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These Are the Top EV Stocks to Watch Right Now

By Rachel Warren, Jon Quast, and Toby Bordelon – Updated Dec 14, 2021 at 7:31AM

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The EV space is red hot right now.

Are you thinking about investing in electric vehicle stocks? This market is full of hot investment opportunities, but not all are necessarily compelling buys for a long-term portfolio. In this segment of Backstage Pass, recorded on Nov. 12, contributors Toby Bordelon, Jon Quast, and Rachel Warren discuss the top stocks trading in this space at the moment. 

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Toby Bordelon: ProShopGuy asks, "What trend is getting more hype for investors, EV companies or companies using AI?" That's actually a good question. It seems like everyone who's using AI query whether they're actually using AI or they're just throwing that out there like back in the early days of dot-com boom.

We have a website. We're dot-com, whatever. It doesn't make any sense, but throw that on your name, you get another 10%, 20% market cap. You might see that happen with AI right now. On to the EV question though, that's actually our second topic of discussion.

Start-up Rivian (RIVN 7.50%) IPO'd this week, and the stock, guys, has soared. I just checked. It's $110 billion market cap, which is more than GM or Ford, and that's for a company that has only delivered, I looked at this, it's a handful of vehicles. I think maybe a couple of hundred is all they've actually delivered, and in very limited situations.

That's a pretty rich market cap for a company like that. Elon Musk, as is his habit, took to Twitter to offer up his opinion, noting that no American automaker started in the last 100 years has ever produced at scale and being cash flow positive except, of course, for Tesla. That obviously excludes Ford, which was founded a little over 100 years ago.

Even then, I think that might be a little bit inaccurate if you worked in Chrysler. What about Chrysler? They are an American company founded within the last 100 years. They produce cars. But you know what, let's leave the veracity of that claim aside and think about this question.

Other than Tesla, what automaker, you can go start-up or legacy, are you most excited about in this developing EV battle? What about you, John. What do you think?

Jon Quast: Well, Toby, when it comes to all of the brand new EV stocks that are out there, quite frankly, I'm not really interested in any of them, and part of the reason why -- and this is a very personal opinion, I realize that a lot of people are going to disagree with me on this -- but the motivation behind so many of these EV start-ups is climate change. As I look at the technology and where we're at in developing electric vehicles, I'm not convinced that it is vastly superior from a climate change perspective than what we have right now.

When you look at the process of making the batteries, recycling the batteries and where we're still getting the electricity to run the vehicles, I'm not convinced that the EV in its current iteration is what is going to be the long-term solution. I think that there's going to be something else that upends the current iteration of electric vehicles that are out there and that is going to be a far more sustainable solution. As far as all of these start-ups go, I'm not really excited about any of them. [laughs] To your point with Rivian, $110 billion market cap, I think it's fair to say that EVs are way more hyped than artificial intelligence at this point.

When you look at Tesla, I think that was a one-in-a-million outcome because there were times that from a financial perspective, Tesla was in not great shape. Elon Musk has talked about this in interviews before, just how thin they got at different points in their history, and a couple of things going the wrong way could have completely caused this company to not succeed at different points in its history. Now it's at a point where it's got so much access to capital, and its cash flow has drastically changed in recent years.

So it's not in the danger anymore, but there was a time in its history that this could've played out a lot differently. I think that a lot of different EV companies are going to find that out the hard way. As far as possibly a legacy automaker, I think that they are the ones who are going to be able to do this profitably with the current iteration of electric vehicles. I think Ford or Toyota are both good ways if you want to invest in an electric vehicle company. They're going to be strong, but other than that, I'm not really excited about this space.

Rachel Warren: I'm sorry. Were you going to say something, Toby? [laughs]

Bordelon: No, go ahead, Rachel.

Warren: I was just going to say I'm with you on this one, Jon. This isn't really a space I follow particularly closely. I know it's one that a lot of investors are excited about, and I get why, absolutely. Obviously, Tesla is an obvious choice here for that. I think it's interesting if you're perhaps wanting to invest in this space, but you want to go with the more legacy automaker, jumping off what you were saying.

I think Toyota is an interesting play in this space. The company is really trying to gain steam in what has become obviously a very competitive market. I would say Toyota is somewhat behind the curve in the sense that it doesn't have the fleet of all-electric vehicles, but it has definitely made strides within the space.

Recently, I believe it was yesterday, actually, Subaru unveiled its first all-electric vehicle, and this was the product of a two-year arrangement it had in developing its vehicle with Toyota, which is its biggest shareholder.

Toyota has led the way in the area of hybrid electric vehicles, and it intends to spend about $14 billion over the next 10 years alone to grow its auto battery production capacity. Management had announced earlier in the fall that this $14 billion number it will be spending on everything from solid-state batteries to improved lithium-ion batteries.

In October, the company said that it was going to be investing about $3.4 billion in automotive batteries in the U.S. through 2030. They said the investment is for developing and localizing automotive battery production, including those for battery-electric vehicles.

I think it's slowly but surely making these strides there. It was interesting because the company released some quick statistics about its effort to ramp up within the electric vehicle space. The company said that it's sold more than 18.7 million electrified vehicles, including over 4.5 million in the U.S.

Again, it's been a leader in the hybrid electric vehicle space. That electrified vehicles already account for nearly 25% of Toyota's U.S. sales volume, and that number is expected to rise to nearly 70% by 2030.

Then, of course, it's getting more and more into these all hybrid vehicles that that number could grow exponentially. I think it's interesting if this is a space maybe you're interested in following more and you would like to go with maybe a player that's been around for even longer than Tesla. I think Toyota is an interesting company to watch for sure.

Bordelon: I think that's how I come out too on this. I tend to lean more toward the legacy automakers. Everyone is doing something in the EV space. This is going to be a tough go with these start-ups. It's going to be tough to get started. When Tesla came on the scene, no one was really doing electric vehicles. Now everybody is, so I think that's going to be much harder for a start-up to get traction.

Rivian has got some nice-looking vehicles, nice-looking truck. I saw someone on Twitter regarding the valuation talking about, they're going to be up to producing a million trucks a year in 2030, so that runs that way. You know who is producing a million trucks a year right now? Ford, and a bunch of other stuff. I'm not sure if people understand the reality of how capital-intensive producing automobiles are and what it really means to produce a million vehicles and what historic valuations are based on that kind of production rate.

I think we are getting ahead of ourselves a little bit here with a lot of these companies. Speaking of Ford, I think that's the one I'd go with if you're looking at cool stuff coming out. Really excited about the F-150 Lightning. The F-Series is the best-selling truck on the planet. Now they're electrifying that.

If this works, it's going to be huge in terms of adoption. Personally, I'm more excited about the electric Explorer they've teased. They haven't really given us any details on it and say, "Yeah, we're working on that."

Well, I wanted some more detail at some point. I would love for it to be my next car guys, but I'm thinking I might have to, depending on the timeline for this, wait a little bit and maybe go with the Mach-E first and see how that works out. But excited to see what they're putting out.

Honestly, this whole space, when you look at the legacy automakers, all of these start-ups, a lot of cool stuff happening. A lot of cool products come to market in the next couple of years. If you are in the market for a car and you want to go electric, you got a lot of options coming up here soon. It's an exciting time to be a car buyer, I think. Lot of possibilities here.

Jon Quast has no position in any of the stocks mentioned. Rachel Warren has no position in any of the stocks mentioned. Toby Bordelon owns shares of Ford. The Motley Fool owns shares of and recommends Tesla and Twitter. The Motley Fool has a disclosure policy.

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