Electric vehicle stocks are struggling overall due to the continued global semiconductor shortages and supply chain barriers.
However, Real Money's Jim Collins says there's more than one way to play the burgeoning market than just Tesla. Investors can capitalize on success by investing in the companies that will underpin the entire sector.
Companies that build products and technology for the EV market without actually manufacturing the cars themselves may offer investors opportunities they haven't considered.
Real Money's Jim Collins explored this idea recently in a piece identifying some of the plays he's keeping an eye on: Read Here Are 5 Electric Vehicle Accessory and Tech Names to Watch; and get more of his trading ideas and investing strategies.
Collins writes: "In the interest of presenting some compelling emerging growth ideas in this mega-cap-dominated market, I decided to run with the ball myself." All of the companies that Collins mentions build products and technology for the EV market without actually manufacturing the cars themselves.
Collins says that in an emerging space, the best thing you can do is pick the right winners. Investors who can successfully pick the car companies that will dominate electric vehicles, they’ll do very well.
But when there’s no good way to know who will win or lose in advance, the next best thing is to invest in the industry at large. Buy stock in the companies that build things every electric vehicle will need. It doesn’t matter whether Tesla (TSLA) - Get Tesla Inc Report, Ford (F) - Get Ford Motor Company Report or General Motors (GM) - Get General Motors Company (GM) Report crushes this market, you’ll be sitting on a stock with value to any (or every) winner.
Amazon-backed (AMZN) - Get Amazon.com, Inc. Report electric vehicle company Rivian Automotive confirmed Friday that it had filed a draft registration with the Securities and Exchange Commission for an IPO.
The company is seeking a roughly $80 billion valuation and hopes to execute the IPO around the Nov. 25 Thanksgiving holiday, Bloomberg reported, citing people who asked not to be identified. If the company were to go public at an $80 billion market capitalization, it would be one of the biggest debuts on that basis of the year.
In July, Rivian said it had closed a $2.5 billion funding round led by existing investors Amazon, Ford and T. Rowe Price. The company has raised about $10.5 billion to date.
The Covid-19 pandemic has resulted in supply-chain disruptions and parts shortages that have forced Chief Executive Officer R.J. Scaringe to postpone its model launches several times. Last month, Rivian announced that it would delay the deliveries of its debut R1T pickup to September after originally planning to debut this month.
The company also moved the production debut of its R1S electric SUV, the startup's second planned model, to sometime in the fall after originally slating an August debut for the vehicle. But, the company has not yet delivered any models to retail customers.
In February, Amazon began testing a fleet of Rivian electric-powered vans in Los Angeles, about a year after the company ordered 100,000 of the custom delivery vehicles.
Here is a list of the electric vehicle stocks to watch:
Tesla Shuts China Factor on Chip Shortage
Tesla (TSLA) - Get Tesla Inc Report shares were sliding on reports that the electric vehicle maker's gigafactory in China faced closures linked to the global semiconductor shortage. Bloomberg reported that the Shanghai production site was halted for around four days last month amid a backlog in chip supplies that largely affected the clean-energy carmaker's Model Y SUV.
The report followed a Tweet from founder and CEO Elon Musk that suggested the new Tesla Roadster, slated for release later this year, could be delayed until 2023. Musk said last month that Tesla is "operating under extreme supply chain limitations regarding certain 'standard' automotive chips," and told investors in July that it could impact production rates over the second half of the year.
Ford Grapples With Supply Chain Bottlenecks
Ford Motor reported a significant slump in overall August sales, typically one of its strongest months of the year, as the carmaker continues to grapple with supply chain bottlenecks and chip shortages that are hitting rivals in markets around the world.
The company said August sales fell 33.1% from last year to 124,176 vehicles, taking the overall annual pace of sales down from around 18 million at the start of the year to around 13 million at present. Still, a solid gain in electrified vehicles sales, which surged 67.3% from last year to 8,756 vehicles, underscoring recent reports that suggest it is doubling production targets for its F-150 Lightning amid a surge in customer demand for the new electric pickup.
General Motors Will Cut Production
General Motors (GM) - Get General Motors Company (GM) Report said that it will cut production at the majority of its North American plants this month, including Fort Wayne, Indiana, Silao, Mexico and Wentzville, Missouri. The company posted weaker-than-expected second-quarter earnings last month.
Lordstown Motors Names New CEO
Shares of Lordstown Motors (RIDE) - Get LORDSTOWN MOTORS CORP. Report soared the most in 10 months after the electric-car maker named former Icahn Enterprises boss Daniel Ninivaggi as its new CEO. Ninivaggi succeeds Steve Burns, who along with Chief Financial Officer Julio Rodriguez resigned in early July.
The electric vehicle maker demonstrated its Endurance pickup truck at the Northeast Chapter of the American Association of Airport Executives’ Annual Conference. Lordstown drew cautious commentary from analysts after the company said it was ready to start "limited production" of its electric pickup truck in September. The company, which also announced a second-quarter loss, said it will begin limited production of its Endurance pickup truck in late September.
Nio Trimmed Forecast for Third-Quarter Deliveries
Nio (NIO) - Get NIO Inc. Sponsored ADR Class A Report shares fell this past week after the Chinese electric vehicle maker trimmed its forecast for third-quarter deliveries. “In light of the continued uncertainty and volatility of semiconductor supply, the company prudently adjusts vehicle production and expects to deliver approximately 22,500 to 23,500 vehicles in the third quarter, revised from the previous outlook of 23,000 to 25,000 vehicles,” Nio said in a statement. NIO delivered 5,880 vehicles in August, representing 48% year-over-year growth. The company posted better-than-expected second-quarter earnings, reporting a jump in revenue and raised its guidance.
Earlier this month, Nio shares fell after a Chinese executive reportedly died in an accident while driving one of the Chinese electric-vehicle maker's model ES8 SUVs. He died after activating the autopilot navigation system in his SUV, according to reports from several Chinese media outlets.