Root, Al.Barron's (Online); New York (Apr 6, 2021).
Electric vehicles sales worldwide will top $5 trillion over the next decade—if one analyst is on the money.
Wedbush's Dan Ives is making the bold prediction based on the "green tidal wave"—everything from greater environmental awareness to falling battery prices to government incentives—that he thinks is coming.
Still, even Ives' eye-popping sales forecast might not be enough for all the traditional and start-up auto makers to thrive, simply because of the sheer number of electric vehicles coming to automotive show rooms.
Of that $5 trillion, the U.S. should account for about $1.5 trillion, Ives tells Barron's. That implies big growth. Last year, EV leader Tesla (ticker: TSLA) made about 80% of all battery-only electric vehicles sold in the U.S., which amounted to about $15 billion in sales. The $1.5 trillion number is 100 times greater than Tesla's 2020 U.S. sales. On Monday, Ives upgraded Tesla stock to Buy from Hold and raised his price target to $1,000 a share.
Ives isn't the only one forecasting explosive growth. After looking at the EV industry in Europe, J.P. Morgan concluded the "EV revolution is under way." Even so, J.P. Morgan has concerns about the market becoming too crowded—counting more than 90 all-electric vehicles set to launch between now and 2025.
J.P. Morgan's European auto analyst, Jose Asumendi, believes German premium auto makers, such as BMW (BMW. Germany), are in a good position to compete with Tesla. He also notes Volkswagen (VOW3. Germany) has the most aggressive goals of any traditional auto maker, and he expects Renault (RNO. France) to lead in the lower cost segment of the European EV market.
Asumendi rates Renault shares Buy and has an $81 price target. He rates Volkswagen preferred shares Buy as well, with a $300 price target. But he rates BWM shares Hold and his target price is about $100.
In the U.S., Raymond James analyst Pavel Molchanov counts 15 all-electric or plugin hybrid, or PHEV, sport-utility vehicles available in 2021. He worries that number will make it tougher for Fisker's (FSR) Ocean SUV to stand out when it arrives in late 2022 , only a little before same time General Motors (GM) will begin to sell its competing all-electric Hummer truck and SUV.
"In January, we noted that the landscape of electric SUVs is relatively less crowded as compared to passenger EVs," Molchanov wrote in a Monday report. He believes consumers will benefit from the expanding range, but "auto makers will need to work that much harder to stand out amid all the new entrants."
The 15 available today: Audi e-tron, BMW X3 xDrive 30e, Ford (F) Escape PHEV, Hyundai Kona EV, Jaguar I-PACE, Jeep Wrangler 4xe, Kia Niro EV, Mercedes-Benz EQC, Mitsubishi Outlander PHEV, Porsche Cayenne EHybrid, Rivian R1S, Subaru Crosstrek PHEV, Tesla Model X, Toyota (TM) RAV4 Prime, and Volvo XC90 Recharge.
More SUV supply is one reason Molchanov is cautious on Fisker stock. He rates shares Hold and doesn't have a target price. Five out of nine, or 56%, of analysts covering Fisker stock rate shares Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 60%.
More competition might be the reason smaller EV stocks are struggling year to date. Shares of Fisker, Lordstown Motor (RIDE) and Canoo (GOEV)–three U.S. based EV start-ups with passenger car and truck offerings—are down about 20% on average.
Fisker stands out, though. Shares are up about 11% year to date but down about 50% from their 52-week high. The S&P 500 and Dow, by comparison, are near all-time highs and both up roughly 9% so far in 2021.
Competition fears might also be roiling the Chinese EV stocks as well. Shares of NIO (NIO), XPeng (XPEV) and Li Auto (LI) are all down year to date, by about 14% on average. Stock in Tesla is holding up better, down about 2% year to date.
Growth is always great, but supply proliferation is the other side of the equation in a booming market.
Write to Al Root at email@example.com
It's an EV Revolution. What So Many Cars Mean for Investors.
Credit: By Al Root