The age of the internal combustion engine is slowly, but surely, coming to an end.
This week, Volvo became the latest car maker to announce plans to go all electric by 2030. In fact, all major manufacturers have made big electric vehicle commitments, which if fulfilled, will drive new electric vehicle sales higher and faster than much of Wall Street currently anticipates.
With EVs on the rise, Wedbush analyst Daniel Ives said this week that stocks in the sector could move far higher this year.
“In my opinion, EV stocks could be up another 40-50% this year, given what we’re seeing in terms of a green tidal wave globally,” Ives said. “I think right now it’s a big enough ocean for more than one boat. It’s not just going to be Tesla’s (NASDAQ: TSLA) world.”
Ives believes EVs could grow into a $5 trillion industry over the next decade – its valued at just around $250 billion now, according to market research firm Fortune Business Insights.
And while newer entries into the field like NIO (NYSE: NIO), Lucid Motors (NYSE: CCIV), Li Auto (NASDAQ: LI), Fisker (NYSE: FSR), and Lordstown Motors (NASDAQ: RIDE) are buzzier, Ives argues the electric revolution will usher in a new era for traditional automakers.
“This is really going to be what I believe is a renaissance of growth for these automakers and you’re going to see a re-rating,” Ives said, specifically pointing to General Motors (NYSE: GM) and Ford (NYSE: F).
Both names are up significantly so far this year, with GM gaining 24.5% year-to-date and Ford up nearly 36% since the start of the year.
GM and Korea’s LG Chem said today that they are exploring building a second battery plant in the U.S. to make cells for the future electric vehicles the automaker has planned with GM having announced that it will build 30 new EV models by 2025.
The additional site would be similar in size to the $2.3 billion facility the two companies are currently building in Lordstown, Ohio, and is just a piece in GM’s $27 billion investment budget for electric and autonomous vehicles.
“GM and LG Energy Solution, via the Ultium Cells LLC joint venture, are exploring a second bakery plant in the U.S.,” said spokesman Dan Flores. “We hope to have a decision on the project in the first half of 2021.”
Ives added, “This is one of the most transformational growth trends in the last 20 or 30 years in terms of EV, and many are going to play and win in this sector over the coming years.”
But it’s not just automakers analysts are bullish on now.
Baird analyst Ben Kallo initiated coverage of EV battery maker QuantumScape (NYSE: QS) this week, issuing a price target of $52 – 18% higher than the price as of this writing.
QuantumScape has been on a wild ride since it went public in November via a SPAC merger. The battery maker rose 57% in its first trading day, then soared another 256% by December 22 before dropping precipitously from that high. The stock is down over 66% from its record, and now sits at $43.90.
Still, Kallo says QuantumScape’s business is worth around $23 billion, making it one of the most valuable auto suppliers in the world.
“The positive product tests to date, experienced management team, strong balance sheet… and large TAM have us optimistic” on QuantumScape, Kallo wrote in a note, referring to total addressable market.