The electric vehicle market has been the talk of the stock market for three years, but shares of EV companies haven't fared well as the market has dropped. Not only are investors concerned about companies executing growth plans, but they're also worried that consumers won't have enough money to buy expensive vehicles in a slowing economy with rising interest rates.
But there are still some good ways to get exposure to EV stocks today without taking a risk on unproven companies or technology. Here's a look at why General Motors (GM -0.07%) and Magna International (MGA -1.73%) are great ways to get exposure to the EV industry.
Hidden in plain sight
General Motors has announced plans to exclusively offer EVs by 2035, an ambitious goal to become a leader in the electric and autonomous vehicle market. GM has several EV models available now, including the 2023 Bolt EV and Bolt EUV, with the set to be available starting in the spring of 2024. The 2024 Blazer EV, 2024 Silverado EV, and 2024 Equinox EV are also expected to be available within the next year. But this only scratches the surface of GM's EV plans.
GM's robotaxi unit, Cruise, is planning to enter a "large number of markets" and scale operations up to "thousands of vehicles" in 2023, according to Chief Operating Officer Gil West. The company is already operating in San Francisco, Phoenix, and Austin, and will unveil the custom-made Cruise Origin next year, a GM-produced robotaxi with no steering wheel.
GM Revenue (TTM) data by YCharts
Unlike most EV stocks, shares of GM are neither speculative nor expensive. GM has a P/E ratio of 6.1 and the price-to-sales ratio is 0.36 (Tesla's price-to-sales ratio is 5.2). This is a value stock in EVs, which differentiates GM from most stocks.
The contract EV company
Magna International is a contract manufacturer for the auto industry, including manufacturing the Fisker Ocean. The company recently announced its third-quarter 2022 results, which showed a 17% increase in sales to $9.3 billion. Excluding foreign currency translation and acquisitions net of divestitures, sales increased by 27%.
Profitability has picked up as well. Diluted earnings per share and adjusted diluted earnings per share also increased to $1 and $1.07, respectively, compared to $0.04 and $0.56 last year. In addition, the company returned $305 million to shareholders through share repurchases and dividends. However, Magna did reduce its outlook for the rest of the year, citing expected lower vehicle production in North America and Europe and higher operating inefficiencies.
As a contract manufacturer, Magna has the benefit of serving both internal combustion vehicles and EVs. But if start-ups like Fisker are going to take market share, they'll be looking to companies like Magna to help them expand more quickly and that should be a tailwind for the company. And investors can get shares at a price-to-earnings multiple of 18.8 and a 2.9% dividend yield today.
Beyond the big EV names
There's more to the EV industry than big names like Tesla, and companies like GM and Magna provide investors with both diversification and value. Don't count them out as companies that could take market share over the next five years, especially as start-ups that face financial trouble look for stronger companies to partner with or buy them out.
