Electric vehicles 2024 and beyond: Why Tesla, BYD and Rivian may lap the field

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Electric vehicle stocks have been punished in 2023 as concerns over demand, pricing, and high interest rates have flipped the script on the Green Tidal Wave thesis. A partial list of year-to-date decliners includes Faraday Future Intelligent Electric (FFIE) -98%, Arrival (ARVL) -84%, Canoo (GOEV) -80%, Fisker (FSR) -77%, Arcimoto (FUV) -76%, Blink Charging (BLNK) -73%, Nikola (NKLA) -66%, REE Automotive (REE) -63%, Polestar Automotive (PSNY) -57%, Lucid Group (LCID) -31%, and NIO (NIO) -24%. While EV juggernaut Tesla (NASDAQ:TSLA) has defied the selling pressure with a 126% YTD gain, there are plenty of analysts such as Bernstein’s Toni Sacconaghi sounding the warning bell for 2024 on the premise that deliveries growth and margins will underwhelm.

Taking a broad view, Piper Sandler recently highlighted that the electric vehicle sector may be in better shape than believed, although it may be a question of a few market share winners generating most of the buzz and thinning the EV field. The firm updated its electric vehicle sales forecast amid the widely-held view that EVs are facing a so-called demand problem. “While our new forecast does imply a modestly slower ramp between now and 2030, it’s important to note that our long-term expectations are unchanged,” reported Alexander Potter. “Specifically, we still think the auto sector will eventually reach 100% EV penetration, and we disagree with the notion that EV demand is approaching exhaustion,” he added.

The previous electric vehicle forecast from Piper Sandler called for 33% electric vehicle penetration across the U.S., Europe, and China in 2025, and then rising to 67% by 2030. The firm’s new forecast cuts those expectations by 600 – 700 basis points to imply 26% electric vehicle penetration in 2025, followed by 60% in 2030. Notably, upward-sloping EV penetration is a function of the very bullish market share expectations for EV specialists like Tesla (TSLA), BYD Company (OTCPK:BYDDF) (OTCPK:BYDDY), and Rivian Automotive (NASDAQ:RIVN). Looking ahead, Piper Sandler expects the EV trio to represent around 25% of all vehicles sold in the US, China, Europe. “So, even if we expected 0% EV mix at all other brands, we would still be forecasting market-wide EV penetration of ~25% in 2030,” noted Potter.

What about the rest? Toyota (TM) is not anticipated to make any major moves after winning market share by selling affordable hybrids. With its EV penetration plateauing, Volkswagen (OTCPK:VLKAF) is said to have a long way to go before achieving its interim EV targets (35%-40% EVs by 2027, >65% in 2030). The cut on General Motors (GM) is that it makes lots of noise about EVs, including a commitment to 100% electrification by 2035, but results are underwhelming so far with the unprofitable Chevy Bolt the only quasi high-volume EV, and EV versions of the Equinox, Silverado and Sierra all facing delays. The real challenge with Ford (F) is anticipated to be convincing Americans to forgo gasoline-based icons like the F-150, Explorer, Expedition, Bronco, and Ranger. Meanwhile, Piper Sandler thinks it is hard to say whether Honda’s (HMC) EV targets are believable, given Honda’s radio-silence in the segment. Across the pond, Mercedes-Benz (OTCPK:MBGAF) has said it will sell exclusively BEVs by 2030 where markets allow, but notably the German automaker has not sworn off internal combustion engine. While Nissan (OTCPK:NSANY) was a clear first-mover in EVs, the Leaf does not currently rank among the world’s top-50 EVs. As for Chinese automakers such as Great Wall, BAIC, Dongfeng, Chery, FAW, GAC, NIO (NIO), Li Auto (LI), and XPeng (XPEV) – Piper pointed out that there is little evidence to suggest which of the companies can sustainably succeed in developed automotive markets like Western Europe or the United States.

Wall Street in general is split on Tesla (TSLA), with 15 Buy-equivalent ratings stacking up against 21 Hold-equivalent ratings and 6 Sell-equivalent ratings. Rivian Automotive (RIVN) is viewed more favorably, with 20 out of 26 ratings at Buy-equivalent or higher (reminder Amazon (AMZN) has a 17% stake in RIVN in its back pocket). BYD Company (OTCPK:BYDDF) is not followed widely on Wall Street, but has a clean sweep of Buy-equivalent ratings on Seeking Alpha. BYD Company also has one of the highest Seeking Alpha Quant Ratings in the automobile manufacturer sector, which has correlated positively with market-topping returns in the past.

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