Opportunities remain in EV stocks despite a rough start to 2022.
It’s been a bumpy ride for electric vehicle stocks so far in 2022. Vehicle production declined almost across the board, largely due to headwinds in China, according to a Bank of America analysis. This, coupled with continued strain from COVID-19 and a semiconductor shortage, has increased the risk profile for the sector considerably. That said, investors looking for long-term plays can still find value in the stocks of companies that make EVs and the batteries that go into them. Here are seven of the best EV stocks to buy, according to industry experts.
Nio Inc. (ticker: NIO)
Not only is Nio’s latest EV, the ES7 SUV, a much-anticipated release promised at the end of August, but Nio is also becoming a global leader in battery swapping technology, says Jane Edmonson, CEO and co-founder of EQM Indexes, which provides the EQUM Lithium and Battery Technology Index. The company operates more than 900 swap stations across China, and plans to launch more throughout Europe as well. “The stock is also benefiting from the reopening of trade in China as COVID restrictions are being lifted,” Edmonson says.
Tesla Inc. (TSLA)
It’s hard to have a list of the best EV stocks and not mention Tesla. As the world’s top EV maker, “it remains the leading technology innovator in the space, especially with regard to battery chemistry,” Edmonson says. But that lead is shrinking, she says, as new competitors join the market, such as many of the names on the rest of this list. Tesla recently announced a proposed 3-for-1 stock split that would take place as a stock dividend. The split won’t be approved until the August shareholder meeting, but if it goes through, it would make shares of the company more accessible to individual investors.
BHP Group Ltd. (BHP)
As a nickel miner, BHP Group may not be the first name you think of when considering EV stocks. But nickel is an essential component of EV battery chemistries, Edmonson says. The supply of nickel is struggling to keep up with demand, she says. This should pose a boon for nickel mining companies like BHP. “Tesla and other EV automakers have been playing around with the battery chemistries to reduce cost,” Edmonson says. Last year, Tesla signed a deal with BHP to obtain sustainably sourced nickel from Australia. Note that BHP trades on U.S. stock exchanges as an ADR, or American depositary receipt, which is simply a certificate issued by a U.S. bank that represents shares of a foreign company’s stock. This means that while BHP is a foreign company, dividends and stock prices will be in U.S. dollars.
Sociedad Quimica y Minera de Chile SA (SQM)
“Sociedad Quimica y Minera de Chile is a specialty chemicals company whose stock has been soaring on higher lithium prices,” which have been spurred by accelerating EV demand, Edmonson says. As a major lithium producer, the company saw a 12-fold increase in quarterly profits thanks to higher lithium prices, she notes. While Bloomberg released a report at the end of May forecasting lower lithium prices in the future, Morningstar senior analyst Seth Goldstein doesn’t consider this a reason to change the price forecast for lithium producers like SQM. With a 3.3% trailing dividend yield, it can also provide some decent income for your EV stock portfolio. SQM also trades as an ADR, so that dividend payout will come as U.S. dollars.
Albermarle Corp. (ALB)
Albermarle is another company benefiting from higher lithium demand. The U.S.-based lithium producer generates 40% of its revenue from lithium and “has been expanding globally to help meet rising demand,” Edmonson says. “They recently announced a third chemical conversion plant in Chile, positioning the company to double its lithium capacity. It has also made additional investments in Australia to further increase capacity.” As with SQM, Goldstein notes that even if Bloomberg is right about falling lithium prices, it doesn’t change the outlook for producers like ALB.
General Motors Co. (GM)
If you want a name you can recognize and an EV stock that’s less speculative than a startup, General Motors is a good option, says Josh Simpson, vice president of operations and investment advisor with Lake Advisory Group. GM has committed to offering 30 new electric vehicles by 2025. “Given their production capabilities, name recognition, distribution network and capital available to invest in their production, they will be a significant player in the EV market in the coming years,” Simpson says. “They already went after Tesla’s customers directly once before when Tesla introduced the Model 3 and was unable to meet the demand for the car.”
Ford Motor Co. (F)
Companies like Ford and GM make more attractive investments not only because they’re more established, Simpson says, but also because of their stronger cash flows, distribution channels and brand recognition. In addition to plans to expand its EV offerings, Ford has also committed to investing in new plants to produce the batteries needed for electric vehicles. “Demand for the new Ford Lightning, their all-electric truck, as well as the Mustang Mach-E have exceeded expectations, and the company has committed to doubling their production ability already,” he says.
7 best EV stocks to buy:
— Nio Inc. (NIO)
— Tesla (TSLA)
— BHP Group Ltd. (BHP)
— Sociedad Quimica y Minera de Chile SA (SQM)
— Albermarle Corp. (ALB)
— General Motors Co. (GM)
— Ford Motor Co. (F)
More from U.S. News
Update 06/21/22: This story was previously published at an earlier date and has been updated with new information.