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 Stellantis N.V. (NYSE:STLA) 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 close-up view of a modern automobile with its sleek curves and luxurious body.
Stellantis N.V. (NYSE:STLA)
Short Interest as % of Shares Outstanding: 0.86%
Number of Hedge Fund Holders: 31
Stellantis N.V. (NYSE:STLA) is a Dutch automotive company created by the merger of Fiat Chrysler Automobiles (FCA) and the PSA Group. As one of the world’s largest automakers by sales, the company has a diverse portfolio of vehicle brands, including Jeep, Peugeot, Chrysler, Dodge, and Maserati. The company operates globally, with footprints in over 130 countries.
Stellantis (NYSE:STLA) is advancing its electrification efforts under the Dare Forward 2030 plan. According to the plan, the company will commit over €50 billion to develop a diverse range of battery electric vehicles and hybrid models. It aims to achieve a 100% BEV sales mix in Europe and a 50% BEV mix in the U.S. by 2030. It has a goal of offering over 75 BEV models and reaching 5 million annual global sales.
The company is developing four BEV-native platforms and three Electric Drive Modules (EDMs) to cater to various vehicle types, from city cars to pickup trucks. The platforms are designed for efficiency and scalability. The company is also exploring advanced battery technologies and hybrid propulsion options. It is our 7th best EV stock to buy according to short sellers.
While Stellantis (NYSE:STLA) is facing some headwinds such as a lawsuit regarding emissions and operational hurdles, especially in North America and Europe, the company is trading near its 52-week lows as of September 2. This could provide a significant entry point for investors.
Analysts see long-term growth for the stock as 26 analysts have an average price target of $22.33, which represents an upside of over 33% from the current levels on September 2.
In the second quarter, 31 hedge funds had stakes in Stellantis (NYSE:STLA), worth nearly $300 million. Two Sigma Advisors increased its stake in the company by 143% with over 2.7 million shares worth $54.744 million, and is the largest shareholder of the company, as of June 30.
Ariel Investments mentioned Stellantis (NYSE:STLA) in its Q2 2024 investor letter stating that the company faced challenges from high U.S. interest rates and inventory levels but is expected to maintain strong profitability and positive free cash flow, which is supported by its global presence and strategic focus. Here is what the firm said:
“Finally, multinational automotive manufacturing company, Stellantis N.V. (NYSE:STLA), fell in the quarter as higher interest rates in the U.S. and tapering demand for high-volume combustion engine models resulted in elevated U.S. inventory levels. Nonetheless, pricing outperformed expectations and management reiterated full-year guidance of double-digit adjusted operating profit margin and positive free cash flow. Although we expect discounting to increase as U.S. inventory ages, we maintain a constructive view on the company. We believe STLA’s strong global footprint and unwavering dedication to leading the industry in profitability, operational excellence, and strategic foresight will continue to enhance long-term shareholder value.”
Overall STLA ranks 7th on our list of the best EV stocks to buy according to short sellers. 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.
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Disclosure: None. This article is originally published at Insider Monkey.
