Electric Vehicle Evolution: Who Will Be The Big Winners?
August 12, 2022 - ValueWalk
The electric vehicle (EV) space is filled with exciting developments, from the rise of new manufacturers to the transition of legacy automakers into the EV space to the expansion to the EV charging grid needed to support more electric vehicles on the road. But an industry isn’t built overnight, and the race to be at the forefront of tomorrow’s EV space is very much heating up. For investors, keeping an eye on leading EV companies and how they pivot to meet this unique and historic moment will be key to realizing a big return on investment in a space that is impacting the entire world.
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We spoke with John Strisower, founder of lightning-fast EV charging company Kilows, to find out more about how the EV space will evolve in the coming years and who he expects the big winners to be as the transportation sector electrifies.
Q: Who do you have your eye on as the big players in the EV space, and who do you think will come out on top?
John Strisower: Tesla Inc (NASDAQ:TSLA) has so many things that give it an incredible global lead. Every time they finish a gigafactory, two or three more are announced. They’re building these everywhere. They have mining operations and raw materials. They just have a long-term view and are accelerating every aspect of the EV space, moving to lower-cost manufacturing and leveraging competitive advantages from AI perspective, such as driving sensor feedback that allows them to enter into autonomous driving in a way no other company has. They’re on a different playing field than the rest of the industry. They're so far out in front in so many aspects, I think they’re incredibly difficult to catch.
Rivian (NASDAQ:RIVN) has a great product and has huge backing since it’s building 100,000 vans for Amazon. They have a Class 1 last-mile delivery van business that's substantial. They also have investment from Amazon and north of $10 million in cash in the bank, so they can weather downturns. I would argue that Rivian is going to be a successful player. They have two models, R1S and R1T. The R1T is the only EV pickup truck on the market right now. Tesla announced that the Cybertruck has been pushed out until at least 2023 – and probably very later 2023 – gives Rivian the opportunity to have the high-end of the truck market.
On the topic of trucks, the Ford (NYSE:F) Lightning is entering the market soon too, which is incredibly important. Ford has long had the most popular pickup trucks in the U.S. Lightning is likely going to be a very large seller on the lower end of the cost spectrum.
Meanwhile, SUVs are coming shortly behind pickup trucks. This is typically an area where General Motors (NYSE:GM) has dominated, so they're coming out with the Hummer and Silverado. They’re starting Hummer deliveries already, though I haven’t seen one in the wild yet.
The Lucid (NASDAQ:LCID) CEO, Peter Rawlinson, is the former engineer that launched the Model S for Tesla. He is brilliant and has developed the Dream Air edition, which I think is a Model S killer. It has a much higher battery capacity, faster charging, and more range at 520 EPA miles of range. It also offers very high acceleration. Lucid is on track for the high end of the market and will be dominant there. The Dream Air edition is the one to beat — it’s expensive but it puts pressure on range and sets the bar very high. I think that will eventually be the standard as battery tech improves and the cost of batteries drops.
I also see Hyundai and Kia, both Hyundai Motors (OTCMKTS:HYMTF) brands, as potential low price leaders. Those two brands have a platform for the Ionic 6 and EV6 that offers an 800V battery platform; they charge extremely fast relative to others on the market, have really good range, and come in at a price point of around $40,000.
Finally, Toyota (NYSE:TM) has long been a holdout in the EV space, but a few months ago announced a $70 billion commitment to battery electric. They’re investing $35 billion for batteries and $35 billion for EV models. That's a tipping point for this industry that they were the holdout and they're all in now. Shortly after that announcement, they announced their solid-state battery tech. In the next few years, Toyota says it will have solid-state powered EVs in the market, and if that happens it's going to be an incredibly important moment in time because it will signal very long duration, high-reliability batteries much less likely to have flammability issues, much less sensitive to temperature variation, and with a wider operating range than lithium-ion batteries. They will be lighter, cheaper, and will charge faster, from near-zero to near full in 10 to 15 minutes. That circles back to the need for very high-speed charging, which we're designing for.
Q: What are some key trends you’re monitoring and how will it affect some of those companies vying for market share in the EV space?
