The US markets are home to what are indisputably the best companies in the world. Coca-Cola, American Express, Berkshire Hathaway, Netflix, Mastercard, Apple, NVIDIA, Amazon… these world-dominating companies are all US shares, and call the American markets home.

So it makes sense that ASX investors might want a slice of come of these businesses. After all, while ASX investors are justifiably fond of the likes of Westpac Banking Corp (ASX: WBC), Telstra Group Ltd (ASX: TLS) and Coles Group Ltd (ASX: COL), these ASX shares can't hold a candle to the names above when it comes to global dominance in their fields.

But many Australian investors might want to know which US shares are being bought by Australian investors in particular. Luckily, financial services and brokerage company eToro has provided some data on this subject.

The ten most popular US shares for ASX investors

Here are the ten most widely-held US shares on eToro's platform over the quarter ended 30 June 2024:

1. Tesla Inc (NASDAQ: TSLA)
2. NVIDIA Corporation (NASDAQ: NVDA)
3. Apple Inc (NASDAQ: AAPL)
4. Amazon.com Inc (NASDAQ: AMZN)
5. Microsoft Corporation (NASDAQ: MSFT)
6. Meta Platforms Inc (NASDAQ: META)
7. Nio Inc (NYSE: NIO)
8. Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL)
9. GameStop Corp (NYSE: GME)
10. Alibaba Group Holding (NYSE: BABA)

These ten US shares are unchanged from the previous quarter's figures. However, their positions in this top ten list have changed. Nvidia replaced Apple in the number two spot, while Nio was usurped by Meta in number six. Gamestop also bumped off Alibaba for the ninth position.

Meme stocks and tech giants

So it's not too surprising to see these companies take out the top US share positions for ASX investors. Tesla, Nvidia, Apple, Amazon, Microsoft, Meta and Alphabet (Google and YouTube owner) are all household names with products most of us probably use every day.

These US shares are well-known for having delivered massive windfalls to their investors in the past, which many ASX investors probably (and reasonably) assume will continue into the future, given their ongoing dominance.

Gamestop, Nio and Alibaba are more interesting though.

Both Gamestop and Nio have made names for themselves as 'meme stocks'. These shares are subject to huge swings in volatility on a regular basis, and have become popular 'swing trades'.

Chinese e-commerce giant Alibaba is one of the largest companies in China, but it has lost more than 75% of its value over the past four years or so. Consequently, some ASX investors may be betting on a big recovery.

But those are the US shares ASX investors have been buying over the past three months. Let's see if it's the same names that pop up next quarter.

The post Which US shares are ASX investors buying in 2024? appeared first on The Motley Fool Australia.

Electric vehicle (EV) sales are rising. In 2021, 6.6 million EVs were sold worldwide, nearly double the sales in 2020. EV Volumes, a data base, estimates 2022 global EV sales at 10.6 million, up nearly 60% from 2021. More than 16.5 million electric cars and trucks were on the road in 2021.

Despite such encouraging growth in sales, EV makers' stocks have continued to falter in 2022. Let's see why that was so, and if the stocks look attractive for 2023 after the steep declines.

Top EV stocks fell steeply in 2022

U.S. stock markets have corrected significantly so far this year. The S&P 500 is down 17%, while the Nasdaq Composite has fallen more than 28% as of this writing. Since growth stocks typically trade at high multiples, they tend to fall harder during market corrections. This has certainly been true in 2022.   

TSLA data by YCharts..

While Tesla (NASDAQ: TSLA) stock has fallen 49%, Lucid (NASDAQ: LCID), Rivian (NASDAQ: RIVN), and Nio (NYSE: NIO) have fallen more than 60% year to date. And all four stocks have fallen far more from their all-time high prices; while Tesla stock has dropped more than 55% from its peak, the others are down more than 80% from theirs.

Is the correction justified, or is there a buying opportunity?

In early 2021, the valuations of EV stocks went through the roof thanks to the hype surrounding electric vehicles. As the broader markets corrected, EV stocks fell, too. And supply chain challenges have hurt the production of EV companies while raising their costs. But has the recent decline finally made these stocks attractive?

For sure, the EV story is just getting started. All these companies have a long growth runway as the transition from internal-combustion vehicles to EVs unfolds. While it is broadly accepted that this transition is inevitable, what isn't as clear is which players will thrive in the long run.

Tesla continues to post solid performance

Tesla's stock seems to have fallen to an attractive level. While it is difficult to determine whether it'll fall further in the short term, the stock is intriguing for several reasons. To begin with, its valuation is far more sensible than it has been in the past.

TSLA PS Ratio data by YCharts.

Tesla's price-to-sales ratio has fallen to 8.3 from around 30 in January 2021. Although it still looks high compared to traditional automakers, that's because Tesla is still growing fast. The company's revenue increased 56% year over year in the third quarter. And that isn't a one-off quarter; its growth over the years is impressive.

TSLA Revenue (TTM) data by YCharts. TTM = traling 12 months..

The above chart compares Tesla's revenue growth over the last three years with that of traditional automakers.

At the same time, its margins remain impressive.

TSLA profit margin (quarterly); data by YCharts.

Overall, Tesla appears to be on a solid footing to keep posting sustained growth in the coming years.

Nio's growth looks impressive

Chinese EV maker Nio expects substantial growth in vehicle deliveries in the fourth quarter and in 2023. Although the company is still incurring losses, it is increasing revenue rapidly, as the chart above shows. Its upcoming models and expansion plans in Europe can be key drivers in the coming years.

Lucid and Rivian look promising

Lucid and Rivian are still at very early stages of their growth compared to Tesla, but both look promising. Lucid managed to establish itself as a serious player by delivering the longest range for its first model, the Lucid Air. The company, which started deliveries at the end of October 2021, has delivered roughly 2,500 cars in a year. It targets producing 6,000 to 7,000 cars in 2022.

After launching the Sapphire, Pure, and Grand Touring variations of the Lucid Air, the company now plans to open registrations for its first SUV, the Gravity, in early 2023. Its focus on the less-tapped Saudi market could help it drive significant growth.

After starting deliveries in September 2021, Rivian has already produced more than 15,000 vehicles. And it has a backlog of more than 114,000 units of its R1, including both SUVs and pickup trucks. It has an attractive order backlog, too: 100,000 delivery vans from Amazon. What's more, it has enough cash to fund its operations through 2025.

Both Lucid and Rivian are at early stages of their growth and are incurring losses. As young EV makers, they are more affected by the supply chain issues that the industry is facing than are the established players. Both companies look promising, but investors should note that these stocks are riskier compared to those of legacy automakers or Tesla.

But they have corrected drastically and, if successful, could generate windfall returns for long-term investors. In short, all four stocks look like attractive buys for 2023.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

On another bright "green" day for the stock market, shares of electric vehicle manufacturers are doing better than most. As of 11:05 a.m. ET Tuesday, shares of EV leader Tesla (NASDAQ: TSLA) had surged by 5%, well outpacing the S&P 500 (which was up a solid 0.9%). Electric truck rival Rivian (NASDAQ: RIVN) was doing even better with a 6.9% gain and Chinese EV maker Nio (NYSE: NIO) was doing best of all -- up 7.8%.

But news from Tesla was probably the main reason for all of these gains.

So what

As multiple sources reported, Tesla on Monday announced it was cutting the prices for its popular Model 3 sedans and Model Y crossover EVs in China by as much as 9%. As The Wall Street Journal reported, a "standard" Model Y in China now sells for the yuan equivalent of just $39,800 -- versus the $58,190 price being charged for a "long range dual motor AWD Model Y" (the cheapest model shown on Tesla's website) here in the U.S.    

