We recently compiled a list of the 8 Best EV Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Honda Motor Co., Ltd. (NYSE:HMC) stands against the other EV stocks.
While there is a lot of skepticism around the EV industry, it has been growing rapidly, especially over the last few years. According to the International Energy Agency (IEA), EV sales reached almost 14 million units in 2023, a 35% increase from the previous year, with the majority of these sales concentrated in China, Europe, and the United States. The three regions accounted for about 95% of global electric car sales, which shows their dominance in the market. China led the way, with over 8 million new electric car registrations, followed by Europe with nearly 3.2 million, and the United States with 1.4 million.
Exploring Future Scenarios for Electric Road Transport
The IEA’s Global EV Outlook 2024 examined the potential paths to electrifying road transport by 2035. The report presents three scenarios: the Stated Policies Scenario (STEPS), the Announced Pledges Scenario (APS), and the Net Zero Emissions by 2050 Scenario (NZE). The STEPS considers current policies and market trends, the APS assumes that all government pledges will be fully implemented on time, and the NZE outlines a pathway to achieve net zero CO2 emissions by 2050.
The projections show that the global EV fleet could grow significantly by 2035. Under the STEPS, the number of EVs is expected to increase from less than 45 million in 2023 to 525 million by 2035. In the APS, this number could reach 585 million, while the NZE Scenario projects a more ambitious growth to 790 million EVs by 2035.
The report also discussed the growth of electric light-duty vehicles (LDVs), buses, and two/three-wheelers (2/3Ws). LDVs, which include passenger cars and light commercial vehicles, are expected to remain the largest segment of the EV market. Electric buses and 2/3Ws are also projected to see significant growth, especially in regions like China and India, where policy support is strong. However, achieving full electrification of these segments will require continued policy support and technological advancements.
Challenges Faced by the Industry
While the EV industry is growing rapidly, it faces many challenges in its growth journey as it is still a young market. A recent McKinsey survey found that 30% of EV owners worldwide, and 46% in the U.S., are considering making the switch. Despite an increase in EV sales by companies, the growth in EV adoption has slowed down in the U.S. Issues such as not enough charging stations, high costs, and problems with battery life are major reasons for this. On the other hand, countries like Norway, which have good incentives and charging infrastructure, have higher EV adoption and fewer complaints.
Furthermore, the demand for metal necessary for EV batteries is expected to increase significantly over the next few years as reported in our article about 10 Best Battery Stocks To Buy Now According to Short Sellers. This demand could create supply issues. Here’s an excerpt from the article:
“According to BP’s Energy Outlook 2024, the transition to a low-carbon energy system will require a substantial increase in the use of critical minerals, such as copper, lithium, and nickel, essential for supporting the infrastructure and assets needed for this transition. According to the report, the rapid expansion of electric vehicles is projected to reach 1.2 billion (current trajectory) to 2.1 billion (goal to reach Net Zero) by 2050, which will significantly increase the demand for batteries and in turn, higher demand for minerals like lithium and nickel.
Copper demand is expected to rise by 75-100% by 2050, mostly due to its use in EVs and the extension of electricity networks. Lithium demand could grow 8 to 14 times by 2050, mainly driven by its use in EV batteries, which will account for about 80% of total lithium demand by 2050. Lastly, nickel demand is projected to increase two to three times by 2050, with most of this growth linked to lithium-ion batteries in EVs.”
Despite the challenges, governments around the world are incentivizing EV production due to the environmental impacts. For example, the U.S. Department of Energy (DOE) said on July 11 that the Biden administration, through the DOE, announced $1.7 billion in grants aimed at converting 11 at-risk auto manufacturing facilities across eight states to produce electric vehicles (EVs) and their components.
This move is part of President Biden’s broader “Investing in America” initiative, which seeks to revive manufacturing communities and protect union jobs. The grants are designed to keep the U.S. auto industry competitive, especially as global rivals invest heavily in EVs. The program, funded by the Inflation Reduction Act, will help retain over 15,000 union jobs and create nearly 3,000 new positions across the selected facilities. These facilities will manufacture a wide range of EV-related products, from parts for electric motorcycles to batteries for heavy-duty trucks.