JS: In terms of the industry more broadly, there are very interesting developments that we forecasted a few years ago and are now seeing. For example, legacy automakers have dealer networks that are franchisees of their brands. These have often been contentious relationships, but now automakers are faced with competing with startup EV makers that don't have that legacy dealer network. EVs don't require this; they don't need the same service or maintenance as [internal combustion engine] (ICE) vehicles. EVs have about 20 moving parts versus ICE vehicles with 2,000 moving parts. That's why there's a market improvement in the reliability of EVs over ICE vehicles.
But with these dealer networks for Ford or GM versus Tesla, Rivian and Lucid, it’s hard for them to compete. So, legacy automakers are creating spin-out brands that are EV only and won't go through dealer distribution. That puts pressure on dealer networks that are ICE-only dealers. They're going to be stuck with ICE while EV goes on to direct sales/support.
We’re seeing dealers react to this in a few ways. Some are diversifying their offerings and getting into different types of vehicles. Some are EV locations offering accessories and supporting charging from home or becoming local experts that can help you set up at-home charging for your EV. We do have heads-up dealers out there who are evolving. Others just realize it's the end of an era and they’re exiting, selling their businesses and moving on.
Q: What remain the key factors limiting the adoption of EVs and how do we get to mass adoption?
JS: We’re trying to solve for mainstream EV adoption. Tesla is an early adopter solution, not a mainstream solution, especially when it comes to its Supercharger network. There’s no clear time to charge and no certainty you will have availability of a plug when you pull up. It’s not the fastest anymore, and soon we're going to see new 800V and higher batteries coming from companies like Toyota. We’ll need to see much faster charging solutions to satisfy mainstream users.
Today, there are 115,000 gas stations in the U.S. The expectation is for those to have attendants, restrooms, and convenience stores. When you drive across the country with the Supercharger network, there's none of that. There may be something you can walk to 5 to 10 minutes away, but you also don't know how long you'll be there. More cars mean slower charging times because of the shared grid connection. Since there’s a single straw to the grid and 10 to 20 posts all sharing, that slows charging times down.
Mainstream users expect a simple, predictable experience. They want someone there, surveillance, and basic services. In the future, it starts with charging that is predictable and fast, then we can add these other services we've taken for granted in gas stations for fueling.
Q: How does Kilows fit in and where are you in terms of developing and deploying your charging stations?
JS: We’re building the first Kilows charging station now, and we’re having lots of investor meetings and have met with people at high levels in the government that can help with grants and contracts for charging stations along interstates. So, there’s some revenue traction starting to occur – we haven’t signed any contracts yet, but we’re on track to getting reservations for service and delivery.
We’ve long intended to have the Alpha version of our charging station available by Q1 2023 and that is tracking despite supply chain issues. Some parts have been delayed, but we’ve been given delivery dates that would let us hit that timeline. So, we have something we intend to demonstrate in the next two months that is truly amazing. We have a hardware, firmware, and software tech stack that allows us to have cross-compatibility with all these leading EVs for lightning-fast charging — if you take one of our plugs and plug it into an EV, it’s going to work. That’s a big deal because the stats say that at non-Tesla charging facilities, 1 in 3 sessions do not work, so the bar for compatibility is incredibly low and that’s what we’re focused on.
Our plug is designed to be compatible with the CCS1 plug, which is the North American standard. You can bring any type of EV and connect to that, and we’re working on developing Tesla adapters that allow them to adapt to CCS1 as well.
Q: What other technological innovations beyond charging are important to growing the EV industry?
JS: The entire world is remaking its global energy system. We’re taking the largest single form of energy, fossil fuels, and moving to non-fossil. It’s the single largest shift in economics in human history and will be for the rest of our lives. It dwarfs cell phones and the internet; it’s bigger than every technology we've built since the Industrial Age. It’s the biggest economic shift period, the market signals are incredibly strong, and the support is public-private and worldwide.
We're moving from centralized fossil-fuel generation of electricity to decentralized renewable energy completely dependent on energy storage. That means batteries. The largest form of energy storage is hydroelectric, but we can't rely on and build on that because there are environmental problems and water shortages. Hydro is not something we can scale, especially in the U.S. The most important single innovation we need is round-trip energy storage that's environmentally friendly combined with renewables, primarily solar and wind today.