Now why would investors think this is good news? After all, as my Foolish colleague Travis Hoium just pointed out, all else being equal, a 9% reduction in MSRP can easily translate into a 9-percentage-point reduction in operating profit margins. So if Tesla earned 17.2% margins on its cars last quarter (which it did, according to data from S&P Global Market Intelligence), cutting the costs of some Tesla cars by 9% could mean cutting its profits on those cars in half.

If you assume (as seems logical) that rivals Rivian and Nio will have to cut their prices in order to compete with Tesla, that would seem to foreshadow falling profit margins across the board in the EV sector.

Now what

That, as they say, is the bad news. But here's where the news might be a bit better for Tesla, Rivian, and Nio. One reason why Tesla is able to cut prices so drastically, says CEO Elon Musk, is that the costs of the commodities it requires to build its cars "are dropping a lot" and the company now anticipates that it will "see some cost reduction in 2023."  

So it seems that while Tesla is sacrificing some of its profit margin through EV price reductions, it may also be gaining some profits back farther up the supply chain. As long as the cost of manufacturing Teslas (and Nios and Rivians, of course) falls in tandem with the prices these companies charge for their EVs, there's a chance that lower car prices won't mean lower profits for their makers.

Or so investors seem to be hoping Tuesday.

Is that a smart bet? Maybe. It's still possible Tesla's price cuts will spark a price war among EV makers. There's also the potential for the still-rising cost of some commodities -- lithium in particular -- to mess up the math and prevent Tesla and its peers from cutting their total costs enough to make up for their price cuts. When you get right down to it, your safest bet is still to avoid the riskier stocks in this space like Nio and Rivian -- neither of those companies is currently profitable -- and focus instead on Tesla.

Trading at 59 times trailing earnings, Tesla still isn't what I'd call a cheap stock. But at least it's cheaper than the alternatives. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

Shares of many Chinese companies are getting hit hard today, including several of China's electric vehicle (EV) makers. Shares of Nio (NYSE: NIO), XPeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) all plunged by double digits Monday morning. As of 10:53 a.m. ET, Nio shares were down 20.6%, XPeng was lower by 18.8%, and Li Auto had plunged 24.1%. 

So what

These names are reacting to news that Chinese President Xi Jinping locked in a third term and selected a group of loyalists for top leadership spots at the Communist Party Congress. Investors fret that could have negative implications for private Chinese companies as well as the country's economy in general.

It implies the continuation of Xi's zero-COVID policy that has led to lockdowns. These lockdowns have crimped both supply and demand in some areas. Xi has also sought to regulate the tech industry and attempt to restrict wealth inequality by clamping down on some successful businesses and their founders. But investors also are reacting to other news that is unique to the EV industry. 

Now what

EV bellwether Tesla announced Monday that it is cutting prices on some vehicles in China. That comes after Tesla upgraded its plant in Shanghai that now has the capacity to produce more than 1 million vehicles per year. Some investors think the price cuts could signal a demand problem, which would be highly impactful to domestic EV makers. But there are other possible reasons for the new pricing as well. 

Tesla dropped the prices of its Model Y by about 9% and the Model 3 by about 5% for Chinese buyers, reports The Wall Street Journal. If the reason is slowing demand, it comes at a particularly bad time for companies like Nio, XPeng, and Li, which have been adding new models and are working to earn profits for the first time. The third quarter was a good one for sales from these companies after navigating disruptions from COVID-related lockdowns.

Nio delivered 29% more vehicles in the third quarter compared to last year. XPeng and Li Auto increased deliveries by 15% and 5% year over year, respectively. Nio's record quarterly deliveries included the first shipments of its ET5 midsize sedan. XPeng started delivering its new G9 SUV in September, and Li Auto also shipped 10,123 of its new Li L9 SUVs last month. 

While it remains to be seen how China's economy will perform under President Xi's third term, the price move from Tesla might not be a sign of slowing demand right now. Rising raw material costs led to prior price increases from Tesla and Chinese EV makers alike. Some commodity costs have since come down, including costs for steel and battery materials.

Investors should rightly be focused on the long-term impacts from China's leadership, but today's stock price drops might be overdone if investors are interpreting Tesla's move as a demand problem in China. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

On an only modestly red day for the stock market, with major indices all down just a fraction of a percent each, shares of automotive stocks are getting hurt more than most. Tic-tac-toe, three in a row, shares of Ford Motor Company (NYSE: F), Tesla (NASDAQ: TSLA), and Nio (NYSE: NIO) are down 2%, 1.9%, and 5.9%, respectively.

Each of the three ran into a fender bender of modestly bad news today.    

So what

In the case of electric vehicle (EV) specialists Tesla and Nio, it's basically Wall Street to blame for today's declines. Granted, yesterday's announcement that Elon Musk has apparently decided he will buy Twitter after all is probably still having an effect on Tesla stock -- but there's new news, too.

Specifically, this morning, Japan's Mizuho bank lowered its price target on Tesla stock, citing "logistics challenges" that prevented the company from hitting its targeted delivery number for the last quarter. Although Tesla did still grow its deliveries 42% year over year, and grew its production numbers 54%, the miss necessitates a price target cut to $370 per share, says Mizuho today in a note covered by StreetInsider.  

Similarly, Mizuho cut its price target on China's Nio by about 5%, to $40 a share, citing -- surprise! -- "softer SepQ deliveries" and consequently lower expected earnings in the quarter. Indeed, across the EV industry, Mizuho says getting the needed parts to build EVs, and getting transportation to deliver them where they're going, remains "a challenge." Long term, Mizuho is still a supporter of both Tesla and Nio stocks and maintains buy ratings on both companies.  

Mizuho just isn't sure the stocks will go up as much as it previously hoped they might.

Now what

Now, what about Ford -- which, for all its electric ambitions, still remains today primarily a maker of SUVs and trucks powered by the venerable internal combustion engine? Well, earlier this week, as you probably heard, Ford reported a 9% decline in sales for September -- and an 18% decline in trucks. The company blames parts shortages for sidelining as many as 45,000 vehicles that remain only half-built because they don't have the parts needed to complete them.  

For that matter, even Ford's small but growing electric operation is apparently not immune from the problems plaguing its competitors. Last night, Ford announced that it's raising the price of its base model F-150 Lightning electric pickup truck by $5,000 -- not because it wants to, but because it has to, in order to absorb the costs of "supply chain constraints, rising material costs and other market factors." 

After this hike and the first round of price increases, announced less than two months ago, the price of the F-150 Lightning is now up an astounding 30% over its originally announced base price of just under $40,000 last year.

Now, from one perspective, Ford charging more money for a truck might be considered a good thing -- more money for Ford, right? But if all the extra money coming in one door immediately goes out another to pay Ford's suppliers, then there's really no net gain for the company or the stock. To the contrary, as Ford F-150 Lightning prices rapidly run up from "It's a bargain!" territory to "Hmm, maybe I should just buy a Rivian truck" levels, the good publicity and sales advantages Ford initially enjoyed from introducing the Lightning are already starting to evaporate.

Granted, at a lowly 4.3 times trailing earnings, I still think Ford stock looks cheap enough to buy. But based on today's bad news, I can't blame other investors for deciding Ford might actually need to get a little bit cheaper. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock fell today appeared first on The Motley Fool Australia.

What happened 

Shares of electric-vehicle (EV) stocks were sinking today after a new report showed that Tesla's (NASDAQ: TSLA) vehicle deliveries in China tumbled 64% in July. Nio (NYSE: NIO) -- which is based in China -- may be reacting negatively to that news, along with new data that showed the company continues to lag behind its rival in China.

Additionally, Lucid Group (NASDAQ: LCID) may be losing some ground after Ford announced today that it's raising the price of its F-150 Lightning pickup truck due to rising material costs. 

