The Nasdaq Composite Index is off roughly 12% from its highs in November and is in correction territory. Long-time investors in the market know that a correction offers an opportunity to buy quality stocks at bargain prices. No one can predict for sure how long or deep the correction would be. However, you should do well if you invest in quality stocks you plan to hold for the long term.
Electric vehicle (EV) stocks have seen a sharper correction this year, thanks to their steep rise in the last couple of years. Rivian (RIVN) stock has fallen 64% off its all-time high price and stocks of leading automakers like Ford (F 0.08%) and Volkswagen (VWAGY -0.73%) have also corrected significantly. Let's discuss why each of these stocks looks attractive right now.
Rivian
Having started vehicle deliveries in September of last year, Rivian has garnered extensive interest in its EVs. Currently, the company makes three models -- pickup truck R1T, SUV R1S, and a delivery van. Rivian's pickup truck has broadly received positive reviews so far. Automobile magazine MotorTrend selected R1T for its Truck of the Year award for 2022.
Image source: Rivian.
With the proven performance of its vehicles, the company now needs to produce and deliver vehicles at scale. It is not as easy as it sounds, but at least Rivian has already delivered a quality product. More precisely, it delivered 920 vehicles by the end of last year.
Moreover, demand also isn't an issue for Rivian. It had more than 71,000 pre-orders for its trucks and SUVs combined as of Dec. 15. Further, it has an initial order of 100,000 delivery vans from Amazon (AMZN -1.04%). Amazon also holds an 18.1% stake in Rivian, indicating its commitment for the order and Rivian.
The demand for electric pickup trucks and vans right now exceeds the company's supply. This may continue to be the case for a couple of years until EV makers ramp up the production of these vehicles. That may provide Rivian a window to establish itself as a serious long-term player in this competitive market.
Ford
Stocks of pure-play EV companies are commanding significantly higher valuations than those of traditional automakers. Investors' enthusiasm for EVs, coupled with the belief that electric vehicles can generate higher margins compared to internal combustion engine vehicles, is largely behind this valuation difference.
Image source: Ford.
Though this belief could be correct to an extent, it ignores that traditional automakers like Ford also have some advantages over new EV companies. Ford has rich manufacturing expertise in a capital-intensive industry that requires hundreds of different parts from as many different suppliers. Moreover, Ford enjoys a deep brand loyalty built over decades.
Ford is already executing on its electrification strategy. It intends to increase its EV production capacity to 600,000 vehicles by 2023. By 2030, the automaker aims to make 40% to 50% of its deliveries electric.
The company is witnessing robust demand for its electric models. Ford sold 27,140 Mustang Mach-E vehicles in 2021, making it the second-best-selling electric SUV in the U.S., behind Tesla's Model Y. Similarly, its upcoming electric pickup truck, the F-150 Lightning, has received immense interest from buyers. The company already has 200,000 reservations for the truck, and deliveries are expected to begin in spring. All in all, Ford could well be a top beneficiary of the ongoing transition to electric vehicles.
Image source: Volkswagen.
Volkswagen
Volkswagen -- the second-largest automaker globally -- is among the legacy automakers investing heavily toward electrification. Seeing the writing on the wall, the company plans to spend 52 billion euros on electrification through 2026 and expects half of its sales to be electric by 2030. Volkswagen's recent EV sales reflect its electrification efforts. In 2021, the company sold more than 450,000 EVs, up 95% over 2020.
The German automaker's investments aim to not only produce quality EVs but also produce them at a low cost. One way the company is trying to accomplish this is by reducing battery costs. It plans to produce batteries in-house and establish six giga-factories in Europe, with a total production capacity of 240 gigawatt-hours (GWh) by 2030. Volkswagen believes that, among other factors, economies of scale will drive down costs for batteries.
Volkswagen's long history, rich experience, enormous operations, and strong brand place it well to succeed in the electric vehicles market.
