The electric vehicle (EV) revolution has begun and 2021 could be a bombastic year for electric car makers and related companies globally. While the fight against the pandemic continues, global warming concerns keep bothering countries across the globe. President Joe Biden has already made EVs and green initiatives a top priority for the United States and supports the rollout of EVs with big tax incentives and government funding.
EV Revolution Push Auto Giants to Pivot
The EV industry is young and growing rapidly. The number of pure-play EV manufacturers compared to traditional automakers is significantly low. However, traditional automakers are also producing electric vehicles and investing millions to catch up with the conversion. On Jan 28, General Motors reported that it plans to end production of all diesel and gasoline-powered cars, trucks and SUVs by 2035. The automaker will shift its entire new fleet to EVs as part of a broader plan to become carbon-neutral by 2040.
Many other automakers are also joining the race like German auto giant Volkswagen topped EV sales in Norway last year leaving Tesla, Inc. TSLA in the second position. Tech giant Apple is also venturing into the electric car race. On Feb 3, Korean automaker Kia Motors reported that Apple will invest $3.6 billion in Kia as part of a deal to build Apple cars in Kia's U.S. factory.
Per a EV-Volumes.com report, 2020 had been a great year for plug-in vehicles, it generated sales of 3,24 million, compared to 2,26 million in 2019. The report also states that EV sales in the United States outperformed the automarket, thanks to the introduction of the Model-Y by Tesla. As said in the article, the EV market is dominated by Tesla, which had 62% of all Plug-in Vehicle sales and 79% of all BEV sales in America. Looking at the future, IHS Markit forecasts global EV sales to growth of 70% in 2021 and in 2025 global sales will top 12.2 million, at a CAGR of 52%.
Biden’s Administration to Support EV Adoption
Just after the inauguration, President Biden signed an executive order to rejoin the Paris agreement on climate change, which Trump had withdrawn from the agreement in 2017. To tackle global warming and move quickly on climate change action, he directed the administration team to consider revising vehicle-fuel emissions standards.The Trump administration hadcut down emissions standards, weakening the climate rules in favor of fossil fuel producers.
Biden has prioritized climate change and that includes giving consumers incentives to adopt electric vehicles. In the current scenario, consumers can get a federal tax credit of up to $7,500 on the purchase of an all-electric or plug-in hybrid EV but the facility is not available for all EVs. However, Biden’s administration supports “cash for clunkers” rebate program. This would encourage car buyers in America to trade their older vehicles for new EVs. This will help in rapid conversion of high carbon footprint creating vehicles and boost sales of EVs. According to the U.S. Department of Energy, the United States currently has less than 29,000 public EV chargers, which cannot cater to the entire country's needs. To counter the deficit, Biden has promised public investment of $400 billion in clean energy to boost battery technologies and electric vehicles. A part of that investment will also be used in installation of 500,000 new EV charging outlets by the end of 2030.
3 Stocks to Watch Out For
The advancement of technology, rising concerns over global warming and government’s initiatives to support clean energy will play a crucial role in boosting the EV market. Here are three EV and related stocks that investors can look out for.
Ford Motor Company F designs, manufactures, markets, and services a range of Ford cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles. The company plans to invest $29 billion in electric and autonomous vehicles. Ford’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Automotive - Domestic industry’s projected earnings growth of 26.5%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 20.7% upward over the past 60 days. Ford flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Magna International Inc. MGA designs, develops and manufactures automotive systems, assemblies, modules and components. The company is forging production partnershipswith LG Electronics to supply electric motors, inverters and onboard chargers and many more. Magna’s expected earnings growth rate for the current quarter is more than 100% compared with the Zacks Automotive - Original Equipment industry’s projected earnings growth of 24.9%.
Magnaflaunts a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved 5.2% up over the past 60 days.
NIO Limited NIO designs, manufactures and sells electric vehicles. The company that belongs tothe Zacks Automotive - Foreign industry has an expected earnings growth rate of 33.9% for the current year. The Zacks Consensus Estimate for its current-year earnings has moved 8.9% up over the past 60 days. Nio carries a Zacks Rank #3 (Hold).
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