Electric vehicle sales are growing rapidly around the world as the cost of batteries declines, charging infrastructure improves, and range anxiety decreases for buyers. An analysis from Deloitte predicts that global sales of electric vehicles will grow from 2.5 million units in 2020 to 31.1 million per year in 2030, or about 29% of all vehicles sold.
This growth opens up a huge opportunity for electric vehicle companies who can build popular products and make vehicles profitable. While You’re here (NASDAQ: TSLA) attracts the most attention in the industry, I think Fisker (NYSE: FSR), General Engines (NYSE: GM), and Proterra (NASDAQ: PTRA) are the stocks that investors should buy today.
One of the most unique business models in electric vehicles is that of Fisker. The company does not build a factory, like most competitors, and does not even build a service network. Instead, the company outsources most of the value chain, with the exception of vehicle seating and sales and marketing functions. The goal is effectively to trivialize the rest of the business, capturing the design and branding value of its EV.
The model is compelling because it could allow Fisker to scale faster than its competitors with less capital and lower financial risk. Owning the plant is actually one of the main reasons that automakers can go bankrupt when demand drops, and Fisker won’t.
The risk for Fisker is not having sufficient infrastructure to run the business. The company relies on contractors to build vehicles and even maintain them, which could lead to misaligned incentives in the value chain. But given the potential for disruption, I think this is an EV stock that’s worth betting on.
General Motors has said it expects to be a fully electric vehicle company by 2035 and is spending $ 35 billion to make the transition possible. But it’s not just GM’s vehicles that make them a great stock of electric vehicles, it’s the company’s controlling stake in self-driving company Cruise that could really disrupt the auto industry.
GM developed the custom Cruise Origin (pictured above) with Cruise, a steering wheel-less electric vehicle that is expected to last 1 million miles. GM will be the Origin to Cruise supplier and will also participate in the financing. If autonomous vehicles take off, GM will not just be a supplier, it could be the owner of a leader in autonomous driving technology.
I think there are a number of ways that GM can benefit from the growth of electric vehicles. GM-branded vehicles might be one of them, but if the future of transportation is self-driving vehicles, Cruise Origin could be the future of electric vehicles.
A potentially important market for electric vehicles is that of buses and large utility vehicles, where Proterra is a forerunner. The company launched its own line of electric buses called the ZX5, but it now also manufactures powertrains for a variety of industrial vehicles, from buses to construction vehicles.
What’s great about Proterra’s strategy is that it allows the company to be an expert in a subset of the electric vehicle market (transmissions) while leaving other parts of its manufacturing behind. to expert partners (such as excavators and school buses).
Proterra is very new to the electric vehicle market and only generated $ 59 million in revenue and a gross margin of 2% in the second quarter of 2021. But if commercial vehicles start to be electrified in large numbers, it could being a key supplier to multiple industries – and that’s why it is a leading electric vehicle inventory today.
Sustained growth of electric vehicles
Momentum is clearly in favor of electric vehicles, and Fisker, GM and Proterra have the business models to win in the market. This is why they are my top picks to support the growth of the industry over the next decade.
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