The electric vehicle revolution is essentially here. It will be expensive and disruptive. It will create enormous opportunities for investors of every stripe.
Real Money contributor Jim Collins believes that it will come in large part from the mainstream market that EVs have so far largely ignored. “Elon Musk can bring on stage a guy in a robot suit at Tesla’s (TSLA) – Get Tesla Inc Report AI Day and grab all the media attention, but the move toward electrification won’t be that simple. Also, crucially, it won’t just involve entry-luxury and luxury cars, which comprise the entirety of Tesla’s current offer,” Collins wrote recently in Real Money.
The shift to electric vehicles is much bigger than any one company, Collins adds. “What I am talking about here is a process. The process of shifting from vehicles powered by internal combustion engines to those powered by batteries. This process is enormous, global, and will cost trillions of dollars. Governments will subsidize some of that, but the real economic value (and, presumably, share price appreciation) will be created by the true innovators.”
However, the global semiconductor shortage for nearly a year has caused grief for automakers, as the COVID-19 pandemic has hurt assembly lines in Southeast Asia. Production delays in Malaysia, Vietnam and the Philippines are forcing automakers to cut production. That’s because the chips are essential to the new generations of vehicles, which require computing power.
On Thursday, the White House held its second semiconductor summit in five months, featuring companies like Intel (INTC) – Get Intel Corporation (INTC) Report, General Motors (GM) – Get General Motors Company (GM) Report, Ford (F) – Get Ford Motor Company Report, Apple (AAPL) – Get Apple Inc. (AAPL) Report, Microsoft (MSFT) – Get Microsoft Corporation (MSFT) Report, Samsung and others. At the meeting, the White House asked companies to clarify the supply and demand in the market, the Washington Post reported.
The chip shortages are expected to cost the auto industry $450 billion in global sales through the end of 2022, the Post reported.
Pat Gelsinger, CEO of Intel, the U.S.’s largest chipmaker, has said that he expects shortages to last into 2023.
Tesla Chief Executive Elon Musk isn’t too worried about the semiconductor shortage that is hampering auto production, saying he expects the issue to be “short term.” Musk’s optimism comes from the production expected from new semiconductor plants that are planned or under construction.
“There’s a lot of chip fabrication plants that are being built,” Musk said during a joint session with Stellantis (STLA) – Get Stellantis NV Report and Ferrari (RACE) – Get Ferrari NV Report Chairman John Elkann, at Italian Tech week, Reuters reported. “I think we will have a good capacity for providing chips by next year.”
Ford announced this past week that the company will spend $50 million in partnership with battery recycling startup Redwood Materials to reuse raw materials from their electric vehicle battery packs to reduce its reliance on imports and avoid supply chain bottlenecks.
Ford said the partnership with the lithium-ion battery supply chain company is to build out a U.S. battery supply chain and battery recycling capabilities for electric vehicles.
“Our partnership with Redwood Materials will be critical to our plan to build electric vehicles at scale in America, at the lowest possible cost and with a zero-waste approach,” said Ford President and Chief Executive Jim Farley in a statement.
Here is a list of the electric vehicle stocks to watch:
Tesla Plans to Expand Full-self-driving Capability; Cathie Wood May Sell Tesla Shares
Cathie Wood of Ark Investment (ARK) said Wednesday that she would likely sell Tesla if the electric vehicle maker’s stock reaches her five-year target of $3,000 by the end of 2022. “If nothing were to change in our outlook, and we got to $3,000 next year, my guess is that we would be peeling out of it,” she said at an investment conference, according to Bloomberg. On Sept. 16, Ark sold 81,600 shares of Tesla, then valued at $61.7 million.
Tesla plans to expand what it calls its full-self-driving capability, but the new head of the National Transportation Safety Board reportedly may not be so keen on the idea. The move would help cars wend their way through cities. For now, the driver-assistance system is meant mostly for highways. But Jennifer Homendy, who last month took over as chairwoman of the NTSB, told The Wall Street Journal that Tesla shouldn’t go ahead with the change before taking care of what the agency sees as safety problems in the system.
Tesla stock rose 2.75% Friday to end at $774.39.
TheStreet Quant Ratings rates Tesla as a Hold with a rating score of C.
Ford Unveiled 2022 Version of Expedition; Carmaker Doubles Production of F-150 Pickup
Ford unveiled the 2022 version of the Expedition, its flagship SUV, which includes an array of driver-assist technology.
Morningstar analyst David Whiston puts fair value at $20 for Ford stock. “Ford is turning itself around by focusing on light-truck models in the U.S., which we think is the right move given light trucks are over 75% of U.S. industry new light-vehicle sales,” he wrote in July.
Shares of Ford have been trading quite well over the past few days, up 7% for the week. The carmaker was a top gainer on Thursday, aided by news that the company is doubling production of its all-electric F-150 pickup.
TheStreet Quant Ratings rates Ford as a Hold with a rating score of B-.
General Motors and Amazon Announce GM OnStar Guardian Emergency Services for Alexa Devices
General Motors and Amazon (AMZN) – Get Amazon.com, Inc. Report announced an extension of GM’s OnStar Guardian emergency services to Amazon’s Alex devices in homes to connect with OnStar emergency-certified advisors by saying, ‘Alexa, call for help,’ during crisis situations, such as house fires, medical emergencies, break-ins and more.
GM has sagged 14% over the past three months, as the global chip shortage has constrained auto output. However, Morningstar analyst David Whiston puts fair value for GM at $62. “We see GM’s aggressive investment in an electric and autonomous future as more important than 2021 results,” he wrote last month after the company reported disappointing earnings for the second quarter.
“We think General Motors’ vehicles are of the best quality and design in decades. The company is already a leader in trucks, so a competitive lineup in all segments, combined with a much smaller cost base, says to us that GM is starting to realize the scale to match its size.
TheStreet Quant Ratings rates GM as a Buy with a rating score of B.
Li Auto Lowers Q3 Delivery Estimate; Shares Fall Sharply
Li Auto (LI) – Get Li Auto Report shares fell sharply this past week after the Chinese electric vehicle maker revised its third-quarter delivery estimate downward to 24,500 vehicle deliveries from 25,000 to 26,000 previously.
The company attributed the reduction to a decline of semiconductor production in Malaysia, thanks to the COVID-19 pandemic. “The recovery of the chip supply has been slower than expected,” Li said.
Other Chinese EV shares dropped too, with NIO (NIO) – Get NIO Inc. Sponsored ADR Class A Report stock down 5.68% for the week and XPeng (XPEV) – Get Xpeng Report down 9.4% in the past five trading days.