In the nascent EV industry, any dramatic news for one automaker can often affect the share price of other automotive companies, which appears to be the case today. As a result, Tesla was down 2.2%, Nio had fallen 4.6%, and Lucid was down 6.6% at the end of the trading day. 

So what 

News data released today by the China Passenger Car Association (CPCA) showed that Tesla's July vehicle deliveries were 28,217, down significantly from 77,938 in June.  

Lucid investors are already on edge right now after the company had to raise its own vehicle prices beginning in June due to rising costs. Additionally, just last week, the company slashed its production guidance for the full year. Lucid now estimates it will produce between 6,000 to 7,000 vehicles this year, down from the previous guidance range of 12,000 to 14,000. 

While the CPCA didn't mention why Tesla's China sales fell, Tesla had been working on upgrading the plant during the month in order to boost production, according to Bloomberg. This could eventually help production increase by 33%. That didn't seem to appease Tesla investors though, who aren't ready to hear about any production delays in China after they'd seen lengthy shutdowns of Tesla's Shanghai factory due to China's strict zero-Covid policy. 

Nio investors appeared a bit jittery about the news, as well, but they may have been focusing on other CPCA data showing that rival BYD remains the uncontested EV leader in the country. BYD delivered 163,042 cars in July, while Nio delivered just 10,052.  

Finally, Lucid's shares were likely reacting to the fact that Ford raised the price for its all-electric F-150 Lightning because of "significant material cost increases and other factors." The price bump means that customers will pay between $6,000 to $8,500 more for the truck, depending on the model.

With another EV maker raising its prices, Lucid investors are likely taking this as a cue that the broader EV industry is feeling the effects of rising inflation and higher material costs. 

Now what 

EV investors have been on a rollercoaster ride lately after the Senate passed the Inflation Reduction Act. The new bill, which could be passed by the House and signed by President Biden as early as this week, provides expanded tax credits for both new and used EV purchases. 

While that news gave some EV stocks a temporary lift, today's drop shows just how volatile these stocks are right now as investors try to assess the impact of inflation and rising material costs for the industry. All of this means that Tesla, Nio, and Lucid investors can likely expect more share-price swings in the near term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

Nio (NYSE: NIO) stock made a dramatic U-turn today after yesterday's plunge, popping 16.7% by market close. Although the markets remain choppy, investors in the electric vehicle (EV) stock are excited about an event coming up tomorrow (US time), June 15.

So what

Nio will hold a product launch event tomorrow and although the company hasn't specified what product will hold the spotlight, it should be its ES7 SUV. Nio released a teaser video of the new model today, giving a sneak peek into its camera and lidar sensor system.

It's an important event as Nio has been postponing ES7's launch since April amid COVID-19 restrictions in China. ES7 will be Nio's sixth EV and is a mid-to-large-size five-seater SUV, between the ES6 and ES8.

That may raise concerns about market cannibalization where the new product could eat into the demand for existing ones instead of creating fresh demand for the company. ES7, though, is smaller than ES8 and will likely be priced higher than ES6. Pricing could make all the difference here which is why it's important to consider what Nio announces tomorrow.

Note that ES6 is also Nio's lowest-priced trim and made up the bulk of its deliveries in the first quarter. Adding a more expensive model, therefore, could also help Nio bump up its average selling prices in the coming quarters, provided the new model receives a warm reception from consumers. Importantly, Nio is expected to start deliveries of the ES7 crossover as early as August.

Now what

Nio's first-quarter numbers failed to impress the market but the EV maker expects its deliveries and margins to bounce back. ES7 will likely contribute to that rebound.

Nio may be facing some headwinds but these appear to be near-term blips and I wouldn't be surprised to see more buying coming in the growth stock. The EV maker, after all, is looking forward to a much stronger second half of the year and is working on its ambitious long-term plans that include the launch of an affordable mass-market EV by 2024.

I consider Nio one of the top growth stocks to buy on any dip, and that's exactly what investors appear to be doing today.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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American depositary shares of Chinese electric vehicle (EV) maker Nio (NYSE: NIO) have fallen sharply so far in 2022. The stock is down 55% year-to-date, and its decline accelerated in recent weeks. This comes as the company has worked to expand its sales footprint into Europe and to increase its production capacity. 

But Nio has had four consecutive months of decreasing vehicle deliveries, due in part to the supply chain issues that have been affecting most automotive companies globally. Most recently, however, a new operational challenge has been added to its list of them. 

Nio is getting hit hard again Monday as U.S.-listed Chinese companies are looking more at risk of being delisted. In December 2020, the Holding Foreign Companies Accountable Act (HFCAA) became law, allowing the Securities and Exchange Commission to delist foreign companies that fail to meet U.S. accounting and audit standards for three straight years. 

Last week, five Chinese companies were specifically named as being in danger of meeting that criterion, meaning they could be delisted in 2024 if they fail to comply. Neither Nio nor any other EV maker was on that list. But that hasn't stopped investors from selling shares based on the perceived risk. Nio also completed a successful listing on the Hong Kong Stock Exchange last week. Investors may believe that move was in preparation for a potential delisting of its American depositary shares. 

The geopolitical climate isn't helping with investor confidence either. There are added uncertainties regarding the prices and availability of many commodities as Russia's invasion of Ukraine continues. Investors may also be weighing how Europe, the U.S., and others will view China's position during and after that conflict. 

Investors need to balance short-term news and uncertainties with long-term plans and potential. There are always risks when investing in equities. While what appears to be panic selling may provide an opportunity for investors to buy Nio shares at lower valuations, they should also be sure to weigh the potential risk of delisting. That means allocating funds for any position appropriately, knowing the investment could be lost in a worst-case scenario. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The global market for EVs is expected to grow from 11 million vehicles in 2020 to 145 million by 2030, according to a report by the International Energy Agency (IEA). And with major players like Volkswagen, Ford, and General Motors getting into the game, it's clear that this trend is here to stay.

But what about lithium shares? ASX-listed lithium companies have been at the forefront of the green boom and many investors are wondering if they make for a better investment case than EV makers.

So far, it's been difficult to say for sure. However, looking back at what has happened in the past might give us some clues.

EV production to take charge of lithium future

Whether the real winners of the green shift will be EV makers or ASX-listed lithium shares partly depends on the battery composition of the future.

According to the IEA, the total lithium demand for EVs and battery storage is roughly 30% of the entire market. However, the agency's forecasts anticipate this will expand to 83% of all lithium demand by 2030 under a 'sustainable development' scenario.

This creates some risk for ASX-listed lithium investors if battery chemistry were to evolve beyond the need for lithium. However, as noted in the scientific journal Nature, the plummeting price of lithium-ion batteries over the years means they will likely dominate the scene for the foreseeable future.

How has it played out for ASX lithium shares so far?

The last year has seen many ASX lithium shares benefit from record-high prices for the electrifying material. In 2021, the price of lithium carbonate exploded by roughly 500%, according to Trading Economics.

Undoubtedly, a major catalyst for these higher prices was a growing demand for EVs. Last year, nearly 6.5 million new electric cars were delivered, an increase of more than 108% over the prior year.

Importantly, experts have estimated that for every 1% increase in EV market penetration, an additional 70,000 tonnes of lithium carbonate is required.

As a result, investors are responding to the expected supply gap (as shown above) by bidding ASX-listed lithium shares higher. For example, here's how some of the largest lithium companies on the ASX have performed in the last 12 months:

• Mineral Resources Ltd (ASX: MIN), up 34%
• Pilbara Minerals Ltd (ASX: PLS), up 187%
• Liontown Resources Limited (ASX: LTR), up 330%

What about EV shares?

Despite noteworthy increases in electric vehicle sales in 2021, manufacturers of these electricity eaters are not experiencing the same fanfare as ASX-listed lithium shares recently.

