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3 Stocks to Watch as Shift in Electric Vehicles Ramps Up

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The adoption of electric vehicles (EVs) is set to accelerate as the world battles climate change and aims to reduce carbon dioxide emission. Notably, Morgan Stanley predicts that global electric vehicle sales are set to grow 50% in 2021 compared to growth of 2%-5% in sales of internal combustion engine (“ICE”) vehicles, as mentioned in a MarketWatch article. Moreover, per a report by Frost & Sullivan, electric vehicle sales in the United States are expected to reach 6.9 million units by 2025.

Batteries are the fuel for electric vehicles and hence their prices are important in determining the cost of an electric vehicle. Per a survey by BloombergNEF, lithium-ion battery pack prices have fallen 89% in real terms, from more than $1,100 per kilowatt-hour in 2010 to $137 per kilowatt-hour in 2020. The survey further mentioned that annual battery prices fell 13% in 2020 compared to 2019. In fact, the survey predicts that by 2023, average pack prices will be $101 per kilowatt-hour. This means that automobile manufacturers will be able to produce and sell “mass market EVs at the same price (and with the same margin) as comparable internal combustion vehicles in some markets.” This should help in reducing the prices of electric vehicles and thereby reduce the advantage that ICE vehicles have so far benefited from.

Moreover, an accelerated shift toward EVs should see automobile manufacturers introducing new models to attract more buyers amid increasing competition. Per another report by BloombergNEF, 500 different EV models are set to be available globally by 2022. Moreover, the share of EVs as a percentage of new car sales is also expected to rise as the report predicts it to grow to 10% by 2025 compared to an estimated 2.7% share in 2020.

Meanwhile, charging stations are also required for the functioning of EVs and hence, the development of such infrastructure is integral to ensure that the shift to EVs continue. Notably, Berg Insight predicts that the number of connected EV charging points in both Europe and North America is set to increase, as mentioned in a Global Fleet article. The article states that EV charging points are expected to witness a CAGR of 38% from 0.9 million in 2019 to 4.4 million in 2024 in Europe and North America.

3 Electric Vehicle Stocks to Watch

As the trend toward adopting EVs accelerates, automobile manufacturers that are focused on EV manufacturing stand to benefit. Hence, it is a good to time to watch out for names that can make the most of this upswing. Notably, we have selected three such stocks that carry a Zacks Rank #1 (Strong Buy) or 3 (Hold). Moreover, all three stocks boast a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesla, Inc. (TSLA - Free Report) designs, develops, manufactures, leases and sells electric vehicles, and energy generation and storage systems in the United States and internationally. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 3.7% over the past 60 days. The company’s expected earnings growth rate for the current quarter is more than 100%.

Blue Bird Corporation (BLBD - Free Report) designs, engineers, manufactures and sells school buses and related parts in the United States, Canada, and internationally. The company offers Type C, Type D, and specialty buses; and alternative fuel applications through its propane-powered, gasoline-powered, compressed natural gas-powered, and electric powered school buses. The company currently has a Zacks Rank #3. Its expected earnings growth rate for the current year is 46.3%.

NIO Limited (NIO - Free Report) designs, manufactures, and sells electric vehicles in the People's Republic of China, Hong Kong, the United States, the United Kingdom and Germany. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings has improved 2.9% over the past 60 days. The company’s expected earnings growth rate for the current quarter is 36.4%.

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