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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Three Ways To Play The 2022 EV Boom

  • The electrification push in the auto industry has hit another gear in 2021
  • Wall Street analysts remain highly optimistic about the sector's prospects in 2022
  • In 2022, all-electric models slug it out for market share with robust demand tailwinds already in place

By their own standards, electric vehicle stocks have had a rather quiet year in 2021 after enjoying a bumper season in 2020. With just four trading sessions left in the year, the sector’s favorite benchmark - Global X Autonomous & Electric Vehicles ETF (DRIV) - has climbed 26.5%, just edging out the broad market benchmark S&P 500’s 25.8% gain.

Despite the latest setback after West Virginia Senator Joe Manchin scuttled Biden’s $1.75 trillion Build Back Better deal, electric vehicle stocks have been making another round of gains on renewed hope that incentives for EVs will still be included in legislation from Washington, particularly in the Green Tidal Wave.

And now a stream of analysts are saying 2022 could be another hot season for the sector as the electrification drive puts the pedal to the metal.

The electrification push in the auto industry has hit another gear after Toyota Motor (NYSE:TM) made its 30 by 30 announcement whereby the leading Japanese automaker unveiled plans to launch 30 new all-electric cars by 2030. Toyota has announced that it aims to sell 3.5 million electric vehicles a year globally in 2030, and also ramp up investment in battery development to ¥2 trillion ($18 billion) from a previous target of ¥1.5 trillion.

The latest announcement places the giant ICE manufacturer on the same all-electric trajectory as Ford (NYSE:F), General Motors (NYSE:GM) and Volkswagen (OTCPK:VLKAF).

The leader of the space, Tesla Inc. (NASDAQ:TSLA), is expected to continue consolidating its lead after promising to deliver the Cybertruck to customers by the end of 2022. The all-electric truck features a range of up to 500 miles; 0-to-60 mph speed is listed at 2.5 seconds and is expected to price at around $40K.

And analysts are now saying the rubber will meet the road next year as all-electric models slug it out for market share with robust demand tailwinds already in place.  Here are some ‘sleeper’ EV stocks to watch out for in the coming year.

#1. Rivian On November 10, San Jose, California-based electric vehicle maker Rivian Automotive Inc. (NASDAQ:RIVN) became the latest name to join the ever-growing list of EV manufacturers going public.

As widely expected, Rivian’s IPO was another blockbuster after the company managed to raise about $13.5 billion by selling 175.95 million shares at $78 a pop. RIVN shares would go on to hit an intra-day high of $179.47 six days later before falling back to earth to close at $96.84 after Friday’s session before the Christmas break. Amazingly, RIVN still boasts a market cap of $86.7 billion, a no-mean feat for a company that is just beginning to book its first sales.

The latest crash appears closely connected to last week’s announcement that Rivian and Ford Motors (NYSE:F) have shelved plans to collaborate on developing an electric vehicle, with each company opting to go solo.

"Both their EV development and ours have advanced to a significant degree since the original deal was formed, giving each company more confidence to move ahead independently,’’ a Ford representative has told the Wall Street Journal.

The company has also disappointed some investors with a slower-than-anticipated production update alongside its first earnings report.

However, there are a couple of other bullish catalysts working in Rivian’s favor.

First off, the company is expected to commence delivery of R1S SUVs during the early part of 2022. The $70K quad-motor model will have a 0-to-60 mph time of around 3 seconds and be able to tow up to 7,700 pounds. 

Related: Saudi Arabia Doubles Down On Asian Demand

Rivian has so far produced 652 R1 vehicles through December 15 and delivered 386 of those. The electric vehicle maker plans to expand annual production capacity to 200K vehicles a year out of its Normal, Illinois plant. The company also confirms that it will begin construction of its second manufacturing facility in the summer of 2022 with an annual capacity expected to clock in at around 400K units.

Second, Rivian still has the backing of several deep-pocketed investors.

Ford Motors paid a total of $820 million for Rivian’s Series B and D offerings and also bought $415 million of the EV maker’s convertible debt offering. Those early investments are now worth over $13 billion, meaning Ford owns a ~12% stake in Rivian and 10.5% of the voting power.

But Ford is just one of the large institutional investors who have placed their faith in Rivian, with eCommerce giant Amazon Inc. (NASDAQ:AMZN) being the other.

Amazon participated in no less than four funding rounds for Rivian, paying $1.35 billion, and also bought $490 million in convertible debt before buying 2.56 million shares worth $200M at the IPO. Overall, Amazon owns a 18.5% stake in Rivian after the IPO and holds 16.9% of the voting power.

Both Ford and Amazon are large, deep-pocketed investors who are unlikely to engage in panic selling at the first signs of trouble. This gives Rivian a level of stability that many early-stage EV startups lack.

Finally, Rivian has been widely touted as the next Tesla, and FOMO (Fear Of Missing Out) could start driving speculator dollars its way.