Expect trillions of dollars of investment in battery tech and solid-state battery development. We’re building a network of energy storage-based, lightning-fast charging stations that will make us an ideal battery lab for this new battery tech. We anticipated this moment, so we’ve built everything to be agnostic on chemistry and form and format. We know battery research is coming and we want to take advantage. That helps in our mission of improving the mainstream EV experience.
Top EV Stock Picks
As the EV industry is heating up, with companies taking charge by leading the industry to new frontiers with electrifying cars and innovative technology, a range of top EV stocks has seen substantial growth on the public market with investors buying up lucrative shares at below-market value prices.
With so much competition in the industry, it’s hard to choose only a few of the best companies out there. And with the industry developing faster than ever before, investors are willing to bet massively on companies that will change the EV game in the coming years.
With an eye on mainstreaming electric cars around the world, Tesla (NASDAQ:TSLA) has been a top pick when it comes to high-value lucrative EV stock picks. Though TSLA had a rough first half of the year, supply chain constraints pressured the company into further delaying deliveries of their vehicles as a shortage of crucial components added strain to the overall production chain.
TSLA has since recovered and has gained upwards momentum, moving above its 40-week moving average. Positive Q2 earnings also managed to help TSLA come out of the woods, as the company is expecting to grow annual vehicle deliveries by 50%. These estimates could help Tesla stocks in the long term, as the company manages to gain momentum, and take lead in the EV industry.
Rivian Automotive (NASDAQ:RIVN) posted full-year guidance on vehicle deliveries, with Q2 revenue above industry estimates. Rivian posted more than $364 million in revenue against the $337.5 million expected. The top line performance of the company, even in the challenging market, helped RIVN shares to lower the expected loss of $1.63 per share to $1.62 per share.
Though RIVN has a year range price of $19.25 - $179.47, investors are more convinced by the company’s strong performance and future guidance. Ongoing consumer support and more than 98,000 net preorders for its R1-series truck give Rivian a solid position on the stock market.
Both Ford and General Motors are taking a different approach when it comes to their electric vehicles, but this doesn’t mean that share options aren’t still an attractive pick for investors.
Ford (NYSE:F) has both the labor and production capacity, and in Q2 the automaker delivered more than 16,000 EVs. Despite the efforts, and ramping up production, Ford shares are still down 27.29% year-to-date (YTD). The dwindling share prices come after a challenging first quarter, battling major shortages of components, and a tight labor market. The sudden increase in production costs has also hurt the company's bottom line.
General Motors (NYSE:GM) on the other hand has a forward-looking strategy that would see the company planning to have its EVs represent one-third of global production by 2026. This would account for around two million vehicles. The bad news is that during the earnings call in June, GM saw earnings per share drop by 42.13%.
YTD performance is also down 37.13%, and GM has yet to be able to break past the $40.00 barrier. General Motors will need to provide clear investor guidance on the road forward if it looks to re-instill investor sentiment in the coming months.
Inventors have been heavily underwhelmed by Lucid Group (NASDAQ:LCID) after the company announced it was lowering its 2022 production guidance and burned through more than $800 million during Q2. Stock performance veered heavily after the announcement, with shares tumbling 12% before gaining slight momentum and sliding again.
It’s been a challenging year in terms of production for the company, as the company is far behind its goal to produce between 12,000 and 14,000 EVs this year. In Q1 Lucid produced 1,405 vehicles and Q2 saw production halt at 679. LCID is perhaps in a tight spot right now, and investors are perhaps more bearish over future performance, seeing many put a strong hold on LCID shares for now.
Concerning Hyundai Motor Company (OTCMKTS:HYMTF), investors have a mixed sentiment when it comes to HYMTF, the company posted a 10.62% year-over-year (YoY) change in revenue back in March. The YTD performance of HYMTF is down 11.65%, somewhat less than expected, with day range price movement remaining consistent between $35.54 - $37.08.
Then finally, Toyota (NYSE:TM) has experienced major headwinds from all sides throughout the last few weeks, with some Wall Street lowering TM shares to “Hold.”
Toyota stocks are riding out choppy conditions in the market, and investors are unsure whether the company has entered the EV race without the needed experience and technological guidance. Even at its size company stocks are currently a hit and miss for many growth and value investors.
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