In fact, investing in the likes of Tesla Inc (NASDAQ: TSLA) or Nio Inc (NYSE: NIO) a year ago would have led to the underperformance of all three of the lithium shares listed above, as shown below.

An interesting dynamic to consider is: as lithium prices move higher, this will have a direct impact on the margins of EV makers if they cannot pass on the additional cost.

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Stocks in the electric vehicle (EV) sector have attracted loads of attention following the success of Tesla's (NASDAQ: TSLA) stock and now its business. Tesla reported net income of more than $5.5 billion in 2021. That helped confirm the company could profitably grow as the EV sector matures, which many supporters and shareholders have preached for several years.

That has attracted speculative investors looking for "the next Tesla" and has driven valuations to astronomical levels for several companies, like Rivian Automotive, that have barely begun delivering vehicles. But several of China's EV companies have already proven they can manufacture at scale. Although there are unique risks associated with these businesses, there are also concrete reasons why those who want exposure to the sector should consider investing in them now. 

Targeting the right markets

There's a reason why Tesla's first manufacturing facility outside the United States was built in China -- it's the largest automotive market in the world. Chinese EV makers have been working to take advantage of that, too. Nio (NYSE: NIO), XPeng (NYSE: XPEV), and Li Auto (NYSE: LI) have each been increasing sales quickly over the past two years. 

 

Data source: Company releases. Chart by author.

Although they're building off of a much smaller base than Tesla, these three Chinese EV makers increased vehicle sales between 109% and 263% in 2021 compared to 2020 levels. And though Nio, XPeng, and Li are completely focused on electrified vehicles, Chinese internal combustion and EV automotive giant BYD (OTC: BYDDY) is producing many more new energy vehicles (NEVs), which are defined as both electric and plug-in hybrid models. Sales volume for BYD new energy vehicles soared 218% to more than 600,000 in 2021. It also told investors it expects to potentially double that in 2022 to 1.2 million, reports industry follower CnEVPost.

Though focused mostly on China to this point, these companies also plan to expand beyond those borders. BYD is a global company already, and Nio has established a presence in Norway. Nio has also said it plans to move into Germany, the Netherlands, Sweden, and Denmark in 2022. The International Energy Agency (IEA) predicts China and Europe will continue to dominate EV sales over the next decade, as shown below. 

 

Date source: International Energy Agency Global EV Outlook 2021 report. Chart by author.

Competition and other risks

The IEA Global EV Outlook for 2021 predicts two scenarios for EV sales over the next decade. The first, more conservative, view is based on stated governmental policy objectives. The second assumes a more aggressive sustainable development push that results in EV sales obtaining a 34% share of the automotive market by 2030 -- more than double what the stated policy is expected to achieve. 

 

Data source: International Energy Agency. Chart by author.

Though competition is ramping up from both start-up companies and established legacy automakers, both scenarios provide ample opportunity for the Chinese EV companies to continue growing sales. 

To be sure, Chinese EV companies and their respective shares carry added geopolitical risks. For this reason, investors should size allocations appropriately. But based on businesses that have already shown they can be successful, and markets that provide ample opportunities, investors wanting exposure in the sector shouldn't overlook these companies. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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2021 was a strong year for the stock market, and investors hope that 2022 can provide a repeat performance and give them double-digit returns once again. On the first trading day of the year, the Nasdaq Composite (NASDAQINDEX: ^IXIC) seemed ready to keep up its momentum, with futures contracts on the index rising three-quarters of a percent as of 7:15 a.m. ET.

Tesla (NASDAQ: TSLA) put in another amazing performance in 2021, with its stock adding another 50% for the year. The growth of its electric vehicle (EV) business has been stellar, and over the weekend, Tesla reported impressive delivery numbers that complemented the numbers from its Chinese competitors quite well.

More records fall for Tesla

Shares of Tesla climbed more than 7% in premarket trading on Monday morning. The EV manufacturer's fourth-quarter delivery and production numbers came out, and they marked another high note for bullish shareholders in the stock.

Tesla's Sunday report showed it produced almost 306,000 vehicles in the fourth quarter of 2021. That brought its total production for the year to more than 930,000 vehicles, most of which were mass-market Model 3s and Model Ys. Delivery figures were even more impressive, with 308,600 cars and SUVs going out in the fourth quarter, bringing the total for the year to 936,172.

Many had thought that Tesla's initial hope for a 50% rise from the 500,000 vehicles it delivered in 2020 was overly ambitious. However, the final numbers show the huge demand for Tesla EVs as well as the company's ability to get its manufacturing capacity up. Investors are hoping for similar outperformance in 2022.

Chinese EV makers weigh in

Also on the rise were shares of EV manufacturing companies located in China. Tesla's numbers helped lift the whole industry, but its competitors also reported solid production and delivery numbers of their own.

Nio (NYSE: NIO) shares were up more than 2% in premarket trading. The company delivered nearly 10,500 vehicles in December, up 50% year over year, and topped the 25,000 mark for quarterly deliveries. All told, Nio delivered 91,429 vehicles in 2021, which was more than double its 2020 count.

XPeng (NYSE: XPEV) delivered vehicles at an even faster rate. The Chinese company reported 16,000 deliveries in December, up 181% year over year. That marked more than 41,750 vehicles in the fourth quarter, which was more than triple the year-ago figure, and total deliveries for 2021 came in at 98,155. That prompted a nearly 3% rise in the stock price in premarket trading Monday.

Finally, Li Auto (NASDAQ: LI) saw its shares also rise almost 3%. Li delivered 14,087 of its electric cars during the month of December. Fourth-quarter deliveries came in at 35,221, up 144% from year-earlier levels. For the year, Li delivered almost 90,500 EVs.

The future of EVs

Despite the fundamental success of all of these businesses, stock performance among EV companies has been mixed. XPeng and Li have managed to post gains over the past year, but Nio lost 35% of its stock price as investors seemed surprised that its Chinese competitors' delivery figures raced past its own.

The growth of the entire EV industry is likely to continue in 2022, and the question will be who benefits the most from that growth. As new players like electric truck disruptor Rivian Automotive (NASDAQ: RIVN) and established automakers like Ford Motor Company (NYSE: F) start moving toward bringing more EVs to market, Tesla will have to maintain its immense customer loyalty and first-mover advantage to produce the sort of gains shareholders have gotten used to seeing. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Seemingly every month, a legacy automaker makes an announcement outlining bold plans to decarbonize its operations by investing in electric vehicles (EVs).

Simultaneously, we've seen plenty of new players enter the space, including Chinese automakers like Nio (NYSE: NIO) and U.S. players like Lucid Group (NASDAQ: LCID) and Rivian Automotive (NASDAQ: RIVN). A few years ago, Tesla (NASDAQ: TSLA) seemed like the only true EV investment opportunity. Today, the industry feels more crowded and competitive than ever before.

If you're wondering how to navigate the noise with sound investment ideas, you've come to the right place. Here's the latest on Lucid and Rivian, what makes Tesla unique, and some other investment ideas worth considering now.

Well-deserved praise

Lucid and Rivian have plenty in common. They both have a lot of cash, impressive technology, ambitious plans to disrupt the industry, and are very expensive stocks.

Lucid's competitive advantage is its battery technology, which has allowed it to achieve a longer range and faster charging from a compact configuration. Its battery efficiency of more than 4.5 miles per kilowatt hour is higher than the 4 miles/kWh of Tesla's Model S and other luxury sedans. Lucid stock was the best performing among automakers in 2021 mainly because it delivered on its major promises.

Lucid's initial range and horsepower projections for its Air Dream Edition were met with skepticism. But then the Environmental Protection Agency (EPA) rated the long-range version of the Air Dream Edition with a better-than-expected 520 miles of range and 933 horsepower, and the performance version of the Air Dream with an estimated range of 471 miles and 1,111 horsepower.

