10 Best EV Startups to Watch

Published on June 23, 2021 at 11:10 am by Usman Kabir in Hedge Funds, Lists, News

In this article, we discuss the 10 best EV startups to watch. If you want to skip our detailed analysis of these startups, go directly to the 5 Best EV Startups to Watch.

Electric vehicle (EV) stocks have been on a record rally in the past few months as the new administration in the White House extends tax benefits for clean energy firms, increases spending on research and development of green initiatives, and technological advances within the industry continue to excite investors. According to a report by global consultancy McKinsey, global EV sales rose to above 2 million in 2019 before the COVID-19 pandemic.

However, the coronavirus crisis provided a mixed result for the EV sector, with sales falling close to 25% year-on-year, but EV-related stocks like Tesla, Inc. (NASDAQ: TSLA) registering record rallies. The share price of the California-based EV maker climbed more than 700% over the course of twelve months beginning in early 2020 and has only taken a breather since April as demand concerns from China and supply chain problems hit deliveries. Tesla, Inc. (NASDAQ: TSLA) recently announced that it would hold an artificial intelligence summit soon.

As Tesla, Inc. (NASDAQ: TSLA) slumps, the Chinese counterpart, NIO Inc. (NYSE: NIO), has been posting record delivery numbers. On May 25, investment advisory Bank of America maintained a Buy rating on NIO Inc. (NYSE: NIO) stock as the order momentum around the firm picked up after a less than impressive start to the year. The company is looking to expand into new cities, debuting new EV models on the market soon, and has also moved into the EV battery business. All growth indicators are positive for the firm.

In tandem with NIO Inc. (NYSE: NIO), another Chinese EV firm, XPeng Inc. (NYSE: XPEV), has also come into the spotlight this year. On June 1, Bank of America maintained a Buy rating on XPeng Inc. (NYSE: XPEV) stock with a price target of $46, highlighting that it expected the sales of the firm to grow at a compound annual growth rate of 57% till 2025. The bank underlined the new model pipeline, in-house software development, and powertrain capabilities as some of the growth catalysts for the company.

The electric vehicle industry has disrupted the auto sector at lighting speed, giving hope to other tech-enabled firms seeking to establish themselves in other markets. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

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With this context in mind, here is our list of the 10 best EV startups to watch. These startups were ranked keeping in mind the problems in the EV space they aim to solve, the money they have raised so far, and the quality of the products or services they offer.

Best EV Startups to Watch

10. Karma Automotive

Karma Automotive is a company that focuses on the development and production of luxury electric vehicles. It is placed tenth on our list of 10 best EV startups to watch. It has so far managed to raise more than $100 million in funding over two rounds, one of them led by Northern Lights Foundation. The company has an assembly plant in California and has sold more than 500 of Revero vehicles. It is also in discussions for the development of an electric powered commercial delivery truck.

Another similar investment in the EV space is Fisker Inc. (NYSE: FSR), the California-based EV maker that is set to join the Russell 3000 Index. On June 8, investment advisory RBC Capital Markets initiated coverage on Fisker Inc. (NYSE: FSR) stock with an Outperform rating and a price target of $27.

At the end of the first quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $337 million in Fisker Inc. (NYSE: FSR), up from 18 the preceding quarter worth $146 million.

Just like Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO) and XPeng Inc. (NYSE: XPEV), Fisker Inc. (NYSE: FSR) is one of the best EV stocks to watch.

9. Rimac Automobili

Rimac Automobili is a Croatian car manufacturer that concentrates on providing full technology solutions for automotive companies. The firm focuses on electric vehicle production. It has so far managed to raise more than $200 million over six funding rounds, with the latest round in March bringing in more than $70 million. Some of the lead investors in the company include Porsche Ventures, Kia Motors, and Hyundai Motor Company, among others. Rimac is famous for EV-powered hypercars.

Another great stock to watch for in the emerging electric vehicle market is Arrival (NASDAQ: ARVL), a technology company that makes and sells electric vehicles that are priced the same as their fossil fuel counterparts. On June 3, investment advisory Barclays started coverage on Arrival (NASDAQ: ARVL) stock with an Overweight rating and a price target of $25.

At the end of the first quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $164 million in Arrival (NASDAQ: ARVL), up from none in the previous quarter.

Just like Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), and XPeng Inc. (NYSE: XPEV), Arrival (NASDAQ: ARVL) is one of the best EV stocks to watch.

8. StoreDot

StoreDot is a company that makes and sells technology related to lithium ion batteries. These batteries are used in a range of devices, including smartphones and electric cars. The company has so far raised more than $130 million in funding over ten rounds, with the latest round taking place earlier this month. Some of the lead investors in the company are Raison Asset Management, BIRD Energy, Daimler, among others. The technology marketed by StoreDot makes it easier to charge batteries faster.

