We recently published a list of 13 Most Promising EV Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Stellantis N.V. (NASDAQ:STLA) stands against the other most promising EV stocks to buy according to hedge funds along with the industry outlook.
According to a September 13 report by S&P Global, the auto industry’s shift to electric vehicles (EVs) is accelerating, with 2026 seen as a pivotal year for adoption. By 2030, over 25% of new passenger cars sold are expected to be electric, as the transition away from internal combustion engines (ICE) gains momentum.
Major automakers are projected to produce over 70% of global EVs by 2030, up from just 10% in 2022. However, a few challenges remain, like range anxiety, especially for those without convenient charging options. Addressing these issues will require collaboration among automotive, utilities, government, and property owners, which could create a way for significant growth in vehicle electrification and potentially end the ICE era.
We discussed the market dynamics of the 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.”
The Electric Vehicle Shift and Its Economic Impact on Europe
While Europe saw significant adoption of EVs in the earlier years, it has seen a slowdown. According to an October 3 report by McKinsey, the growth of EVs in Europe poses both opportunities and challenges for the automotive industry, which currently contributes $1.9 trillion to the economy.
While electric mobility could add up to $300 billion in gross value added (GVA) by 2035, the industry could risk losing $400 billion if European OEMs’ global market share declines from 60% to 45%.
Key strategies for success include expanding the domestic battery supply chain, improving manufacturing capabilities, streamlining regulations, and investing in R&D and talent development. By proactively addressing these challenges, European OEMs can capitalize on the EV shift, generate new value, and secure the region’s economic future in the automotive sector.
Shifting Gears to the Inevitable Future of Electric Vehicles
In a CNBC interview, Young Liu, Chairman of Hon Hai Technology Group said that the future of the automotive industry will be dominated by electric vehicles, with hybrids playing a limited role due to advancements in battery technology. He made a note of current challenges such as charging times and range anxiety, but expects improvements in battery systems will eliminate the need for hybrids.
Liu outlined a path to profitability for EV companies based on three key strategies: “platformization, modularization, and standardization”. He believes these will help streamline operations and reduce the need for individual investments in proprietary platforms, which is a challenge for traditional manufacturers due to their existing structures.
Our Methodology
For this article, we used stock screeners and ETFs to identify over 40 companies with significant operations related to the EV industry. Next, we narrowed our list to 13 stocks most widely held by institutional investors. The most promising EV stocks are listed in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s Q2 database of 912 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 close-up view of a modern automobile with its sleek curves and luxurious body.
Stellantis N.V. (NASDAQ:STLA)
Number of Hedge Fund Holders: 31
Stellantis N.V. (NASDAQ:STLA), a major global automotive manufacturer formed in 2021 from the merger of Fiat Chrysler Automobiles and the PSA Group, is one of the largest and fastest-growing automotive brands. It is the 9th most promising EV stock to buy.
Despite its diverse brand portfolio allowing revenue generation in varying economic conditions, the company has faced challenges, especially in Europe, where inventory levels have surged due to a sluggish economy. This situation is echoed in the U.S., where rising used car inventories have impacted sales. Moreover, the company has encountered difficulties maintaining operations in American plants due to union-related issues.
Nevertheless, the company, which includes well-known brands like Chrysler, Jeep, and Maserati, is focusing on electrification as part of its “Dare Forward 2030” strategy. It aims for 100% BEV sales in Europe and 50% in the U.S. by 2030, with more than 75 BEV models expected globally.
Stellantis (NASDAQ:STLA) is aggressively entering the EV market with plans to transform its product lineup and production capabilities. It has developed four BEV-native platforms, STLA Small, Medium, Large, and Frame, which are designed to cater to different vehicle types. The STLA Large platform, introduced in January, aims to support eight vehicle launches across five brands by 2026, supporting a potential range of 800 kilometers (500 miles). By 2024, the company expects to have 48 BEV models available.
The company is also advancing its manufacturing capabilities, including a €103 million investment to expand electric drive module production in Hungary, scheduled to commence in late 2026.
In addition to its BEV efforts, Stellantis (NASDAQ:STLA) plans to offer 30 hybrid models in Europe by 2024, with sales already increasing by 41% in 2024 compared to the previous year. Partnerships play a vital role in its electrification strategy, such as collaborating with NHOA Energy to develop the Atlante fast-charging network in southern Europe, aiming for 5,000 fast charge points by 2025.
In September, It announced a $406 million investment to improve EV and hybrid production capabilities at three facilities in Michigan, which shows its commitment to a multi-energy strategy that incorporates electric, range-extended, and internal combustion engine models.
Overall STLA ranks 9th on our list of most promising EV stocks to buy according to hedge funds. While we acknowledge the potential of STLA 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 STLA 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.