This stamp of approval was just one factor of many that made the industry take Lucid seriously. It has expanded its manufacturing capacity, has over 17,000 reservations for its Air line, and plans to expand capacity even further while rolling out lower-priced Air versions in 2022.

Like Lucid, Rivian has a large existing manufacturing capacity, plans to expand in the years ahead, and has strong demand for its vehicles. The company is looking to disrupt the electric van, truck, and SUV market. Although it began deliveries in the third quarter, the results came in lower than Rivian had guided for. However, a bright spot was that pre-orders for its R1T truck now stand at over 71,000, and that's on top of R1S reservations and the 100,000 delivery vans Amazon pre-ordered.

Rivian was awarded the Motor Trend 2022 Truck of the Year award and Lucid received the Motor Trend 2022 Car of the Year award. Investing in either company is a bet that their technology will hold up as new players enter the space, that they will grow production over time, and one day achieve consistent positive operating cash flow and profitably. It's a tall order, which is why both companies are some of the highest-risk options in the industry.

A dynasty far from decline

Despite the potential of companies like Lucid and Rivian, the idea that either is the "next Tesla" is doubtful. Tesla is the industry leader and is probably going to remain the most valuable automaker for decades to come.

Its invaluable first-mover advantage, incredible technology, and years making mistakes (and learning from them) have made it a battle-hardened veteran with one of the highest operating margins in the industry. Put another way, Tesla may not produce the most cars, but it does convert more revenue into actual profit than its competitors.

Its renewable energy and energy-storage segments are growing and also very profitable. In sum, betting against Tesla is a bad idea, especially if the company continues to retain its high profitability even as it grows revenue at a breakneck pace.

Less limelight, but lots of potential

The EV industry is so much more than new automakers or Tesla becoming even bigger. Lucid and Rivian will also have to compete against a crowd of legacy automakers backed by much larger workforces and capital. Make no mistake, these companies are not just going to sit idly by and watch newcomers gobble up market share that took them decades to build.

The legacy automaker that has arguably done the best job fostering real change is Ford (NYSE: F). It may surprise you to learn that Ford stock more than doubled in 2021, making it the second-best performing automaker behind Lucid for the year. Its new management team is keen on investing heavily into EVs to dominate the electric truck industry and compete in electric SUVs -- and it'll soon be making its own batteries and producing vehicles at its new mega factories in Tennessee and Kentucky.

Another way to invest in the EV industry is through infrastructure companies like ChargePoint (NYSE: CHPT), the largest Level 2 (240 volt) charging network in North America. It's quickly growing its Level 3 DC fast-charging network, and continues to look for ways to monetize its subscription business. Although ChargePoint's growth and path to profitability are attractive, some investors may prefer to go with a basket of EV charging stocks.

Zoom out and focus on the big picture

Real gains aren't made when a company beats a single quarter's estimates. Rather, they are made over the long term as new companies evolve into paradigm-shifting growth stories that go on to define an industry. That's exactly what Tesla did to the auto industry. And while there may never be another company quite like it, the auto industry has a very good chance of looking much different a decade from now than it does today.

An investor's task is to determine which companies have the best chance of succeeding and avoid those that aren't making the necessary capital commitments to prepare their businesses for the future.

It isn't hard to envision an EV stock like Lucid taking market share from today's leading luxury sedan makers. Or Rivian taking a chunk out of Jeep's business. Or Ford emerging from the shift from the internal combustion engine (ICE) to the electric motor with a tighter grasp on the global truck market. Or ChargePoint expanding its footprint across North America and Europe.

No matter how good a company's prospects look, the reality is that no one knows exactly which of them will emerge victorious, how long it will take for EVs to surpass ICE vehicles, or if other transportation fuels like compressed natural gas and hydrogen will also take large shares out of the commercial and passenger vehicle markets. Therefore, the best choice for most investors is probably to compile a basket of EV stocks. That way, diversification reduces risk without compromising the chance for upside if a single company proves to be a long-term winner.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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For those wanting to invest in this trend but feeling nervous about picking individual stocks, a new exchange-traded fund (ETF) is coming that might do the heavy lifting.

BetaShares revealed recently that BetaShares Electric Vehicles and Future Mobility ETF (ASX: DRIV) would be "coming soon".

"Sales of electric vehicles are projected to grow strongly in coming years," stated BetaShares.

"The transition to smarter vehicles is likely to significantly increase the use of semiconductors and high-tech componentry in cars."

Which shares will this ETF hold?

While details, including launch date, are currently scarce, the fund manager did provide 4 examples of shares that the new ETF would hold:

• Tesla Inc (NASDAQ: TSLA): arguably the most famous electric vehicle stock, which has risen more than 1,000% since the start of 2020
• Nio Inc (NYSE: NIO): one of several Chinese car makers focusing purely on electric engines
• Aptiv PLC (NYSE: APTV): a US auto parts provider headquartered in Ireland, which has a large business making electronic active safety technologies
• Uber Technologies Inc (NYSE: UBER): best known for its dominance in ride-sharing.

All up, the Electric Vehicles and Future Mobility ETF will hold up to 50 different stocks involved in the future of transportation. 

According to BetaShares, the convenience of investing in foreign businesses through ASX shares is not the only advantage of the new fund.

"DRIV offers potential portfolio diversification benefits to Australian investors, given that automotive technology is under-represented in the Australian market."

Thematic ETFs are so hot right now

The new ASX listing is the latest in a series of thematic ETFs to come to the market this year.

Just last month, BetaShares itself listed ASX's first cryptocurrency-related ETF, while this month ETF Securities revealed it would debut the first-ever Australian funds directly investing in Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH).

ETFs have become popular in recent years on the back of the success of passive index funds.

But Nucleus Wealth spokesperson Jayden Stent warned last month there were considerable risks with theme-based ETFs.

"You don't want to be lulled into thinking that because some ETFs offer low volatility that all ETFs are the same," he said on a Nucleus blog.

"The potential for large swings will mainly depend on the type of the fund… Investors [need] to take note of what the ETF is tracking and what are the underlying risks associated with it."

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On the surface, the stock market appears to be doing relatively well. The Nasdaq, S&P 500, and Dow Jones Industrial Average indices are all down around 5% from their recent highs and are still up big for the year. Look closer, however, and it's clear that the prices of many smaller growth stocks, and even some top-tier companies, are hovering around 52-week lows.

Investors that follow the electric vehicle (EV) industry are probably wondering if the tech sell-off affects growth companies like Lucid Group (NASDAQ: LCID) and Nio (NYSE: NIO). Here's a look at how each company could be impacted.

Lucid is no stranger to skepticism

Daniel Foelber (Lucid): It seems like a distant memory now, but it was only in August and September when share prices of Lucid were struggling to stay above $20 a share as early investors cashed out. The electric vehicle maker spent much of the summer fine-tuning its luxury sedan, the Lucid Air, but failed to mention the date everyone really cared about -- which was deliveries. This period was followed by the company's late September announcement that it had begun mass production, which was followed by its late October announcement that it had begun customer deliveries. These were major milestones that Lucid said it would hit in the second half of 2021. And once it hit them, investors breathed a sigh of relief and gained confidence that Lucid is the real deal, even though its battery technology already showed it was.

In hindsight, the stock price volatility looks rather silly. But uncertainty is a tricky beast that can get the best of both imagination and fear.

What Lucid management did well this year, especially during its Q3 conference call, was set expectations. The company knows that its financial figures will appear paltry for a few years, so it's creating its own yardstick for the market to measure it on. For Lucid, that means setting goals for its cash position, reservations, number of showrooms and service centers, production, deliveries, and manufacturing capacity. Meeting and exceeding expectations in these performance indicators should be enough to keep Lucid's investment thesis alive. But if Lucid incurs delays or falls shot due to unforeseen headwinds, investors may not be so patient. In this vein, Lucid is playing its own game.

