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 Toyota Motor Corporation (NYSE:TM) 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).
Workers assembling a car in a modern manufacturing plant, emphasizing the company’s sense of progress.
Toyota Motor Corporation (NYSE:TM)
Short Interest as % of Shares Outstanding: 0.05%
Number of Hedge Fund Holders: 14
One of the best EV stocks, Toyota Motor Corporation (NYSE:TM) is navigating the shift toward electrification with a well-rounded approach that embraces both its legacy and the future of automotive technology. The company has introduced a new range of combustion engines that are designed to operate on both gasoline and alternative fuels. This helps the company maintain its expertise in internal combustion while preparing for a more sustainable future.
The company’s long-standing experience with hybrids continues to play a significant role in its product lineup. It has been a leader in hybrid technology for years, and this expertise remains valuable as it offers a bridge between traditional internal combustion engines and fully electric vehicles. The growth of its hybrid business reflects a steady demand for vehicles that provide the benefits of electric driving while retaining the convenience of conventional fuel.
Toyota (NYSE:TM) is also advancing its EV strategy with the launch of its bZ (Beyond Zero) series. The bZ4X, the first model from this series, is a compact SUV that combines practicality with advanced technology and a spacious interior.
Toyota (NYSE:TM) was part of 14 hedge funds’ portfolios in the second quarter with a total stake value of $1.42 billion. Fisher Asset Management is the biggest shareholder in the company and has a position worth $1.35 billion as of Q2.
The bZ4X model represents the company’s initial push into the expanding EV market, and it is just the beginning of a broader plan. The company has committed to introducing 30 electric models by 2030 and aims to achieve annual sales of 3.5 million electric vehicles. To support this ambitious goal, it is investing $70 billion in electrification.
Beyond battery electric vehicles, the company is also focusing on hybrid technology and hydrogen fuel cell vehicles. The company’s hybrid models, which combine battery power with gasoline engines, are particularly important in regions where charging infrastructure is still developing. Its hydrogen fuel cell vehicle, the Mirai, is evidence of its dedication to exploring alternative energy solutions.
In a recent development, the company and BMW are expanding their collaboration, with Toyota (NYSE:TM) supplying key components like hydrogen tanks and fuel cell systems. This partnership will help advance BMW’s efforts in integrating these components into their electric vehicle technology, showcasing Toyota’s (NYSE:TM) role in driving innovation across the industry.
The company’s hybrid strategy has also proven successful in the market. It plans to offer hybrid versions of all its models in the U.S., and this approach has already shown positive results. In the first half of the year, Toyota and Lexus experienced a nearly 15% increase in North American sales. Additionally, sales of the hybrid Camry surged by almost 143% year-over-year, outpacing the overall growth in Camry sales.
Overall TM ranks 2nd on our list of the best EV stocks to buy according to short sellers. While we acknowledge the potential of TM 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 TM 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.
