder (and others) at a plant in Indiana. With a market capitalization of $2.8 billion and a positive chart, it’s clear that expectations are high.

Nikola (NKLA) is a Utah startup with dreams of building electric semi-trucks powered by hydrogen fuel cells. The company has no revenues yet, but the stock has a market cap of $6.3 billion, indicating great expectations. Technically, however, the stock is a disaster, down 83% since its June peak as several potential deals have collapsed.

Lordstown Motors (RIDE) plans to use an old GM factory to build light duty electric trucks for fleet owners, emphasizing the lower maintenance costs of electric vehicles. With a market capitalization of $3.5 million, but no revenues, it’s one more sign of the great expectations in this segment. The chart shows a process of consolidation around 20 in recent months.

The Smaller Electric Vehicle Stocks
Fisker (FSR) is led by Henrik Fisker, who has a legacy of designing strikingly beautiful vehicles (for BMW, among others). But out on his own, while he’s produced some very expensive cars, he’s not yet made a profit at it, nor quite succeeded (yet) in making cars in volumes to serve the mass market. Now he’s promised the Fisker Ocean, an SUV that’s billed as “The World’s Most Sustainable Vehicle,” featuring a solar roof, recycled carpeting and vegan interior among other attractions. With no production yet and no revenues, the market capitalization of $1.1 billion tells us investors are expecting good things. The chart is moderately healthy, and not overinflated like so many in this group.

Greenpower Motor (GP) is a Canadian company focused on the electric bus market. Revenues have grown from $2.5 million to $2.8 million over the past two years. The market capitalization is $590 million, and the chart is strong.

ElectraMeccanica (SOLO) has a market capitalization of just $550 million, so we’re in small-cap stock territory here—and we’re talking about a small electric car as well. In fact, the Solo seats only one person—and has only three wheels! Currently imported from China, the Solo’s price is $18,500, but the company’s plan is to open an assembly plant in either Arizona or Tennessee—and drop prices as scale grows. The chart is actually healthy, currently on a normal correction after hitting a high of 13 in November.

Canoo (GOEV) is a Los Angeles-based company with dreams of vehicle membership instead of ownership, fashion-forward urban vehicles and multi-purpose electric delivery vehicles—but there are no revenues yet. From my east coast perch, it appears that Canoo risks letting style take precedence over substance. A market capitalization of $440 million tells us there’s some market interest.

Electric Vehicle Stocks to Buy Now
This is a great sector to invest in, as revolutionary developments challenge the old guard of the industry. But I don’t think there’s any hurry to invest; I think it’s wise to look for good set-ups, like pullbacks to 50-day moving averages and solid bases. And what electric vehicle stocks would I focus on this year?

My first picks are the four Chinese stocks, NIO, BYDDF, LI and XPEV. They’re all growing and they’ve got a big hungry market to serve.

But I would also consider WKHS, RIDE and GP, which are focused on the booming commercial electric vehicle market in America.

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