No one knows how a stock will move in the short term. But if Lucid continues to deliver on its promises in 2022, then the long-term investment thesis will look even better than it does today.

Heading into a transition year

Howard Smith (Nio): Equity investors can be jittery when news headlines are flying, leading to reactions that are based on bigger-picture assumptions resulting in sector-wide stock moves. Investors need to balance that against what might be due to company-specific information.

Share prices of Chinese EV maker Nio have dropped more than 15% over the past several weeks, and a deeper look seems to indicate the drop was due to a combination of both a sector shift and some short-term news from the company. 

Fears of uncertainty surrounding the economic recovery from the pandemic and the potential spread of the new omicron variant impacted stocks in general in recent weeks. Fast-growing businesses in the tech sector typically get hit hardest when market jitters surface. Nio is one such business, and it has yet to report a profitable quarter. It makes sense that a general sell-off in highly valued stocks is going to include Nio. 

But some company-specific fears were put to rest this week, giving investors a potential opportunity as Nio moves into what should be a transitional year for its business. Last month, Nio disappointed investors when it announced only 3,667 vehicle deliveries in October. That was a decrease of 27.5% year over year. Those results were in sharp contrast to the first nine months of 2021, which showed an increase of more than 150% in deliveries compared to the prior-year period.

But the company returned to that prior growth in November when it delivered a monthly record of 10,878 electric vehicles. The dip in October was mainly due to disruption caused by work to upgrade its manufacturing lines in preparation for both higher volumes and new products. Nio expects to deliver three new products in 2022, including the highly anticipated ET7 luxury sedan. It is also expanding its sales into Europe beginning in Norway, with plans to move into Germany next year. With that backdrop of upcoming growth for the company, investors focused on the long-term can use the recent sell-off to get Nio shares at a discount.

Patience and perseverance are paramount 

Just like other growth stocks, Lucid and Nio are not impervious to volatility. Investors shouldn't expect either stock to go to the moon before each company establishes itself as a long-term market participant.

However, Lucid and Nio both have a lot going for them that should help investors weather the current market storm in case things go south over the short term. If Lucid accomplishes its 2022 goals, it would signal strong demand for its vehicles and mark a major milestone that a new U.S. automaker other than Tesla can compete in the ultra-competitive luxury sedan market. Similarly, Nio continues to prove its mettle against a stout Chinese cohort of competitors and is expanding nicely internationally. For most investors, taking a basket approach by diversifying into multiple EV stocks offers one of the best ways to combat volatility. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

Shares of Chinese electric-vehicle (EV) maker Nio (NYSE: NIO) were trading lower on Thursday, on rising COVID-19 concerns a day after it announced its best monthly sales result to date.

As of 11 a.m. ET today, Nio's American depositary shares were down about 2.4% from Wednesday's closing price.

So what

As is true elsewhere in the world, the emergence of the new omicron variant has rekindled concerns about potential business disruptions in China. Those concerns were hitting the EV segment on Thursday; Nio's was just one of many EV-related stocks trading lower in the session. 

For the moment at least, the company is doing well. Nio said yesterday that it delivered 10,878 vehicles in November, its best monthly total to date and more than double its year-ago result. It was only the second time that its monthly delivery total had broken the important 10,000 mark, and it's a sign that Nio (at least for the moment) has its supply chain issues under control.

Now what

Should the automaker's investors be worried about omicron? Nio thinks not, or at least not yet. The company issued a statement on Wednesday reassuring fans and investors that its annual Nio Day is on track to happen on Dec. 18 as scheduled.

The company generally uses its annual Nio Day gatherings to showcase upcoming new products and technologies. Analysts expect this year's event to feature two upcoming new models, including an electric sedan that may be called the ET5. Both of the new models are believed to be on track to launch later in 2022.

Those models will follow the launch of the company's new flagship, the sleek ET7 sedan. Nio is expected to begin shipping the ET7 in early 2022. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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There's a new cast list of electric vehicle (EV) contenders gunning for a slice of the auto industry pie. Among them are Rivian Automotive (NASDAQ: RIVN), Lucid Group (NASDAQ: LCID), and Nio (NYSE: NIO).

Since its initial public offering (IPO) on Nov. 10, share prices of Rivian have zoomed as high as $179.47 and as low as $95.20. In that same time frame, shares of Lucid blasted past $57 and then fell below the $40 threshold. 

With the dust somewhat settled, industry watchers now find Rivian, Lucid, and Nio all worth over $65 billion. Let's find out which electric car company has the best chance to become the next Tesla (NASDAQ: TSLA).

The technological edge

Lucid began deliveries of the long-range and performance versions of its Air Dream Edition luxury sedan in late October. But at a price tag of $169,000, it's hardly a viable option for most people.

However, Lucid's 17,000 reservations are scattered throughout the four trims of the Air, which is a good sign that there's demand for both Lucid's expensive and more "affordable" options. Lucid plans to use the $4.4 billion in cash it got from its merger with SPAC Churchill Capital IV in July to fund its 2022 operations -- which mainly consist of producing and delivering vehicles, expanding production capacity to 50,000 units per year, rolling out all four versions of the Lucid Air, and preparing to debut the Lucid Gravity SUV. 

Aside from a management team stacked with past experience at Tesla, Apple, and other major tech and financial firms, what Lucid has going for it more than anything else is some incredible battery technology that's built completely in-house. The Lucid Air was named the 2022 MotorTrend Car of the Year largely due to its over-500-mile range and over-1,100 horsepower. The efficiency of its battery pack should translate well to the lower-priced trims of the Air, as well as future models.

Carving out its own niche

Lucid may be crowned the king of range, but Rivian is doing everything it can to limit its competition and tap into what it thinks will be a ripe subsector of the EV market. Roughly a third of the company is owned by Amazon (20%) and Ford Motor Company (12%).

Like Lucid, Rivian's specs are impressive. The R1T has an estimated range of 314 miles and a towing capacity of 11,000 pounds. For comparison, the Ford F-150 Lightning has an estimated range of 230 miles (300 miles for the extended range version) and a towing capacity of around 10,000 pounds. But Rivian is hoping to distance itself from the competition as much as possible by tapping into the outdoor community. Rivian's brand image is like if REI and Jeep got together and made electric trucks and SUVs.

Flush with $12 billion in cash, Rivian has the makings of greatness. However, it is completely unproven as a public company. There's still a long laundry list of unchecked boxes that it needs to fill -- the first being sustaining mass customer deliveries. Until management proves it can efficiently allocate the capital it's been given, there are simply too many question marks facing Rivian at this time.

The value of volume

Before Lucid and Rivian hit the scene, it was Chinese electric car maker Nio that was getting the bulk of "FOMO" (fear of missing out) attention from EV investors. Unlike Lucid and Rivian, which have yet to achieve sizable deliveries, Nio delivered 10,628 vehicles in September alone, and has now delivered over 142,000 vehicles in total. By comparison, Lucid plans on delivering just 20,000 vehicles in 2022, and Rivian has about 55,000 reservations for its R1T truck and R1S SUV and has an annual production capacity of 150,000 units at its plant in Illinois. 

Nio has hit some supply chain snags, but the company is facing a lot of optimism on the way to Nio Day 2021 in mid-December. With a three-year advantage over Lucid and Rivian, Nio is a good bet for investors that value experience over potential.

The winner

Tesla's success stems from its technological edge. For that reason alone, the company that has the best chance to become the next Tesla could be Lucid.

