Long-term investors always look for companies that have a wide moat and are the dominating players in their respective industries. Stocks of such companies are expected to beat the market in the long run. Though it's easier to identify such companies in mature industries, it is more difficult in evolving sectors, such as the electric vehicle (EV).
The EV industry is changing rapidly, with several players trying to make a place for themselves. It might be too early to say which will survive in the long run. Here are five companies that look well-placed to dominate the EV space in the next five years, and beyond.
Image source: Tesla.
1. Tesla
Electric vehicle pioneer Tesla (TSLA -2.68%) looks like a no-brainer name in the list of companies that may dominate in the EV segment. The company's annual EV deliveries rose 87% in 2021 to 936,172 vehicles, resulting in a revenue growth of 71% over 2020. Tesla reiterated that it could grow its vehicle deliveries at an average annual growth rate of 50% over a "multi-year" timeframe. At that rate, Tesla could deliver 7.1 million vehicles in 2026.
If Tesla attains that number, it would easily be one of the top automakers in the world. For perspective, Toyota Motor, the top automaker globally by unit sales in 2021, sold 10.5 million vehicles. Toyota was followed by Volkswagen (VWAGY 0.20%), which sold 8.9 million vehicles last year.
Tesla reported a strong operating margin of 14.7% for the fourth quarter. The EV maker is generating industry-leading margins for the last two quarters.
TSLA Operating Margin (Quarterly) data by YCharts
All in all, Tesla looks set to dominate the EV space over the next several years.
2. Volkswagen
Even as pure-play EV makers grab the headlines, legacy automakers are leaving no stones unturned to retain their dominance in the auto sector. Top automakers are investing billions of dollars in electrification efforts. In 2021, Volkswagen Group delivered 452,900 electric vehicles, accounting for 5.1% of the company's total deliveries.
Image source: Volkswagen.
What's more, the German automaker expects that half of its sales will be electric by 2030. Based on its 2021 deliveries, this could be about 4.5 million EVs. Volkswagen expects to spend around 52 billion euros on its electrification efforts through 2026. Looking at the company's long history and its dominant position in the global auto market, it seems likely that it will achieve what it is aiming for. Overall, Volkswagen seems well-placed to be a dominant EV player in the coming years.
3. Ford
Ford Motor Company (F 0.54%) intends to be the second-largest EV maker and produce 600,000 EVs annually by 2023. Furthermore, the company expects 40% to 50% of all its vehicles to be electric by the end of this decade. Ford sells around 4 million vehicles worldwide annually, with roughly 2 million sold in the U.S. The company's major push for EVs could make it a dominant player in this segment a few years down the line.
Image source: Ford.
Ford is getting an immensely positive response to its electric pickup truck, the F-150 Lightning, which the company expects to start delivering in spring this year. Ford enjoys a strong brand loyalty in the U.S., developed over decades by delivering quality vehicles. The company can expect a positive response from this loyal customer base for its electric vehicles as well. All in all, Ford looks well-placed to be a leading EV player in the U.S. in the coming years.
4. BYD
BYD (BYDDY 0.97%) (BYDD.F 0.33%) sold more than 320,000 all-electric vehicles in 2021. That made it the fourth-largest EV maker in the world, according to Cleantechnica. More than 90% of BYD's EV sales are in the domestic Chinese market.
Image source: Getty Images.
BYD has been growing its share in China's EV market steadily. With its years of manufacturing expertise and a strong presence in a growing market, BYD is in a good position to be a leading EV player in the coming years.
5. Lucid Group
Lucid Group (LCID -0.36%) is one of the promising young EV makers that may scale up in the coming years. It has some edge over other EV start-ups. First, the company has already launched its car, which has received a positive response from the media and users. Second, Lucid's car, at its top trim, offers an industry-leading range due to its superior technology. Third, the company has support from Saudi Arabia's sovereign wealth fund, which also holds a 63% stake in Lucid.
Image source: Lucid Group.
Lucid has set long-term growth plans for itself. The company expects to achieve a run-rate production of more than 500,000 units by 2030. It plans to expand internationally, starting with Saudi Arabia, China, and Europe. Furthermore, over time, the company plans to launch lower-priced models targeting the mass markets.
Notably, Lucid is yet to prove that it can scale up production profitably. But achievements so far indicate that Lucid could be a leading player in the EV space five years down the line.