Indeed, some  analysts believe that both stocks can work if Rivian matches Tesla’s success, even to a much smaller degree, in winning a share of the EV market. Wedbush Securities managing director Dan Ives has argued that there will be such enormous growth within the EV sector that many companies will be able to thrive in the sectors. Many investors who missed out on Tesla’s meteoric rise since its 2010 IPO are hoping to ride Rivian from its early days.

In other words, there's more than enough pie to go around.

That’s something we can already attest to considering that the EV market has consistently been exceeding growth expectations by Wall Street.

#2. Ford

Ford Motors (NYSE:F) has lately been making serious inroads into the electrification drive.

The company is set to introduce the all-electric F-150 Lightning by the middle of 2022. The F-150 Lightning will have a range of 300 miles with an extended-range battery. A 0-to-60 mph speed of four seconds with a base price of $39,974.

Although the company sold a modest 21,703 units of its all-electric Mustang Mach-E through the first ten months of the year, according to Motor Intelligence, Morgan Stanley forecast Ford's EV unit sales will reach 150K in FY22 to rep 3.5% of Ford's volume, 473K units in FY25 to rep 11.5% of volume and 1.24M units by FY30 to represent 34% of volume. Ford has already overtaken General Motors (NYSE:GM) in EV sales in the United States.

Further, Ford has already taken 200K reservations for its hotly anticipated F-150 Lightning pickup truck, and plans to start converting reservations to full orders in January 2022, thus beating GM’s Chevy Silverado to the market by a full year. The F-150 Lightning pickup truck is an all-electric version of Ford’s best-selling passenger vehicle in the market, the F-150.

For clean energy buffs, Ford’s latest EV offering is, by many accounts, a masterpiece.

According to the company, it will be the first electric vehicle to serve as a “battery on wheels,” thanks to being equipped with an extended 9.6kWh battery that can power an average home for three days. Ford says the F-150 Lightning’s 9.6 kWh of Intelligent Backup Power can provide full-home power for up to three days on a full charge of battery,  a potential strong selling point following February’s Arctic Blast which left millions of homes in the dark for days on end.Demand for in-home generators in Texas has reached an all-time high since the February ice storms, meaning the battery system ‘add-on’ might have broad appeal to light truck buyers.

Solar, battery storage and energy services provider Sunrun Inc. (NASDAQ:RUN) has partnered with Ford to install the 80-amp Ford Charge Station Pro and home integration system that can be used to power the Intelligent Backup Power system. 

Ryan O’Gorman, Ford’s energy services lead, says that if your F-150 Lightning is plugged in when an outage occurs, Intelligent Backup Power will automatically kick in to power your home. When power is restored, the truck will automatically revert to charging its battery. Users will have to pay extra to install a home integration system on top of the Lightning's base price of $39,974 before any incentives.

#3. Fisker

Fisker, Inc.(NYSE:FSR) designs and manufactures electric vehicles and mobility solutions. Fisker Inc. is the relaunch of the Fisker brand that was founded by Henrik Fisker in 2007. 

Fisker is scheduled to start production on the Ocean SUV in November2022 and could make a delivery soon after. The most attainable model starts under $40,000 and boasts an estimated range of 250 miles. The rangiest version is expected to surpass 350 miles on a single charge. Early reviews could be critical in supporting Fisker's share price.

In addition to designing and developing EVs, Fisker has filed patents pertaining to solid-state battery technology for use in automotives and consumer electronics.

However, at this juncture, Fisker remains a speculative play since it won’t start production of EV SUVs until 2023, and probably won’t start making serious cash until late 2021 on advance orders. Sound familiar? It should. It’s reminiscent of the early Tesla story in many ways.  

Last year, Citi Group initiated coverage on the company with a $26 price target, still good for nearly 60% upside. According to Citigroup analyst Fisker Inc. “as a pre-revenue company, is clearly a higher-risk investment proposition.”

But there’s plenty of reason to be bullish. 

Fisker has four long-term advantages here:

  • It’s making an SUV, which Michaeli says is a good segment to target. 
  • It’s got a strong brand.
  • It’s got a legacy behind the wheel: Henrik Fisker is Fisker’s founder and he’s a legend in automotive design. 
  • And it’s a massive saver of capital because it has an innovative “asset-light” approach, getting Magna International to assemble its first vehicle. 
  • It’s also taking EVs to a new level: Fisker’s Ocean SUV isn’t just an EV, it’s made from recycled materials. 

Fisker has already garnered 17,000 pre-orders … fully prepaid.

And when it does come out with its first Ocean SUV, it will be at an affordable $40,000 price point and a super flexible lease set-up that could be incredibly disruptive …

The rather long wait before its first EVs start rolling off production lines has some analysts sitting on the sidelines though.

Goldman Sachs has initiated Fisker with a Neutral rating and a lowly $15 price target, noting the world-class design talent at the firm but saying it’s holding back from being bullish due to the anticipated length of time before products arrive. 

Still, this could turn out like Tesla’s early days, meaning incredible profits for early-in investors willing to play the long game.

By Alex Kimani for Oilprice.com

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