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 VinFast Auto Ltd. (NASDAQ:VFS) 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).
An e-scooter rider exploring an urban landscape, highlighting the company’s micro mobility division.
VinFast Auto Ltd. (NASDAQ:VFS)
Short Interest as % of Shares Outstanding: 0.19%
Number of Hedge Fund Holders: 8
VinFast Auto Ltd. (NASDAQ:VFS) is engaged in designing and producing EVs, e-scooters, and e-buses across Vietnam, Canada, and the U.S. The company operates through three segments, Automobiles, E-scooters, and Spare Parts & Aftermarket Services.
The Automobiles segment handles the design, development, manufacturing, and sale of cars and electric buses, and provides battery leasing and charging solutions for these vehicles. The E-scooter segment focuses on the design, development, manufacturing, and sales of e-scooters, including battery leasing and charging services for the scooters.
The Spare Parts & Aftermarket Services segment is involved in selling spare parts and offering support services for both automobiles and e-scooters. As a subsidiary of Vingroup JSC, one of Vietnam’s major conglomerates, the company is dedicated to expanding the accessibility of electric vehicles to a broader audience.
In Q2, 8 hedge funds had investments in VinFast (NASDAQ:VFS), with positions worth $342,000.
VinFast (NASDAQ:VFS) is making significant strides in expanding its presence and operations on a global scale. The company is aggressively growing its showroom network and increasing its international deliveries. In Indonesia, the company has quickly made its mark by signing agreements with five dealership partners and opening its first store in April.
By late summer, the company had further shown its expansion with the launch of 15 additional dealer stores within a month. It introduced two new electric vehicle models, the VF 5 and VF e34 in the country.
In addition to its progress in Indonesia, the company is also expanding into other key markets. In Thailand, the company has signed a letter of intent with 15 initial dealers. Meanwhile, in the Middle East, it has secured a dealer sales agreement for the Oman market and established an exclusive dealership partnership with Al Mana Holding W.L.L. for Qatar. The first showroom in Doha is set to open in the third quarter of 2024, where customers will be able to explore four VinFast e-SUV models, the VF 6, VF 7, VF 8, and VF 9.
VinFast’s (NASDAQ:VFS) ambitions in the U.S. are equally bold. The company plans to set up 125 sales points, and currently, it operates 18 dealerships across seven states, with further expansions on the horizon. Additionally, it is exploring the development of a second manufacturing facility in India, complementing its first plant expected to launch in the first half of 2025.
The company has shown growth financially as well. In Q2, the company delivered over 12,000 vehicles, marking a 24% increase from the previous quarter and a 26% rise from the same period last year. For the first half of 2024, deliveries reached 21,747 vehicles, representing an impressive 92% increase compared to the prior year. The company is targeting approximately 80,000 electric vehicle deliveries for 2024, more than double the 34,855 vehicles delivered in 2023.
Overall VFS ranks 4th on our list of the best EV stocks to buy according to short sellers. While we acknowledge the potential of VFS 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 VFS 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.
