Without a doubt, electric vehicles are the future. Compared to gasoline-fueled autos, they’re cheaper to power and maintain, and of course, EVs are much better for the environment. All of those qualities make them more attractive to consumers and businesses. But perhaps most importantly, governments are putting their considerable weight behind electric vehicles. Moreover, EV makers can make a great deal of money by selling subscriptions to various services, such as security systems, self-driving systems and battery-monitoring devices. Given these points, investors should look for the best electric vehicle stocks to buy.
However, investors need to consider that the consumer EV market is extremely crowded and competitive.
Therefore, I think that the best electric vehicle stocks are those of automakers that have some exposure to the less-competitive commercial EV sector. Other good EV makers are those that have a great deal of money to promote their consumer EVs and firms that have heavyweight partners which can help them develop and market their vehicles.
Best Electric Vehicle Stocks: General Motors (GM)
General Motors (NYSE:GM) reported strong overall second-quarter results, and its EV business is sprouting tremendous green shoots. Moreover, the automaker’s commercial EV business looks poised to take off, GM is proactively obtaining access to batteries and an extensive charger network, and it has a great deal of money.
In Q2, the company’s revenue rose 4.6% year over year to $35.76 billion, $1.4 billion above analysts’ average estimate. While its automotive operating cash flow fell 11% YOY to $3.47 billion, the decline appears to be attributable to Covid-19 measures in China. In the medium term, those issues should improve, and they should disappear in the long term.
As I pointed out in a previous column, in Q2, the automaker delivered “more than 7,200 plug-in vehicles, up sharply from just 457 in Q1.” Meanwhile, the demand for the company’s Cadillac Lyriq, a luxury SUV, has been very strong, and the reviews of the EV have also been “solid.”
Last month, FedEx (NYSE:FDX) obtained the first 150 of 2,500 electric delivery vehicles that it ordered from GM, while Walmart (NYSE:WMT) has ordered 5,000 electric delivery vehicles from the automaker.
Meanwhile, GM’s joint venture with battery maker LG is kicking into first gear, and GM has established a partnership with EVgo (NASDAQ:EVGO), which has over 850 fast EV charging stations in North America.
Rivian (NASDAQ:RIVN) has an alliance with Amazon (NASDAQ:AMZN), which has ordered 100,000 delivery EVs from the startup. Additionally, AMZN plans to be operating “thousands” of Rivian vans across 100-plus cities by year-end. It has also taken an 18% stake in the EV startup.
Increasing my confidence in Rivian, InsideEvs has called Rivian’s R1T “highly capable, luxurious in an outdoorsy sort of way, and packed with features that you won’t find on upcoming electric pickup trucks.”
Also making me more bullish on Rivian is that a few famous billionaires who are well-known for their investment prowess have bought a sizeable amount of RIVN stock. Specifically, Ray Dalio bought 62,800 shares of Rivian last quarter, David Einhorn’s Greenlight Capital acquired 74,000 shares, and George Soros holds a huge 17.8 million of the automaker’s shares.
Best Electric Vehicle Stocks: Nikola (NKLA)
Nikola (NASDAQ:NKLA) delivered 48 of its battery-electric trucks in Q2, indicating that the automaker’s “projected production and delivery ramp is (mostly) going according to plan,” a Seeking Alpha columnist pointed out last month.
With Nikola slated to deliver 300-500 of the EVs this year and ramp up its annual production capacity to 20,000 by the end of next March, the company is on the way to becoming a major producer of electric trucks for businesses.
Another big positive for NKLA stock is the fact that the company is a first mover in the hydrogen truck sector, which is getting a big boost from government incentives.
Meanwhile, Nikola has an incoming CEO with a great deal of impressive experience in the auto sector, and two giant companies are helping it to build its trucks. And giving the company access to high-quality, affordable EV batteries, the automaker agreed in August to buy Romeo Power (NYSE:RMO), an EV battery maker.
Finally, as I noted in my previous column:
[Nikola] has just $456 million in cash, but it plans to raise another $400 million by selling additional stock. Its relatively low $2.3 billion market capitalization makes NKLA stock a bargain in light of the automaker’s growth prospects.
On the date of publication, Larry Ramer held long positions in RIVN and EVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.