It’s been a mixed year for electric vehicle (EV) stocks. While Tesla (NASDAQ:TSLA) has achieved a healthy return of 51.2% so far and Crane Shares Electric Vehicle and Future Mobility Index ETF (New York:Kars) rose 23.8%, and Chinese electric vehicle stocks underperformed even as auto deliveries proved their strength. This is evident in the decrease of nearly 28% year-to-date in ETF Global X MSCI China Consumer Disc (New York:CHIQ), which includes shares of a number of electric car makers in that country in its 77-share portfolio.
2021 was also marked by the emergence of new players in the consumer and commercial electric vehicle segment. In general, the electric car segment has become competitive. The entry of traditional automakers into the electric vehicle space has intensified the competition.
However, there is significant scope for value creation from the sector. Electric vehicle companies with a technological advantage – whether it’s batteries as a service or self-driving capabilities – are more likely to gain or maintain market share. Moreover, as companies expand globally, there is a large market to deal with.
It should also be noted that various estimates indicate that the industry is poised for healthy growth through 2030. It is therefore likely that electric vehicle stocks will always be among the attractive investment topics in the next decade.
However, the industry is likely to see consolidation in the next few years. My focus is on electric car companies that are likely to be leaders or acquirers.
In 2022, let’s talk about seven electric vehicle stocks that are poised for a strong rally.
- Lucid Motors (NASDAQ:LCID)
- Rivian Cars (NASDAQ:countryside)
- Fisker (New York Stock Exchange:FSR)
- stronghold (New York Stock Exchange:F)
- Lee Otto (NASDAQ:In the)
- New (New York Stock Exchange:NIO)
- XPeng (New York Stock Exchange:XPEV)
Best EV Stocks of 2022 to Buy Now: Lucid Motors (LCID)
Among the emerging names, American electric car manufacturer Lucid Motors looks attractive for 2022. The company has already started delivering its first model. Initial bookings were encouraging and it has 17,000 vehicles backlog as of November 2021. This implies a $1.3 billion revenue backlog.
LCID stock is up more than 100% after the merger around $20 levels. However, there has been a correction in the recent past and it provides an attractive entry opportunity.
A major catalyst for 2022 will be the continued growth in vehicle deliveries with Lucid’s expansion into Canada, Europe, Middle East and Africa. In addition, the company is pursuing the second phase of manufacturing expansion, which will boost annual delivery capacity to 90,000 vehicles.
Lucid also has plans to enter China in 2023. In the same year, the company will launch its second model, the SUV. This will help further accelerate growth.
LCID’s stock is among the largest electric vehicle stocks to consider with the company’s focus on innovation and technology. The Lucid Air, for example, is the longest-range car rated by the Environmental Protection Agency (EPA), with a speed of 520 miles on a single charge. (Speaking of a single shipment, be sure to check out the latest version of Luke Lango, The electric vehicle charging revolution is in full swing.)
Overall, Lucid is in a position to capture a market share in the fast-growing electric vehicle market. I wouldn’t be surprised if LCID’s stock doubles in the next 12-18 months.
Rivian Automotive Corporation (RIVN)
After rising to highs of $180, RIVN stock has calmed down and is currently trading at $96. I think current levels are attractive for some exposure.
Mass deliveries of the company’s R1S SUV will begin in 2022 and there is a healthy pipeline for pre-order of 71,000 vehicles. It is also worth noting that the Rivian EDV truck has a backlog of 100,000 vehicles Amazon (NASDAQ:AMZN). During the last quarter, Rivian completed the certification process for the sale of its electric delivery truck.
In terms of manufacturing capacity, the Normal, Illinois plant has planned for an annual capacity of 200,000 vehicles. Rivian is also considering expansion with the Georgia facility, which will potentially have an annual capacity of 400,000 vehicles.
From a financial perspective, Rivian raised $13.7 billion from its most recent initial public offering. The proceeds will support the expansion of manufacturing capacity at both locations.
An important point to note is that the company reported negative free cash flow of $1.1 billion for the third quarter of 2021. This implies an annual cash outflow of $4.4 billion. The cash burn will likely continue and Rivian will need additional cash infusions in 2023 or 2024.
However, this is unlikely to be a reason for the stock to remain stagnant. Once car deliveries speed up, the RIVN stock will likely head higher.
Best Electric Vehicle Stocks of 2022: Fisker (FSR)
FSR stock is an interesting name among EV stocks that seem to be in good shape for 2022. In the past 12 months, Fisker’s stock has trended up 7%. After a long period of consolidation, the stock appears to be in a position to break out.
The company’s first product launch, the Fisker Ocean, is expected to launch in the fourth quarter of 2022. The vehicle has already received 62,500 signs of interest. With a marketing campaign underway in the US and Europe, Fisker Ocean’s launch is likely to do well.
It’s also worth noting that Fisker plans to release four vehicles through 2025. In this time frame, Fisker is targeting annual volumes of 200,000 to 250,000 vehicles. With ambitious long-term plans, FSR stocks look attractive.
Recently, Fisker announced a partnership with Bridgestone To provide total after-sales services to Fisker customers in France and Germany. Collaborations are likely to help accelerate expansion outside the United States. China is also a target market for Fisker Ocean and Project Pear.
Currently, FSR shares have a short interest of over 20%. I think the stock is likely to see a short-term rally in 2022. Moreover, pre-order inflation is likely to be another catalyst to the upside.