Our Methodology
For this article, we used stock screeners and ETFs to identify companies involved in EV manufacturing and sales. We then selected 8 stocks with the smallest short interest and listed them in descending order of their short interest. We also mentioned the hedge fund sentiment around each stock, which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of motorcycles and vehicles lined up in an assembly line with workers in the background.
Honda Motor Co., Ltd. (NYSE:HMC)
Short Interest as % of Shares Outstanding: 0.13%
Number of Hedge Fund Holders: 12
Honda Motor Co., Ltd. (NYSE:HMC) is making impressive strides in its transition toward a more sustainable future, with a significant focus on electric and hybrid vehicles. The company’s dedication to electrification is evident in its expanding lineup of EVs and hybrid models. The Honda e, introduced in 2020, marks the company’s entry into the compact EV market, which caters to urban drivers with its efficient design.
Building on this momentum, the company released the e:N1, an electric SUV produced in Thailand starting in 2023. The e:N1 features a 68.8 kWh battery and delivers a power output of 201 horsepower. It aims to provide a substantial driving range and performance.
The company’s hybrid initiatives continue to advance with models like the Honda CR-V PHEV, which will be available in 2025. This plug-in hybrid offers an all-electric range of up to 50 miles and can be fully charged in under 2.5 hours, which reflects the company’s ongoing commitment to reducing emissions while providing practical solutions for drivers.
It is also preparing to launch the Honda N-VAN e: in 2024, a mini-electric vehicle tailored for both commercial and personal use in Japan, which addresses the growing demand for smaller, versatile electric options.
A major development for Honda (NYSE:HMC) is the introduction of the Honda 0 Series, set to debut globally in 2026, starting with the North American market. This series will showcase its innovative approach to electric vehicle design, focusing on the principles of “Thin, Light, and Wise.” The 0 Series will feature two key models: the Saloon, designed for improved aerodynamics and driving dynamics, and the Space-Hub, which offers a spacious interior with a unique face-to-face seating arrangement.
The company has set ambitious targets for its electric and fuel-cell vehicle sales. The company aims for EVs and FCEVs to make up 40% of its global sales by 2030, with an ultimate goal of achieving 100% zero-emission vehicle sales by 2040.
To support these goals, it plans to ramp up production to 2 million electric vehicles annually by 2030. In addition, the company is expanding its hybrid vehicle range, which will continue to play a crucial role during the transition period.
Honda (NYSE:HMC) is also investing heavily in its EV infrastructure. It has announced plans for an approximately USD$11 billion investment in Canada to build a comprehensive EV value chain, strengthening its supply system to meet future demand in North America. Furthermore, it is developing its own battery technologies, including solid-state batteries, which could further improve the performance and safety of its electric vehicles.
For the first quarter, the company reported a GAAP EPS of ¥81.81 (1 Yen = US$ 0.0068, as of September 2). It reported revenues of ¥5.4 trillion, a 16.9% increase year-over-year. Operating profit also saw a significant rise, increasing by ¥90.2 billion to reach ¥484.7 billion, compared to the same period last year.
The company’s aggressive push into electric and hybrid vehicles, coupled with its investments in infrastructure and technology, position it well for future growth. Its balanced approach between immediate hybrid solutions and long-term electric ambitions aligns with global trends toward sustainability and could drive significant value for investors. It is among our best EV stocks to buy according to short sellers.
In the second quarter, 12 hedge funds held positions in Honda (NYSE:HMC), worth $398.704 million. As of June 30, Fisher Asset Management is the most dominant shareholder in the company and has a position worth $326.202 million.
Overall HMC ranks 3rd on our list of the best EV stocks to buy according to short sellers. While we acknowledge the potential of HMC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HMC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.