Top EV Stocks to Watch in July

Electric vehicle (EV) stocks may prove to be a long-term winner of the clean energy transition, but right now global demand for EVs is slowing.

Despite battery prices falling, many consumers have concerns about the driving ranges and charging costs associated with owning an EV. On top of this, American and European EV stocks are coming under pressure from Chinese competitors.

Some 97% of consumers in China surveyed by Alix Partners for its latest EV sentiment report, published in April, indicated that their next car purchase or lease will probably be an EV, up from 85% in 2021. This is compared to 43% across Europe, up just one percentage point from 2021’s level, and 35% in the US, where demand has remained flat.

The majority of Chinese consumers said they would most likely purchase or lease a car from a domestic brand. Chinese EV stocks have a significant cost advantage, the main one being that critical materials are sourced and mined in the country, so batteries are cheaper to make.

Fending off competition from China and driving sales growth may require American and European automakers to “accumulate core EV technologies”, such as batteries and semiconductors, Kota Yuzawa, Research Analyst at Goldman Sachs, argued in May. Yuzawa is “bullish on automakers with strong balance sheets and line-ups with multiple powertrains, such as hybrid EVs” that are generating good cash flow and using that cash to invest in electrification.

While pure-play EV stocks like Tesla [TSLA] get most of the headlines, many legacy automakers are ramping up their electrification efforts. Here are five other EV stocks to consider.

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Five EV Stocks to Watch in July

Stellantis [STLA]

Stellantis is expanding its hybrid model range to meet both environmental and affordability needs.

Why invest in STLA?

The owner of Citroën and Peugeot plans to expand its hybrid line-up in the coming months. According to a July press release, Stellantis will offer 30 hybrid models across nine of its 14 brands, including Fiat, Jeep and Alfa Romeo, by the end of the year, with a further six models to be added by 2026. Despite weak EV demand globally, Stellantis’ hybrid sales jumped 41% year-over-year between January and May. Hybrid technology “propels us toward a future of lower emissions, extended vehicle range and overall affordability for our customers,” Uwe Hochgeschurtz, Chief Operating Officer at Stellantis in Enlarged Europe, said in a statement.

General Motors [GM]

GM has received government funding to scale EV production.

Why invest in GM?

Last week, President Joe Biden’s administration announced the allocation of $1.7bn across several firms in an effort to boost domestic EV production and prevent plant closures. The owner of the Chevrolet brand was awarded $500m to convert an assembly plant in Michigan, originally built in 1999 for internal combustion engine production, for EV production. The grant should help the automaker accelerate its targeted phase-out of combustion engine vehicles by 2035.

Renault [RNLSY]

Renault has announced a cost-cutting EV battery strategy.

Why invest in RNLSY?

The French automaker’s EV unit, Ampere, is working with Asian battery giants Contemporary Amperex Technology (CATL) [300750:SZ] and LG Energy Solutions [373220:KS] to lower battery costs by approximately one fifth. “This decision is an effective and cutting-edge response to market volatility and change in technologies,” Ampere said in a press release issued on 1 July, adding that lithium iron phosphate (LFP) batteries will be integrated into models from 2026. LG Energy Solutions announced separately on 2 July that it will supply Ampere with 39 gigawatt hours’ worth of LFP pouch-type batteries for five years from 2025.

Toyota [TM]

Toyota’s EV sales in the US accelerated by 63% in the June quarter.

Why invest in TM?

The Japanese manufacturer’s American division sold 247,347 EVs in the US in Q2, up 63.1% from the June quarter last year, and accounting for 39.8% of its total sales volume. Toyota is one of several automakers, including GM and Stellantis, to back EV charging firm IONNA in its bid to roll out a US-wide EV charging network. IONNA plans to install 30,000 charging ports by 2030. Ted Ogawa, President and CEO of Toyota Motor North America, said that the IONNA partnership will help “promote the adoption of battery EVs and increase customer confidence in the technology”.

Ford [F]

Ford has opened its EV dealership programme to all dealers in the US.

Why invest in Ford?

The Dearborn, Michigan automaker has made a significant change to its EV strategy in a bid to ramp up EV sales. From 1 July, all car dealers are now able sell its EVs, whereas previously only those that invested in costly upgrades, like $100,000 fast chargers, were permitted to do so. “The growth has slowed down and we’re getting into the tough innings,” Marin Gjaja, Chief Operating Officer at Ford’s EV unit, Model e, told reporters on a conference call last month, as covered by Bloomberg.

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How to Invest in EV Stocks

According to Goldman Sachs, the headwinds facing the EV industry mean the investment bank’s bear case scenario is becoming increasingly likely. It has forecast EV market penetration will be 11% this year and 25% in 2030, whereas, under the base case and hyper-adoption scenarios, EVs would account for 34% or 45%, respectively, of all cars sold in 2030.

If the bear case does play out, then EV stocks could experience downward pressure for some time to come. In this light, it may be worth considering another way to invest in EV stocks: through thematic ETFs.

Take the First Trust S-Network Future Vehicles and Technology ETF [CARZ], for example. The fund, which holds Ford, GM, Stellantis and Toyota, offers exposure, not just to EV makers, but to those stocks that are developing EV technologies and building out the EV infrastructure, as well as chipmakers and copper and lithium miners.

Meanwhile, the iShares Self-Driving EV and Tech ETF [IDRV] holds Renault alongside well-known Chinese EV brands and battery makers.

Download the OPTO app today to discover more thematic ETFs that offer exposure to EV stocks and the broader industry.

Conclusion

There are likely to be bumps in the road for the EV industry as demand continues to splutter. However, those automakers that are ramping up production and investing in scaling EV technologies are likely to be better placed to ride out the current slowdown.

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