08 January 2022

Market Analysis

What to expect from top electric vehicle stocks in 2022

Electric vehicle stocks have been some of the hottest investments in the past couple of years, owing their popularity to Elon Musk, the renewable energy source revolution, and the inevitable end of fossil fuels. 

After all, the stock market is touted as forward-thinking, and investors are always watching global trends for the next big play. 

As some EV stocks have managed to outperform the 27% gains of the S&P 500 in 2021, despite being plagued by pandemic-fueled supply chain disruptions, we take this opportunity to examine how the big dogs are faring and what trends we can expect in the first quarter of 2022.

Taking charge: Tesla smashes forecasts with record deliveries report

The last few months of 2021 have been rocky for Elon’s Tesla, however, the pioneer carmaker still managed to end the year at a 50% gain. 

Last week, Tesla released its vehicle Q4 production and deliveries report, which beat analyst estimates, setting a new record. More than 308,000 Tesla Model S, 3, X and Y were delivered in Q4, 2021, which brings the total for the year at 936,172 – an 87% year-over-year increase.

This is an impressive feat since Tesla managed to ramp up production and vehicle delivery during a period where the entire automotive industry is severely impacted by the global chip shortage and supply chain issues. 

Meanwhile, Tesla fans can expect production of the infamous Cybertruck as well as a more affordable Tesla model to start as early as 2023. The EV company also announced its plans to expand production by adding more production sites to supplement its current factories in Shanghai, Austin, Berlin and Fremont. 

Tesla will certainly face stiff competition heading into 2022 as rivals are also charging up with their own electrified lineups including Nio and Li Auto in China as well as Rivian and Lucid in the US.

Lucid plans to expand into European markets

Lucid is a rapidly growing EV company headquartered in California. It became a publicly traded company on Nasdaq, following a SPAC merger back in July 2021 and is now valued at $65 billion. 

The LCID stock is currently trading near $38 – a 232% increase since January 2021. And according to its Q3 earnings report, Lucid is expected to “provide production capacity for up to 90,000 vehicles per year by the end of 2023, by expanding Lucid Air production capacity and adding production capacity for the 'Project Gravity' SUV. The phase 2 expansion is expected to add 2.85M sq. ft. of production footprint and will further vertically integrate production processes.”

While the company only started delivering its high-end flagship in late October 2021, it has since announced its plans to expand its footprint in Europe as well. 

Nio expands production, promises long-term growth 

Nio is one of the leading electric vehicle makers in China, headquartered in Shanghai. The company’s market cap currently stands at $47 billion after dropping by near 40% in 2021. 

Despite the company performing well in the past year with cars delivered in 2021 reaching more than 91,400 - a 110% YoY increase – the Chinese government is cracking down on tech companies, adding yet another challenge for EV stocks in the region. 

That being said, electric vehicles are in high demand in China, and the company is anticipated to expand its lineup with more models to be announced this year. The company’s stock is trading well below the consensus, and revenues are expected to grow by 75% in 2022.

Nio’s new production facility in Hefei, China is anticipated to produce 240,000 vehicles per year. And the company is also taking steps to expand its footprint in Europe as well by making its cars available in five European countries this year.

Li Auto staged for a break-out in 2022

Li Auto is a newcomer in the Chinese EV market and has been listed on Nasdaq since 2020 where it raised $1 billion with its IPO. 

Its Q4 delivery report showed a YoY advance of 143%, jumping from 25,116 vehicles delivered in the previous quarter to 35,220. 

The manufacturer's reported revenue reached 1.21 billion, according to its Q3 earnings call, translating to a 199% increase from the same quarter in 2020. 

The company enjoys strong fundamentals with more than $7 billion in cash and cash equivalents according to its Q3 financials and it has recently announced its plans for expansion with a new Beijing manufacturing site, to be completed in 2023, and the acquisition of another factory in Changzhou. 

Seeing as how rivals like Nio, Xpeng and Lucid are expanding into European markets, it’s very likely that Li Auto will be following suit this year.

Final thoughts

Scalability is arguably the main challenge for electric vehicle manufacturers in the coming years since demand is high and keeps rising, but supply is lagging. 

This will likely be the case for the foreseeable future as inflation woes, interest rate hikes and global labor market shortages are looming on the horizon. 

Though the companies that are currently driving the electric revolution i.e., Tesla, may not be the ones that ultimately turn out to be the next Google or Amazon of electric vehicles, the industry has only just started gearing up, and this global shift to the electric motor is taking place in front of our very eyes. 

Tesla’s outperformance in 2021 suggests robust demand for the electric vehicle industry, which is poised to become one of the most profitable investments in the long-term. 

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