We recently compiled a list of the 11 Best EV Stocks To Buy For The Long Term. In this article, we are going to take a look at where Honda Motor Co., Ltd. (NYSE:HMC) stands against the other EV stocks to buy for the long term.
The Challenges of EV Adoption and the Promise of Solid-State Batteries
On August 30, Mark Fields, former Ford CEO and President joined CNBC’s ‘Squawk Box’ to discuss the challenges facing electric vehicle (EV) adoption. Fields pointed out that early enthusiasm for EVs was driven by automakers and government regulations, but mass adoption is proving more difficult. Consumers are hesitant due to several factors including the high cost of EVs, the lack of visible and convenient charging infrastructure, and the slow charging times compared to gas refueling.
Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station.
Fields commended his former company’s strategy as it involves focusing on hybrid models to ease consumers into EV technology without the range anxiety that comes with current models. He noted that automakers are also facing financial challenges in the EV space, as shown by his former company’s recent writedowns.
He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.
Exploring Three Scenarios for the Future of EVs
Despite the challenges, the EV industry seems inevitable and is poised to grow over the next few decades. We discussed the International Energy Agency’s (IEA) EV outlook in our article about the best EV stocks according to short sellers. Here is an excerpt from it:
“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.”
Moreover, governments worldwide are pushing for increased EV production due to environmental concerns, with the U.S. making significant moves in this direction. On July 11, the Department of Energy (DOE) announced $1.7 billion in grants to support the conversion of 11 auto manufacturing plants in eight states to produce electric vehicles and their components. This is part of President Biden’s “Investing in America” initiative, which is aimed at protecting union jobs and giving a boost to EV manufacturing.
The program is funded by the Inflation Reduction Act and will preserve over 15,000 union jobs and create nearly 3,000 new ones, which will support the production of EV components like batteries and electric motorcycle parts.
Our Methodology
For this article, we used screeners and ETFs to identify 22 EV manufacturers with a market cap of above $50 million and narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 11. We took analyst comments mostly from The Fly and TipRanks. We also added 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 fleet of motorcycles and vehicles lined up in an assembly line with workers in the background.
Honda Motor Co., Ltd. (NYSE:HMC)
Average Analyst Price Target Upside as of September 11: 25.36%
Number of Hedge Fund Holders: 12
One of the best EV stocks, Honda Motor Co., Ltd. (NYSE:HMC) is making significant strides in the EV sector as it continues to align its efforts with a broader vision to achieve carbon neutrality by 2050. The company’s commitment to electrification is evident through its latest developments, including the unveiling of the all-new e:NP2 and e:NS2 at the 18th Beijing International Automotive Exhibition in April. The new models aim to enhance the EV experience with their advanced features, performance, and design.
Additionally, the stock has a consensus Buy rating as per the coverage of 19 analysts. As of September 11, the average price target of $38.84 implies an upside of 25.36% to the stock’s current price.
In the U.S., Honda (NYSE:HMC) has seen substantial growth in its vehicle sales, with August marking a significant increase. American Honda sold 139,950 units, showing a 25% rise from the previous year. The surge was driven by strong performances across its passenger car range and record-breaking sales of electrified models.
In the U.S., the company achieved all-time high sales of electrified vehicles, reaching 35,886 units, with strong contributions from hybrid-electric versions of the CR-V and Accord, as well as the newly launched Civic hybrid and Prologue EV. The all-electric ZDX also set a monthly sales record with 1,003 units, which is a sign of the growing demand for its electric offerings.
Honda (NYSE:HMC) was held by 12 hedge funds in the second quarter and the stakes amounted to $398.704 million. Fisher Asset Management has a position worth $326.202 million and is the most significant shareholder as of the second quarter.
Honda (NYSE:HMC) is focused on expanding its EV footprint to North America with a major investment planned for Ontario, Canada. In April, it announced a CAD$15 billion initiative to build a comprehensive EV value chain in the region.
It includes setting up an innovative EV plant and a standalone EV battery plant in Alliston, Ontario. The proposed facilities will also involve a cathode active material and precursor (CAM/pCAM) processing plant, developed in collaboration with POSCO Future M Co., Ltd., and a separator plant with Asahi Kasei Corporation.
The new EV plant is expected to have an annual production capacity of 240,000 vehicles, while the battery plant aims for a capacity of 36 GWh per year. Production is slated to commence in 2028.
The company is setting ambitious targets for the future of its vehicle lineup. It aims to have battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs) makeup 100% of its sales by 2040. It fits well with the company’s broader goal of achieving carbon neutrality across all its products and operations by 2050.
Overall HMC ranks 7th on our list of the best EV stocks to buy for the long term. While we acknowledge the potential of HMC 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 HMC 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.