We recently published a list of 11 Hot EV Stocks to Buy Now. In this article, we are going to take a look at where Embraer S.A. (NYSE:ERJ) stands against the other hot EV stocks to buy now.
Just like any new technology, there is a lot of skepticism about the electric vehicle (EV) industry as well. Some believe that the technology is not viable while others are worried if the infrastructure will be enough to meet the charging demand and so on.
However, the electrification of vehicles is inevitable in the future. While there has been a slowdown in EVs in the US and Europe, China’s dominance and growth in the industry are a testament to the fact that the technology will take over internal combustion engines relatively soon.
We discussed the dominance of the Chinese EV industry in our article, 11 Small Cap EV Stocks to Invest In. Here is an excerpt from the article:
“While the growth in the US and Europe is slowing down, China is picking up a significant pace and dominating the EV landscape. According to a World Economic Forum report, Chinese EVs are much cheaper than their Western counterparts, with an average price of $34,400, compared to $55,242 in the U.S. The price gap is driven by lower labor costs, favorable government subsidies, and more affordable battery sourcing.
Chinese automakers now produce more than half of the world’s EVs and are using their cost advantages to potentially dominate the global market. As Chinese brands gain scale and expertise, their competitive pricing could allow them to challenge Western automakers.”
A lot of the EV slowdown in the West is attributed to the removal of subsidies, higher prices compared to gas-powered cars, and limited charging infrastructure. Nevertheless, some governments are now considering reinstating subsidies, and automakers are working to introduce more affordable EV models to boost demand and recover market share.
Burning Question: Is EV and Battery Manufacturing Worse for Climate?
While it is clear that EVs are better for the environment, many people have raised questions about the impacts of EVs and battery production on the environment. According to a report posted on the MIT Climate portal in 2022, Sergey Paltsev from MIT’s Joint Program on the Science and Policy of Global Change explained that despite the manufacturing emissions, EVs have a significantly lower environmental impact compared to gasoline-powered cars.
The higher emissions from manufacturing EVs, especially due to the production of their lithium-ion batteries, are offset by the cleaner operation of EVs over their lifetime. Charging emissions vary depending on the energy source.
In regions using clean energy like hydropower, EVs have a very low carbon footprint, while in areas reliant on coal, the emissions are higher. However, even in the worst scenarios, EVs generally outperform gasoline vehicles in terms of emissions.
Moreover, studies from MIT and the U.S. Department of Energy show that EVs consistently produce less carbon dioxide per mile driven than hybrids or gas-powered cars. For example, the average EV emits 25% less CO2 than hybrids when using the U.S. grid’s energy mix, and this gap widens in regions with cleaner energy.
Our Methodology
For this article, we scoured stock screeners and ETFs to identify nearly 50 stocks that were involved in the EV industry in a significant capacity. Next, we narrowed our list to 11 stocks that had double-digit year-to-date share price growth as of September 30 and were most widely held by institutional investors. It is important to note that the share price returns were calculated while the market was open which could result in fluctuations compared to the provided data. Finally, we listed the 11 hot EV stocks to buy in ascending order of their hedge fund sentiment, 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).
An engineer examining a detailed blueprint of an aircraft.
Embraer S.A. (NYSE:ERJ)
Year-to-date Share Price Returns: 97.53%
Number of Hedge Fund Holders: 25
Embraer S.A. (NYSE:ERJ) is a prominent name in the global aerospace industry. It is engaged in the design, development, manufacturing, and sale of aircraft and systems across multiple regions, including North America, Latin America, the Asia Pacific, Europe, and its home country of Brazil. It ranks 4th on our list of hot EV stocks to buy now.
Founded in 1969, it has a remarkable history, having delivered over 8,000 aircraft to date. The impressive output means that one of its planes takes off approximately every 10 seconds, collectively transporting more than 145 million passengers annually. As the leading manufacturer of commercial jets with up to 150 seats, the company plays an important role in the aviation sector and is also Brazil’s top exporter of high-value goods.
Embraer (NYSE:ERJ) is actively going after advancements in electric aviation, especially in the development of electric vertical takeoff and landing (eVTOL) aircraft. It is considered to be the next step in the future of urban air mobility, which is expected to address the growing need for innovative urban transportation solutions.
In 2023, the company announced plans to establish a new factory near São Paulo for the production of electric flying taxis, with the goal of having them operational by 2026.
The facility will be located in Taubaté, approximately 140 kilometers (87 miles) from São Paulo, the economic hub of Brazil. Pending final approvals from relevant authorities, the manufacturing plant will be constructed in a designated area within the company’s current site in the city, which will undergo expansion.
Through its subsidiary, Eve Air Mobility, the company focuses on creating eVTOL aircraft that include the vehicles themselves. It also provides supporting infrastructure and services necessary for their operation. Designed for short-distance travel in urban areas, these eVTOL aircraft are key to reducing congestion and improving transportation efficiency in cities.
In July, Eve Air Mobility achieved a significant advancement by unveiling the full-scale prototype of its “flying taxi.” The prototype represents an impressive step toward obtaining certification and entering service by 2026.
The aircraft is equipped with electric engines, although the initial version does not feature a cabin or pilot. The goal is to have a final model that can accommodate four passengers and a pilot.
Embraer’s (NYSE:ERJ) management has expressed that the readiness of this prototype for testing is a sign of progress toward the certification process, which began with an application to Brazil’s civil aviation authority in 2022.
Eve plans to have five conforming prototypes ready for testing in the next year and seeks to produce a pre-series eVTOL by 2026 as part of its certification strategy.
Overall ERJ ranks 4th on our list of hot EV stocks to buy now. While we acknowledge the potential of General ERJ 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 ERJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.