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The electric vehicle industry has faced multiple headwinds in the recent past. This includes chip shortage, broader supply chain issues and raw material inflation. Furthermore, a surge in Covid-19 cases in China also impacted industry sentiments.
It’s also worth noting that analysts are talking about a potential recession in 2023 due to geopolitical factors. Contractionary monetary policies have also contributed to slowdown fears.
With these near-term factors in consideration, electric vehicle stocks have corrected in the last few months. This correction seems like a good opportunity to accumulate for the long term. With a global push toward clean energy, the electric vehicle industry has multi-year tailwinds.
Geo-political tensions can further accelerate the adoption of electric vehicles as Europe looks to reduce energy dependence on Russia. Therefore, long-term investors can consider exposure to quality electric vehicle stocks.
Top 4 Electric Vehicle Stocks That Look Attractive for the Long-Term
Top 4 Electric Vehicle Stocks To Buy
Here are four electric vehicle stocks that can be gradually accumulated in the next few months.
XPeng (NYSE: XPEV) is possibly the best stock pick among Chinese electric vehicle stocks which is also why it’s first on our list of EV stocks to buy. With the electric vehicle industry facing near-term headwinds, XPEV stock has declined by 43% in the last six months. The correction provides a good entry opportunity.
In terms of growth, XPeng reported 159% upside in vehicle deliveries for the first quarter of 2022. It’s worth noting that delivery of the P5 sedan commenced in October 2021. Further, the company plans to launch mass-delivery of G9 in Q4 2022. New models will ensure that delivery growth remains strong.
XPeng also has ambitious international expansion plans. With the planned foray into several European countries, the positive growth momentum will sustain. With innovation at the forefront, XPeng seems well-positioned to gain market share in international markets.
From a financial perspective, XPeng reported cash and equivalents of $6.6 billion as of March 2022. The cash buffer is likely to ensure aggressive investment in growth and product development.
In the last few quarters, the company’s vehicle margin has been just above 10%. With delivery growth and operating leverage, vehicle margin is also likely to improve.
Overall, XPeng is well-positioned for long-term growth and value creation.
Lucid Group (LCID)
Lucid (NASDAQ: LCID) stock has also been in a correction mode in the last six months. During this period, the stock has declined by 55%.
Negative industry sentiments in the near term are one reason for the correction. Further, Lucid lowered the production guidance for 2022 which is another factor for the downside. However, it seems that the worst is discounted in the stock.
Among the positives, Lucid is already taking online orders for its first luxury sedan model from 17 countries. There seems to be a clear plan for aggressive international expansion.
Besides the ramp-up in manufacturing capacity in the United States, Lucid has already planned its first overseas plant in Saudi Arabia. The company has also signed an agreement with the Saudi government for the delivery of 100,000 cars through 2030.
On the flip-side, it’s unlikely that Lucid will be free cash flow positive any time soon. This factor is likely to be offset by robust delivery growth. With plans for expansion in Europe and China, the long-term outlook is positive.
Lucid is also attractive considering the innovation edge. The company’s first car was certified by the EPA for a range of 520 miles.
Overall, Lucid has financial flexibility for manufacturing and international expansion. Even with the possibility of equity dilution in the next 12-18 months, LCID stock is attractive at current levels.
Even Tesla has not been spared in the broad market correction. From 52-week highs of $1,243, TSLA stock has declined to current levels of $745. For long-term investors, this presents a good buying opportunity.
For Q1 2022, Tesla reported delivery of 310,048 vehicles. Deliveries were robust and amidst the headwinds the industry faces. Importantly, Tesla continues to report healthy cash flows, which provides ample financial flexibility for product development.
It’s also worth noting that the company’s Gigafactory in Europe is a growth catalyst in the next 12-24 months. As Europe looks to reduce dependence on Russia for energy, the Gigafactory comes at the right time.
Tesla also has an attractive line-up of new models that include the Cybertruck, Tesla Semi and Roadster. New models have the potential to boost deliveries and cash flows.
Given the financial flexibility, Tesla is likely to pursue further investment in Gigafactory. Southeast Asia and India are potential locations for investment.
Overall, Tesla is likely to remain the market leader in electric vehicles and the outlook is positive for the long term.
Li Auto (LI)
Li Auto has been an out-performer among electric vehicle stocks in the last six months. During this period, the stock has declined by 5%. The company continues to report robust delivery growth and the stock seems like a long-term value creator.
For the first quarter of 2022, the company reported vehicle deliveries of 31,716. On a year-on-year basis, deliveries surged by more than 50%.
Importantly, the company also reported operating and free cash flow of $289.3 million and $79.2 million respectively. With sustained growth in deliveries, the company’s cash flow upside is likely to be strong.
It’s also worth noting that the company launched LI ONE model in November 2019. Deliveries growth has been supported by just one model. The company plans to launch L9, a smart SUV in Q3 2022. This will be a potential catalyst for deliveries upside through 2023.
From a financial perspective, Li Auto reported cash and equivalents of $8.0 billion as of March 2022. There is ample financial flexibility to invest in product development and expansion within China. These factors make Li Auto an attractive bet at current levels.