We recently compiled a list of the 11 Best Lithium and Battery Stocks To Invest In. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other lithium and battery stocks.
The West Auto Industry Faces Uncertainty with Potential Tariffs and Policy Reversals
According to a Reuters report from November 6, automakers are preparing for potential changes under President-elect Donald Trump, including new tariffs on vehicles imported from Mexico and the reversal of pro-electric vehicle policies. Trump has indicated plans to rescind EPA and Transportation Department regulations and may reduce or eliminate EV tax incentives.
Moreover, the Zero Emission Transportation Association expressed a willingness to collaborate with Trump on future EV development. Trump has also warned of tariffs of up to 200% on Mexican vehicles and is considering similar measures for imports from other regions while encouraging foreign automakers to build plants in the US.
Additionally, in October, Reuters reported that the European Union approved additional tariffs on Chinese electric vehicles, ranging from 7.8% to 35.3%, on top of the existing 10% duty, in response to what it calls unfair subsidies by China. These tariffs, effective October 30, aim to address concerns over subsidized raw materials, batteries, and financing, with China opposing the decision and calling for negotiations to prevent further trade tensions.
China has launched its own probes into EU imports, including pork, dairy, and brandy, potentially retaliating against the EU measures. Chinese EVs currently account for 8% of the EU market, a figure expected to grow to 15% by 2025, with their prices typically 20% lower than European counterparts. The investigation has caused division within the EU, with Germany opposing tariffs while France supports them.
Future of Electric Vehicles in the U.S. Amid Political Changes
GlobalData lowered its 2030 U.S. EV market share forecast from 33% to 28%, citing weakened emissions standards and a focus on lower oil prices after the 2024 elections. Bloomberg reported on November 7 that Mark Wakefield of AlixPartners highlighted that $129 billion in EV investments through 2027 and the $7,500 EV tax credit may be at risk. Automakers are expected to cut EV spending, delay new models, and shift production toward hybrids and gasoline vehicles, like Volkswagen’s adaptation at its South Carolina plant. While reversing Biden’s Inflation Reduction Act could prove challenging, changes to fuel economy standards are likely, though their impact may not be felt until later in the decade.
Optimism for Lithium Demand Amid Market Recovery
The lithium market has experienced a huge decline over the past several quarters due to oversupply and lower demand. However, Ana Cabral, Co-Chair & CEO at Sigma Lithium is positive about the future demand for lithium as discussed in a September interview with CNBC. She noted that lithium prices hit a low point in August but have been recovering steadily. The Chinese recovery package, the largest since COVID, has especially boosted the market, as China accounts for more than half of global EV sales.
While the U.S. has seen slower EV adoption compared to China and Europe, with growth in China outpacing the U.S. and Europe, the fundamentals remain strong. As China continues to dominate the EV market, it plays a crucial role in driving demand and lithium prices. Regarding other uses of lithium, Cabral emphasized that EV batteries remain the primary driver, especially as automakers shift away from combustion vehicles, which is expected to create further demand in the coming years.
Our Methodology
For this article, we used stock screeners to identify around 20 lithium and/or battery stocks and chose the 11 stocks most widely held by institutional investors. The stocks are listed in ascending order of their hedge fund sentiment, as of Q3 2024.
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).
25 Most In Demand Cars Heading into 2024
Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
Tesla, Inc. (NASDAQ:TSLA) is a leading electric vehicle company with key ventures in batteries and solar technology. It plans to invest $3.6 billion in Nevada to build a factory producing 4680 battery cells, essential for the Cybertruck, which requires around 7 GWh of battery capacity annually.
Additionally, the company is committing $1 billion to establish a lithium refinery in Texas, designed to sustainably produce battery-grade lithium hydroxide. This facility is expected to support 50 GWh of annual output, improving battery supply and reducing costs.
Tesla (NASDAQ:TSLA) CEO Elon Musk seems to have a close relationship with President-Elect Donald Trump which could prove beneficial for the company. Reports suggest that the Trump administration plans to prioritize creating federal regulations for self-driving vehicles. According to a Bloomberg report from November 17, this initiative would focus on easing restrictions through the Department of Transportation, aligning with Tesla’s (NASDAQ:TSLA) investments in autonomous technology. Current regulations limit the production and deployment of fully autonomous cars, but potential federal rule changes could support the company’s goals. Elon Musk has voiced support for nationwide policies enabling self-driving vehicle use.
Moreover, the market is anticipating that the President-Elect is likely to cancel the Inflation Reduction Act (IRA) EV tax credits, which Elon Musk is less worried about. In the company’s Q2 earnings call in July, Colin Langan of Wells Fargo asked Elon Musk about the potential impact on Tesla if the IRA was repealed under a Trump presidency. Langan noted Tesla benefits from EV subsidies and production tax credits for batteries.
Musk acknowledged that while losing IRA support would have some negative effects on Tesla, it would be far more damaging to competitors. Musk said:
“I guess that there would be like some impact, but I think it would be devastating for our competitors. But — and it would hurt Tesla slightly. But long-term probably actually helps Tesla would be my guess. Yes — but I’ve said this before on earnings calls, it — the value of Tesla overwhelmingly is autonomy. These other things are in the noise relative to autonomy. So I recommend anyone who doesn’t believe that Tesla will solve vehicle autonomy should not hold Tesla stock. They should sell their Tesla stock. You should believe Tesla will solve autonomy, you should buy Tesla stock. And all these other questions are in the noise.”
Overall TSLA ranks 1st on our list of the best lithium and battery stocks to invest in. While we acknowledge the potential of TSLA 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 TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
