Electric Vehicle Intensity

The last two posts, “Electric Vehicle Batteries:  Keeping Value Generation in Sight” on October 22^nd and “Are Batteries Entering an Iron Age?” on October 29^th speculated on which developer of lithium iron phosphate batteries might capture the interests of electric vehicle manufacturers.  China’s Contemporary Amperex Technology Co., Ltd. (300750:  SHE) is an oft-mentioned candidate, but BYD Company Ltd. (1211:  HK) may have an edge with its innovative blade design.

Some investors may want to skip the electric vehicle components segments and dive right into to the car manufacturers themselves.  There are many to choose among.  First there are the innovators such as Tesla, Inc. (TSLA:  Nasdaq), Fisker (FSR:  NYSE), Faraday (FFIE:  Nasdaq) or Lordstown Motors (RIDE:  Nasdaq).  The legacy car manufacturers, including General Motors (GM:  NYSE) or Ford (F:  NYSE) or Toyota Motor (TM:  NYSE), are also getting in the electric vehicle game by switching out the combustion engine system for an electric power train in established models.   

Which electric vehicle producer is the right choice?  Is a stake in Tesla with high profile in the electric vehicle market and its price earnings multiple near 400.0 times trailing earnings, a good choice?  Would one of the old timers such as GM be a better choice since it trades at a more economical 7.8 times trailing earnings?  Or should investors look to a global operator like Toyota since it offers a forward dividend yield of 2.5%?

In this post an alternative method is used to screen the car manufacturers for the best electric vehicle bet.  It could be called the EV Intensity Measure  -  the percentage of the OEM’s sales in the U.S. in 2020 that were electric vehicles.  U.S. sales were chosen simply because reliable data was readily available from GoodCarBadCar.net for 35 car brands made and sold by 16 car manufacturers.  

EV Intensity provides a view on how much of the manufacturers sales volume is already electric.  A ranking is shown below, providing a view on which manufacturers can lay legitimate claim to the electric car market.  Admittedly, the EV Intensity measure does not reflect well for companies that have not yet sold cars, ranking most of the innovators near the bottom of the list.  EV Intensity does provide insight into which established and profitable companies are becoming serious EV producers.       

It should be no surprise that Tesla is actually the most EV Intensive of all the car producers given that its single brand is exclusively electric.  The Smart car brand owned by Daimler is also exclusively electric, but it gets lost in the mix with Daimler’s overall brand portfolio.  Daimler ranks #6 in EV Intensity on our list of car manufacturers.

A distant second to Tesla is BMW (BMW:  DE) with 6.9% electric vehicle intensity in its BMW and Mini brands.  In early 2021, BWM management set a year 2030 goal for having at least half of sales volume to be electric cars.  Of course, this goal is worldwide and includes Europe where electric cars have been embraced with greater zeal than the U.S.  The European Union reports 10% of total vehicle sales in 2020, were electric models.  Given a return on equity of 17.4% in 2020, it appears the company’s strategic positioning is working well.

A stake in BWM is priced at a multiple 5.02 times trailing earnings, revealing BMW is among the best bargains in the automotive sector.  The stock even comes with a dividend kicker with a forward yield of 2.09%.  

 

Company	Symbol	EV Intensity Measure*
Tesla, Inc.	TSLA	100.00%
Bayerische Motoren Werke, AG	BMW:  DE	6.90%
Zhejiang Geely Holding Group	Private	4.14%
Mitshubishi Motors Corp.	MMTOF	3.53%
Daimler AG	DAI:  DE	1.34%
General Motors Corp.	GM	1.25%
Honda Motor Company Ltd.	HMC	1.22%
Volkswagen Group	VOW: DE	1.10%
Toyota Motor Corporation	TM	1.09%
Renault-Nissan-Mitsubishi Alliance	Private	0.99%
Hyundai Motor Group	011760:  KS	0.62%
Stellantis N.V.	STLA	0.42%
Ford Motor Company	F	0.37%
Tata Motors Ltd.	TTM	0.32%
Mazda Motor Corporation	MAZDA:  NS	0.00%
Subaru Corporation	7270:  T	0.00%
Data from GoodCarBadCar.net
Electric vehicles as percentage of an OEM's sales volume
in its primary brands

 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.