What Lucid has done better than Nio or Rivian is stuck to its schedule. The company hit its production and delivery targets. Until it breaks that trend, there's reason to believe it can hit its 2022 goals, and beyond that, scale production while sustaining an over-20% gross margin (similar to Tesla). 

That being said, Lucid, Rivian, and Nio are several years away from even being considered the next Tesla. The best approach for most investors is probably to buy a basket of multiple EV stocks. It's a good way to protect yourself from steep losses in case one company fails, but also give yourself room for an investment to exponentially compound.

Another helpful practice is to follow the story as these EV newcomers mature. As with all young industries, new competition and developments could shift the dynamics on a dime. Staying up to date on industry happenings is the best way to ensure you're following the companies that have the best chance of becoming the next Tesla and not caught holdings shares of a company that's on a downward spiral. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The stock market is giving incredibly high valuations to electric vehicle stocks, whether the companies have proven themselves effective manufacturers or not. Tesla (NASDAQ: TSLA) is one of the most valuable companies in the world, while start-ups like Lucid Motors (NASDAQ: LCID), NIO (NYSE: NIO), and Xpeng (NYSE: XPEV) are worth tens of billions of dollars with very little production, and a company like Rivian is eyeing a potential $80 billion valuation in an IPO. 

Meanwhile, older manufacturers like General Motors (NYSE: GM), Ford (NYSE: GM), Toyota (NYSE: TM), Honda (NYSE: HMC), and Volkswagen are trading for less than the market's price-to-earnings ratio, as you can see below, indicating that investors don't think highly of their earnings growth potential. Is this because EV companies are disrupting the old guard or because EV stocks are overvalued? Let's take a look. 

GM Net Income (TTM) data by YCharts

EV valuations versus the old auto industry

If you had invested in traditional auto stocks since the start of 2000, your performance would hardly be impressive. General Motors, Toyota, Honda, Ford, and Volkswagen have all underperformed the market, and you could buy all five manufacturers for less than $600 billion, based on today's market capitalizations. Their valuations haven't fallen relative to historical valuations as EVs have hit the market -- automakers have always had relatively low valuations because of the boom-and-bust nature of the business. 

GM Market Cap data by YCharts

Compare these valuations to five of the most valuable EV manufacturers today. 

TSLA Market Cap data by YCharts

This chart doesn't even include Rivian, which could go public with an $80 billion valuation, or Nikola, Workhorse Group, Canoo, Fisker, and a number of start-ups that are effectively pre-revenue. This is a very crowded field today. 

Tesla is relatively established as a manufacturer, but companies like Lucid are still in pre-production and many manufacturers are just starting to ramp up operations in a meaningful way. Clearly, the market thinks the economics of manufacturing EVs long term is going to be far better than the economics of the traditional auto industry over the last century. I think we should be skeptical of that. 

Why the auto business has traditionally been a terrible place to invest money

A good way to understand the strategic position of auto manufacturers is to consider Porter's Five Forces for the industry. Porter's Five Forces is a method for analysing a business's competitive position developed by Michael Porter at Harvard University and is commonly taught in business schools today. 

I have laid out the five forces below and how I see the traditional auto fits into this analysis today, based on a low/medium/high level. You can adjust any of these factors if you disagree with my analysis. 

Data sources: Michael Porter, author's analysis. 

The threat of new entrants to the auto business is low and has been for decades, given the high cost to design vehicles and build manufacturing capacity. Suppliers have some power in the market because many are large and have significant scale, but there's a limit to their power. Buyers do have bargaining power because they can simply go to any other automaker for a vehicle. The threat of substituting one brand for another is also high. And given relatively low margins for automakers and the money spent on advertising vehicles, we know that rivalry among competitors is high.

The same forces don't hold for the EV industry today, where economics will likely be far better for the next few years for some very critical reasons. 

EV financials may never be better than they are today

Looking at the same five forces for the EV industry, we see a much more attractive environment. 

Data sources: Michael Porter, author's analysis. 

There's a bigger potential threat of new entrants today than there was in the traditional auto industry, partially because many of these new entrants are public and can raise capital from equity markets relatively easily. But it's still extremely difficult to establish an auto company today -- so I only made that a medium threat level. But it's also clear that the intensity of rivalry among EV manufacturers is nearly nonexistent, there are very few substitutable options for customers given a limited number of models available, and buyers have little bargaining power because there are so few options. 

To add to the improved position of EV companies today, they're getting a financial windfall from government regulations and tax incentives, and benefiting from disrupting a slow-moving legacy business. 

• EVs have a tax credit windfall for buyers in the U.S. 
• EV manufacturers are getting a regulatory credit windfall
• There is limited competition from any EV manufacturer
• EV start-ups are competing against a legacy cost structure (dealerships and unions) 
• EV companies like Tesla are starting to charge a premium for technology like self-driving features

What I see from both the Porter's Five Forces analysis above and the five bullet points is there are tailwinds behind EV companies today. But in every single case, I think the tailwind has an end date. 

• Eventually, all automakers will make enough EVs to render regulatory credits negligible
• Tax credits will (likely) expire
• Competition from start-ups and legacy companies is launching regularly, and eventually there will be ample supply of EVs for anyone who wants one
• Most new start-ups are not using a traditional dealer model, reducing the benefit of any single company (Tesla) disrupting the dealer model
• Premium features like self-driving are a novelty today, but they'll eventually be standard and -- depending on how autonomous driving technology and business models develop -- may make the idea of purchasing a vehicle in the first place obsolete

Add all of this up and I think we will see an increased level of rivalry, a bigger threat of substitutes from one EV to the next, and more bargaining power from buyers. Long term, Porter's Five Forces and the strategic position of EV manufacturers resemble that of auto companies over the last 50 years. In all likelihood, EV manufacturers will face the same rise and fall of demand during recessions and ultimately pricing pressure that will hurt margins. Some of that threat will come from traditional auto companies themselves, but some competition will be EV-maker versus EV-maker in the marketplace. 

Are EV manufacturers playing a new game? 

When I consider EV companies over the long term, they look a lot like traditional automakers. They are manufacturers just like traditional automakers and some haven't even proven the ability to be world-class manufacturers. They need to grow, develop technology, market products, hold off competitors, and at the end of the day hope they can make enough money on vehicle sales to cover enormous fixed costs associated with operating an auto company.

EV companies will face the same challenges in the future that traditional auto companies have been facing for a century -- which makes me wonder why EV companies are so highly valued compared to how traditional auto companies have been valued for decades? 

Add it up and this looks like EV stocks are much more fallible than investors think right now, which makes me very hesitant about investing in this space at all. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The electric vehicle and battery maker, with a market cap of some US$784 billion (AU$1.07 trillion) once again took top spot for most held shares by Aussie (and global) investors on eToro's investment platform.

We take a closer look at Tesla and the other 4 top held shares below.

But first…

What did eToro's top held shares list reveal?

One thing that jumps out from the top 5 held shares is that they can all be labelled as growth stocks. In fact, 9 of the 10 top held shares on the eToro platform in the past quarter ending 30 September were growth stocks.

On the surface that may be surprising, as more economists are beginning to suspect that the boost in inflation hitting much of the world might not be quite as transitory as they'd been hoping. Meaning the odds of earlier and potentially larger interest rate hikes from the world's central banks is increasing.

Higher rates could impact shares like tech companies, which are often priced with future earnings growth in mind. However, investors appear to be shrugging off those fears.

According to eToro's global markets strategist, Ben Laidler:

The fact that growth – and in particular big tech – stocks increasingly dominate portfolios suggests two things: firstly, that investors believe interest rate rises will be slow and steady; and, secondly, that they believe there is still plenty of mileage in growth stock earnings.

With that said, here are the top 5 shares held by Aussie investors in the quarter just gone by.