As EV vehicles become mainstream, firms like Canoo Inc. (NASDAQ: GOEV), which offers business to business dealing in electric vehicles for purposes like delivery and lifestyle, are becoming more popular. On June 21, investment advisory RF Lafferty maintained a Buy rating on Canoo Inc. (NASDAQ: GOEV) stock with a price target of $18.

At the end of the first quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $14.8 million in Canoo Inc. (NASDAQ: GOEV), down from 17 in the previous quarter worth $96.6 million.

Just like Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), and XPeng Inc. (NYSE: XPEV), Canoo Inc. (NASDAQ: GOEV) is one of the best EV stocks to watch.

7. Zenobe Energy

Zenobe Energy is a firm that markets battery storage solutions. It is the largest independent operator in the battery storage business in the United Kingdom. The firm has so far raised more than $200 million from investors in four funding rounds. Some of the lead investors in the company include Infracapital and Tokyo Electric Power, among others. The firm aims to market battery solutions that reduce operating costs for businesses, improve reliability of power solutions, and benefit the environment at the same time.

Battery storage is on track to become one of the most lucrative businesses as more electric vehicles are sold around the world. One of the firms to watch out for in this market segment is QuantumScape Corporation (NYSE: QS), a firm that works on developing and selling solid-state lithium-ion batteries. On April 13, investment bank Morgan Stanley gave QuantumScape Corporation (NYSE: QS) stock an Overweight rating with a price target of $70.

At the end of the first quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $534 million in QuantumScape Corporation (NYSE: QS), down from 35 in the previous quarter worth $1.8 billion.

Just like Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), and XPeng Inc. (NYSE: XPEV), QuantumScape Corporation (NYSE: QS) is one of the best EV stocks to watch.

In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and QuantumScape Corporation (NYSE: QS) was one of them. Here is what the fund said:

“QuantumScape Corporation is an early-stage developer of solid-state battery technology for electric vehicles aimed at improving key aspects of batteries, including safety, charging times, energy density, and cost. The company went public via a SPAC in November. After rapid appreciation, the stock came under pressure when the company raised additional capital to help accelerate its commercialization process. We exited our small position, as described below.

We sold QuantumScape Corporation, an early-stage solid-state electric vehicle battery innovator, because it was an undersized position with an ambitious valuation. We will continue to monitor QuantumScape’s developments and may revisit the company as an investment at a future point in time. “

6. Ola Electric Mobility

Ola Electric Mobility is a ride-hailing company that focuses on dealings related to electric cars. It plans to have one million electric vehicles on the roads in India by the end of the year. The company has so far raised more than $300 million in funding over five rounds, with the latest round raising more than $1 million last year. Some of the leading investors in the startup include Kia Motors and Softbank, among others. Ola is one of the few electric vehicle firms in the world working on electric powered rickshaw and other smaller vehicles for emerging economies.

One of the major talking points around EV adoption has always been charging infrastructure. ChargePoint Holdings, Inc. (NYSE: CHPT), the California-based firm with EV infrastructure in 14 different countries around the world, could be a solid bet in the EV space in the coming years. On June 21, investment advisory Needham initiated coverage of ChargePoint Holdings, Inc. (NYSE: CHPT) stock with a Buy rating and a price target of $39.

At the end of the first quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $207 million in ChargePoint Holdings, Inc. (NYSE: CHPT), up from none in the previous quarter.

Just like Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), and XPeng Inc. (NYSE: XPEV), ChargePoint Holdings, Inc. (NYSE: CHPT) is one of the best EV stocks to watch.

In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and ChargePoint Holdings, Inc. (NYSE: CHPT) was one of them. Here is what the fund said:

“We are far from a consensus on how best to build and operate EV charging infrastructure. Evidence for this is in the sheer diversity of business models that are being sold (mainly via SPACS) to an eager public looking to capture secular EV momentum. This is not an indictment of individual companies; we simply do not have any clarity on policy, consumer preferences, and the technology that will shape how a profitable business operates in the space. ChargePoint is the clear front-runner for the moment. It has a ~75% market share in North America, growing at a compounded annual rate of 60%. Their network is ~2x the size of Tesla’s in North America and ~5x as large globally. They have seen a 28x increase in customer spend over the last four years. ChargePoint is a vendor, not an operator, and is aiming to achieve a 1:1 upfront to reoccurring revenue ratio with a B2B sales model minimizing the capital expenditure required for scaling.

We like ChargePoint, but it is trading at over 100x 2025 earnings. Far too little real-world uncertainty is priced into their valuation. We think we will have several opportunities to enter an investment within the EV charging infrastructure industry with better pricing, decreased operational risk, or likely both in the future. There is a 94% correlation between all public companies in the EV charging landscape today; we read this as meaning there is no discernment between individual ventures’ prospects. It is a bet that EVs will grow, and thus EV charging infrastructure must grow. We agree with that assertion, but we are not interested in swimming in those waters at this stage.”

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