Tesla (NASDAQ:TSLA) has been a magnet for attention, and criticism, in recent years, but it is hard to argue with the results.
Shares of the electric vehicle maker are up more than 1,000% over the past three years as investors grow increasingly excited about the wave of change coming to the automotive industry.
Tesla has come a long way in a short amount of time, but it will hardly be alone in benefiting from the electrification of the automobile. Here's why three Fool.com contributors believe Fisker (NYSE:FSR), NIO (NYSE:NIO), and ChargePoint Holdings (NYSE:CHPT) have the potential to deliver Tesla-like returns in the years to come.
Asset-light could deliver outsized returns
Lou Whiteman (Fisker): Henrik Fisker is a revered name in automotive design, but his electric vehicle start-up dreams have faced some setbacks. His original company, Fisker Automotive, ran short of cash and sold to Wanxiang Group in 2014. But he held onto the name, and his second attempt to build a company looks a lot more promising.
Fisker is focused on what the designer does best: creating beautiful cars. This time around the company is leaving the manufacturing and maintenance to others with more experience and as importantly, better scale. Fisker is working with partners including Magna International and longtime Apple supplier Foxconn Technology Group -- also known as Hon Hai Precision -- to build vehicles. It also has partners to provide delivery, services, and fleet management services for its vehicles.
Manufacturing vehicles is hard, as Tesla has discovered over the years as it tries to scale its operations. And with industry titans like General Motors and Volkswagen ready to flood the market with electric vehicles scale is going to matter more than ever in the years to come.
There's risk to this plan, as Fisker is relying on a lot of partners to get things right. But the asset-light model allows the company to focus on what it does best, including design, brand building, and marketing.
Fisker's stock has been volatile. It was nearly a double for the year as of early March before giving back most of those gains in recent weeks. I can't say for sure it or any stock will experience the sort of run Tesla has had over the past three years, but the asset-light model, if successful, gives Fisker the chance to generate strong returns without substantial investment in plants, supply chains, and workforce.
The "Tesla of China" might really be the Tesla of China
John Rosevear (NIO): Financial media folks have called NIO "the Tesla of China" so often that it's almost a cliche at this point. But there are some genuine reasons to think that the Hefei-based maker of upscale electric vehicles really could follow in Tesla's footsteps.
First, its products are luxurious, stylish, and packed with new technology, but not extravagant. That combination nicely hits the "sweet spot" of the world's largest new-vehicle market (China's), where sales and margins are both likely to be strong over time. A related point: Owners really like the cars, and NIO wins many new customers by word of mouth -- just as Tesla does in the United States.
Second, CEO William Bin Li and his team have done a great job of building relationships with local government authorities. Among other things, the company has agreed to help make the city of Hefei, in China's industrial Anhui province, a center for electric and self-driving vehicle research and development.
Those kinds of relationships are important in every country, but they're especially important in China -- and Li and company have shown a commitment to nurture them.
Third, like Tesla's, NIO's stock is expensive because electric-vehicle investors have big expectations for the company. NIO's market cap of about $60 billion is huge for a company that only sold about 43,000 vehicles in 2020. (Contrast with Ford Motor Company, which sold about 4.2 million vehicles last year and has a market cap of roughly $50 billion.) But -- again, as with Tesla -- investors have been wiling to pay up for the possibility of big growth.
In the near term, they're likely to be rewarded. NIO could well sell 100,000 cars in 2021, and it seems very possible that it will be selling a few million a year by mid-decade.
There is one big caveat: As with Tesla, a lot of that future growth is already baked into NIO's stock price. I think NIO looks like the best of the upstart Chinese electric-vehicle makers, and I think there's a good chance that it will thrive and grow and that investors will be rewarded over time. But be prepared for some volatility along the way: If and when investors reset their expectations, NIO's stock price could see an abrupt reset as well.
This is a stock to watch in a crowded field of electric vehicle stocks.
ChargePoint is very big, and very expensive
Rich Smith (ChargePoint): In February, my colleague John Rosevear helped us put together a comprehensive list of every publicly traded stock that could reasonably be called an "EV stock." Out of these two dozen odd companies, which EV stock will be the next Tesla?
I wish I knew.
Tesla's kind of an odd duck. It's the most successful electric car manufacturer in the world, but at the same time really, really expensive at a trailing P/E ratio of more than 1,000 times. In these respects, I guess I could argue that ChargePoint is a lot like Tesla. According to its own data, ChargePoint offers its customers more than 132,000 "places to charge" across North America and Europe. That's seven times more chargers than Tesla boasts, and makes ChargePoint the global market share leader in EV charging.
At the same time, this huge network only netted ChargePoint $146.5 million in sales last year, and cost it $197 million in losses on the bottom line, resulting in a stock valuation of 54 times sales (and infinity times earnings). Valued on price to sales, ChargePoint is actually already twice as expensive as Tesla!
On the face of it, that probably doesn't sound like a good thing. It does, however, mean that -- like Tesla -- ChargePoint possesses a richly valued stock that it can use as currency to acquire and roll-up competitors, to raise cash to build its own network, and to avoid the need to take on debt.
Whether this is how things play out, and ChargePoint's rich valuation becomes a self-fulfilling prophecy, helping to turn ChargePoint into the next Tesla -- or whether it means the stock is simply vastly overvalued and doomed to fall -- remains to be seen.