Tesla takes the cake

As mentioned up top, Elon Musk's brainchild Tesla, held onto its top spot for most held shares.

Commenting on Tesla's resilience among investors, eToro's Australian market analyst Josh Gilbert, said:

Australian investors are clearly passionate about investing in EVs, with Tesla once again dominating the local rankings. Despite Tesla's performance being quite lacklustre at the beginning of 2021, Australian investors have renewed their optimism after the company announced its latest Q2 earnings in Q3 2021.

The report demonstrated vehicle deliveries were up 122 per cent year-over-year, gross margins were continuing to swell and most importantly, guidance was strong for the rest of the year.

Staying with the tech theme but moving away from Tesla and EVs, the number 2 most held share by Aussie investors last quarter was Apple Inc (NASDAQ: AAPL), with a mind-boggling market cap of some US$2.4 billion.

Apple moved up from fourth spot in Q2.

According to Gilbert:

We can also see that Australian investors have increasingly favoured the defence end of tech with names such as Apple and Microsoft [the number 8 holding]. The balance sheets that these names possess can help Australian investors weather most market storms, whilst also finding growth in the tech space.

Coming in at number 3 for Q3 was fellow electric vehicle maker, Chinese company Nio Inc (NYSE: NIO), which held the number 2 spot in the previous quarter.

Indeed, investors appear well attuned to the continuing growth potential of the EV market. And for good reason. EV sales in the first half of 2021 were almost 3 times the number in the first half of 2020, and made up some 7% of all car sales.

Rounding out the list we have GameStop Corp. (NYSE: GME) as the fourth most popular share among Aussie investors. That's down one spot from the number 3 most popular share it held in the second quarter of 2021.

And Amazon.com, Inc. (NASDAQ: AMZN) came in at number 5, up 1 place from the number 6 spot it held in Q2.

Will Tesla remain king of the hill in the current quarter or will it be unseated?

Stay tuned.

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Stocks got back into the groove on Monday, and the Nasdaq Composite (NasdaqINDEX: ^IXIC) helped lead the way higher. Even as other major market benchmarks gave up much of their daily gains, the Nasdaq was still up a third of a percent as of 12:30 p.m. EDT.

Electric vehicles have been a hot area of the market lately, and Tesla (Nasdaq: TSLA) remains the leader in that high-profile industry. Even though Chinese competitors were the ones doing most of the talking on Monday, Tesla's stock continued to move higher as investors seemed confident in the company's ability to remain atop the fast-growing market. Below, we'll look at what China's EV companies said and what it means for Tesla and the broader industry.

China loves electric vehicles

Several Chinese electric automakers reported their latest monthly results. They all showed continuing growth, albeit at different rates.

Shares of Nio (NYSE: NIO) were up nearly 3% Monday afternoon. The company reported delivering 7,931 vehicles in July, jumping almost 125% compared to the same month a year ago. Nio shipped 3,669 ES6 five-seat SUVs, 2,560 EC6 coupe-model SUVs, and 1,702 ES8 six- and seven-seat SUVs. That brought the total number of vehicles that Nio has delivered in its history above the 125,500 mark.

XPeng (NYSE: XPEV) saw an even bigger rise, with its stock climbing 6%. The automaker reported deliveries of 8,040 vehicles in July, rising 228% year over year. Deliveries of the P7 midsized sedan hit 6,054, while XPeng sent out 1,986 of its compact SUV model, the G3. 2021 has been an exceptional year for XPeng, with year-to-date deliveries through seven months almost quintupling the same figure from 2020. The company attributed much of the popularity of the P7 to its navigation-guided pilot driver assistance platform, and ongoing technological innovation could make that feature even more valuable to drivers.

Lastly, Li Auto (Nasdaq: LI) led the pack with 8,589 deliveries in July. The company's Li ONE has been a massive hit, with year-to-date deliveries of nearly 38,750. July marked a record month for deliveries once again, and co-founder Yanan Shen predicted that new upgrades by the end of 2021 will further support the positive perception of Li Auto's vehicle model for consumers. Li's shares were up 2% on the day.

Tesla keeps winning

Some might have thought that gains for Chinese EV stocks would mean losses for Tesla, but that's not how investors looked at it. Instead, Tesla stock rose 5%, as shareholders seemed to assume that if China's own domestic automakers are having success, so too is Tesla in serving the Chinese market through vehicles from its Shanghai Gigafactory facility.

Tesla did get a vote of confidence from KGI Securities Monday. Analysts gave Tesla an outperform rating and set a price target of $855 per share, implying almost 20% further upside from where the stock trades currently.

The other news item affecting Tesla came from Piedmont Lithium (Nasdaq: PLL), which said it would delay lithium shipments to the automaker. Piedmont shares were up even though the supplier didn't specify a date on which it could make good on its agreement with Tesla.

As the leader in the EV space, Tesla has been able to keep competition at bay while steadily growing the addressable market for electric vehicles of all kinds. That's a positive for the entire industry, and it means Chinese EV stocks can win without endangering Tesla's key role in driving innovation forward in the industry.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Tesla keeps winning even as Chinese EV foes watch sales soar appeared first on The Motley Fool Australia.

CommSec is one of the most widely used brokers in Australia. Because of this, this data can give us a valuable window into the US shares that ASX investors are finding enticing. So here are the top 10 US shares that CommSec-ers were buying and selling last week. This week's data covers 12-16 July.

Nothing can keep GameStop down

1. GameStop Corp. (NYSE: GME) – representing 3.3% of total trades with an 89%/11% buy-to-sell ratio.
2. Apple Inc (NASDAQ: AAPL) – representing 3.2% of total trades with a 72%/28% buy-to-sell ratio.
3. Tesla Inc (NASDAQ: TSLA) – representing 2.9% of total trades with a 61%/39% buy-to-sell ratio.
4. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 2.5% of total trades with a 65%/35% buy-to-sell ratio.
5. Virgin Galactic Holdings Inc (NYSE: SPCE) – representing 1.6% of total trades with a 49%/51% buy-to-sell ratio.
6. NVIDIA Corporation (NASDAQ: NVDA)
7. Microsoft Corporation (NASDAQ: MSFT)
8. Amazon.com, Inc. (NASDAQ: AMZN)
9. Nio Inc. (NYSE: NIO)
10. Alibaba Group Holding Ltd (NYSE: BABA)

What can we learn from these trades?

That the meme is strong for one. Yes, 'meme stock' king GameStop is back at the top of this pile, displacing the giant Apple as well as perennial ASX favourite Tesla. Even more interestingly, 89% of GameStop trades last week were in the 'buy' column.

This coincides with GameStop shares hitting their lowest level since May recently. Clearly, there are more than a few investors hoping for another one of those lucrative 'pops'.

We see a less-enthusiastic commitment to other meme stocks like AMC, Nio and Virgin Galactic. Although, in saying that, Virgin Galactic investors appear to be more inclined to bail out than buy more, with 51% of trades in the 'sell' column.

Ever since Sir Richard's successful space flight earlier this month, investors have been stampeding to the exits. Since 8 July (3 days before the flight), Virgin Galactic shares have lost more than 38% of their value. Imagine what would have happened if it wasn't a successful flight!

We still see bubbling affection for the US big tech blue chips like Apple, Amazon and Microsoft. Apple in particular maintains a dominant position in this week's numbers, even pipping Tesla with its 72% 'buy' bias.

This week's report also marks the return of chipmaker NVIDIA after a few weeks' absence. NVIDIA has been on an exceptional run lately, rising roughly 50% between 13 May and 6 July. That's a pretty significant move from what is now a company with a market capitalisation of US$468 billion.

The post ASX investors were buying GameStop (NYSE:GME) shares last week appeared first on The Motley Fool Australia.