There are certain advantages of electric vehicles (“EV”) over its traditional peers. That’s the reason EVs are likely to dominate the auto market in the future. Pollution issues apart, a host of other factors such as government sops, cost advantages, technical superiority and increasing adulation from both automakers and customers have turned the fortune in favor of EVs.
In fact, government support for EVs, which have a very small share in total vehicles sales, has escalated in recent times. European nations such as France and the United Kingdom have already specified future plans of completely banning diesel and gasoline cars sale. The announcement by China, the largest car market in the world, to totally switch to EVs at an unspecified date, has sent a clarion call to global automakers. Moreover, stricter fuel-efficiency standards being imposed by countries across the world seem to be working in favor of EVs.
Added to this, technical superiority like prospects of charging a car without visiting a gas station and declining cost of EVs appear favorable. However, it must be noted that at present, the number of charging stations is inadequate. This takes a lot of time to charge a vehicle. These disadvantages are unlikely to exist in the near future.
Treading EV Path
Given these advantages, carmakers are fast shifting gears and focusing on production of EVs. Tesla, Inc. TSLA, the pioneer in EV, has come up with Model S, 3 and X, with the aim of creating awareness among customers. Putting behind emission scandals, German automaker Volkswagen AG VLKAY is going all out to establish itself in the electric vehicles market. The company intends to invest more than $24 billion in zero-emission vehicles by 2030 to create mass market. The company plans to offer 80 new electric cars across its different groups by 2025, up from its earlier target of 30. In fact, the company intends to roll out the electric version of each of its 300 group models by 2030 (read more: Volkswagen Joins Electric Car Race in a Big Way).
General Motors Company GM has introduced Chevrolet Bolt and pledged to go for electrification of vehicles. Ford Motor Company F has also disclosed that it is working on EVs, specifically sports utility vehicles.
Bottom Line
The war has just begun. The future of EVs, and in turn traditional vehicles, to a great will depend on the pattern of customer demand. It goes without saying that the auto space is set to witness a drastic change in the near future. Some re-orientation and re-strategizing seem to be unavoidable.
Stocks to Consider
Of the stocks discussed above, General Motors, Tesla and Ford carry a Zacks Rank #3 (Hold), while Volkswagen has a Zacks Rank #2 (Buy).
A few top-ranked automobile stocks are Toyota Motor Corporation TM and Daimler AG DDAIF. Both Toyota and Daimler sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Toyota has a long-term growth rate of 7%.
Daimler has an expected long-term earnings growth rate of 2.8%
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