Ford is among the traditional automakers making significant investments in the electric vehicle sector. F stock is up more than 100% in the past 12 months. However, at a forward P/E ratio of 10.3, the stock remains attractive.
Ford CEO Jim Farley recently estimated that the company is likely to increase production of electric vehicles to 600,000 vehicles by 2023. This would make the company the second largest producer of electric vehicles in the United States.
With electric Mustang Mach-E, F-150 Lightning and E-Transit vehicles in the pipeline, Ford is well positioned to make headway in the electric vehicle segment.
Ford and South Korea SK . innovation It plans to invest $11.4 billion in the production of a new electric vehicle plant and three battery manufacturing facilities. Production of advanced lithium-ion batteries will begin in 2025.
The key point to note is that Ford reported adjusted free cash flow of $7.7 billion for the third quarter of 2021. The company has an annual cash flow potential of $30 billion. This provides significant financial flexibility for significant investment in the electric vehicle sector.
Ford also has ambitious plans for several new electric car models in China. This will help speed up the sales shift from traditional to EV.
Overall, the F stock looks attractive and is poised for a further rally in 2022 with electric vehicle developments being the catalyst. It is the third largest holding of the KARS ETF, mentioned above. It has a weighting of 5.31% of assets in a portfolio of 71 shares.
Best EV Stock of 2022: Li Auto (LI)
Chinese electric vehicle shares have underperformed in the past 12 months. I think LI is attractive at current levels and is poised to go higher relatively soon.
For the third quarter of 2021, Li Auto reported 25,116 vehicles have been delivered. Year-over-year, deliveries are up 190%. In the same period, revenue increased 199.7% to $1.15 billion.
Besides the headline numbers and strong growth, there are two important reasons to like Li’s stock.
First and foremost, the company’s auto sales growth has been driven only by one model, the Li ONE. With a more diversified portfolio in the next few years, deliveries are likely to remain strong.
Furthermore, the company reported free cash flow of $180.8 million for the third quarter of 2021. This means an annual cash flow of close to $800 million. Even at an early stage of growth, Li Auto was offering healthy operation and free cash flow. With strong financial flexibility, the company is in a position to make significant investments in innovation and expansion. As of the third quarter of 2021, the company reported cash and cash equivalents of $7.6 billion.
Li Auto also generated research and development expenditures of $137.9 million for the fourth quarter. On an annual basis, research and development expenditures increased by 165.6%. These investments will translate into innovation-driven growth.
Nio’s stock has been steadily declining. For the year to date 2021, the stock is down 38%. However, I think the stock is oversold at current levels. A sharp rise in 2022 seems very likely.
One reason to be optimistic about Nio for 2022 is the launch of new models. The electric car maker is planning three new models on its Nio Technology Platform 2.0. This is likely to ensure healthy growth in vehicle deliveries over the next 24 months.
Global expansion is another catalyst for growth. Nio plans to enter Germany, the Netherlands, Sweden and Denmark in 2022. The company has already established a presence in Norway. Europe is another big market for electric cars, and it’s at a turning point.
Nio is well positioned for robust international expansion from a financial perspective. As of the third quarter of 2021, the company announced cash and cash equivalents of $7.3 billion. The offering to the market in November 2021 helped Nio raise $2.0 billion.
So it looks like the company is fully funded for the next 12-24 months. With growth in vehicle deliveries coupled with vehicle margin expansion, Nio stock is likely to head higher. NIO stock, with 5.72% by assets, is the largest electric vehicle maker holding the CHIQ exchange-traded fund.
Best EV Stock of 2022: XPeng (XPEV)
Among Chinese electric vehicle stocks, XPEV has been the best performer in the past 12 months. Returns were marginally positive during this period. With strong growth in deliveries and a pipeline of new products, XPeng is likely to erupt to the upside.
In November 2021, XPeng unveiled a new model targeting international markets. The G9 SUV will be launched in China in the third quarter of 2022. This launch will support the growth of deliveries in 2023. It should be noted that the G9 will feature nvidia (NASDAQ:NVDAChips, lidar technology and semi-autonomous driving system. The car is likely to be “tech-heavy” and will attract global attention.
It should also be noted that the company launched the XPeng P5 smart family sedan in October 2021. This is the company’s third production model. Growth in P5 deliveries will have a positive impact on revenue through 2022.
XPeng saw a healthy increase in vehicle margin to 13.6% for the third quarter of 2021 compared to 3.2% for the third quarter of 2020. With continued growth in deliveries, margin expansion is likely to continue.
Like other Chinese electric car companies, XPeng also boosted its balance sheet to post solid growth. At the end of September 2021, the company announced $7.0 billion in cash and cash equivalents.
Overall, XPEV stock is among the top electric vehicle stocks to consider for 2022. With product launches, global expansion and margin improvement, there are catalysts ample. It is among the top 10 holdings of both KARS (2.8%) and CHIQ (3.08%) exchange-traded funds.
at the date of publication, Faisal Humayun He did not have (directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the author, and are subject to InvestorPlace.com’s posting guidelines.
Faisal Humayun is a Senior Research Analyst with 12 years of industry experience in credit research, equity research and financial modelling. Faisal has authored over 1,500 stock articles focusing on the technology, energy and commodities sector.