We recently published a list of the 11 Small Cap EV Stocks to Invest In. In this article, we are going to take a look at where Harley-Davidson, Inc. (NYSE:HOG) stands against the other small-cap EV stocks to invest in.
The electric vehicle (EV) industry was growing at a strong pace over the last few years. However, it’s facing some challenges that have slowed down the growth. It does not mean that the industry is at a halt. Over time, it is on track to take over the internal combustion engines entirely.
The transition to EVs is proving more difficult than anticipated, with consumer demand not matching expectations, partly due to a lack of charging infrastructure and the complexity of switching from long-established fuel technologies.
A CNBC report from September 10 states that European car manufacturers are facing a range of challenges in their shift toward EVs, which is leading several companies to rethink their timelines. Volvo recently abandoned its goal of selling only EVs by 2030. Instead of that, it is opting to remain flexible and include hybrid models in its lineup.
Other major automakers, such as Volkswagen, Ford, and Mercedes-Benz, have similarly delayed plans to phase out internal combustion engine vehicles due to market uncertainties, including slower infrastructure development and changing government incentives.
Despite these short-term setbacks, experts believe automakers will continue investing in EVs to remain relevant in the market.
The Competitive Edge of Chinese Electric Vehicle Makers
While the growth in the US and Europe is slowing down, China is picking up a significant pace and dominating the EV landscape. According to a World Economic Forum report, Chinese EVs are much cheaper than their Western counterparts, with an average price of $34,400, compared to $55,242 in the U.S. The price gap is driven by lower labor costs, favorable government subsidies, and more affordable battery sourcing.
Chinese automakers now produce more than half of the world’s EVs and are using their cost advantages to potentially dominate the global market. As Chinese brands gain scale and expertise, their competitive pricing could allow them to challenge Western automakers.
The Western EV Market Compared to China
While Tesla remains a strong competitor to China, other U.S. and European automakers have been slower to compete effectively due to high prices and limited EV options. However, the US government and the private sector are also trying their best to expand the industry and become a dominant force in the EV industry.
According to a Reuters report published on September 23, Monroe Capital LLC announced its intention to launch a new fund, the Drive Forward Fund LP, aimed at raising up to $1 billion to provide loans for smaller auto suppliers as the industry transitions from ICE vehicles to EVs.
The White House supports the intention and said that this fund will help small and medium-sized auto manufacturers to access affordable capital to refinance, grow, and diversify their operations and will benefit the over 250,000 employees in this sector.
The recent implementation of new U.S. tariffs on Chinese EVs, along with the need for compliance with strict emissions regulations, is pushing automakers to adapt their supply chains.
Monroe CEO Ted Koenig stated that the fund would be vital for stimulating growth and innovation in the automotive supply chain. Many small and medium suppliers currently struggle to secure financing, which limits their ability to move toward EV part production.
Apart from that, we also discussed DOE’s move to boost EV operations in the US in our article about the 8 Best EV Stocks to Buy According to Short Sellers. Here is an excerpt from the article:
“…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.”
Erin Keating of Cox Automotive is also bullish on the US EV industry as she pointed out in a CNBC Power Lunch interview that competitive lease deals are putting downward pressure on used EV prices. She sees it as a positive, as more leased vehicles will eventually enter the used market, and ensure a steady supply of affordable EVs.
Addressing concerns about EV infrastructure and range anxiety, Keating reassured consumers that used EV batteries are holding up well, with minimal degradation. As infrastructure improves, she expects consumer confidence and EV adoption to grow.
Our Methodology
For this article, we made a list of 20 small-cap companies that are involved in the EV industry, as of September 25. Our small cap threshold is between $1 billion to $10 billion. We narrowed our list to 11 stocks most widely held by institutional investors. The 11 small cap EV stocks to invest in are listed in ascending order of their hedge fund sentiment.
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).
Is Harley-Davidson, Inc. (NYSE:HOG) the Best Small Cap EV Stock to Invest In?
Harley-Davidson, Inc. (NYSE:HOG)
Number of Hedge Fund Holders: 29
One of the best EV stocks, Harley-Davidson, Inc. (NYSE:HOG) is a storied manufacturer of motorcycles based in Wisconsin. It has operations across Harley-Davidson Motor Company, LiveWire, and Harley-Davidson Financial Services.
The decision to spin off its electric motorcycle division, LiveWire, through a merger with AEA-Bridges Impact has positioned it as the first publicly traded electric motorcycle company in the United States. While LiveWire is a publicly traded company on its own, Harley-Davidson, Inc. (NYSE:HOG) owns a controlling interest in the company.
The move emphasizes the company’s dedication to the electric vehicle sector while allowing the core motorcycle business to thrive independently as LiveWire focuses on capturing the growing demand for electric motorcycles.
Under the LiveWire brand, the company has introduced a series of electric motorcycles, including the flagship LiveWire ONE. Equipped with a 15.5 kWh battery, the model offers an impressive range of approximately 104 miles on a full charge, which is a significant innovation for the company.
In March, the company expanded its electric offerings with the launch of the LiveWire S2 Mulholland, which shows its focus on diversifying its product line to meet varying consumer needs in the electric segment.
At a stake value of $594.413 million, 29 hedge funds held positions in Harley-Davidson (NYSE:HOG) in the second quarter. As of June 30, H Partners Management is the top shareholder in the company and has a position worth $389.064 million.
In addition to advancements in product development, it announced a strong share repurchase program in July, with plans to buy back $1 billion of its outstanding common stock by 2026.
The new initiative will utilize cash flow from operations and replace existing repurchase plans, building on the $875 million already spent on share buybacks since 2022. Such actions underline its intent to return value to shareholders while enhancing the stock’s appeal.
On September 24, Harley-Davidson (NYSE:HOG) announced a cash dividend of $0.1725 per share for the third quarter, payable by September 27 to shareholders on record as of September 16. As of September 25, the stock’s dividend yield is 1.81%.
Artisan Partners stated the following regarding Harley-Davidson, Inc. (NYSE:HOG) in its Q2 2024 investor letter:
“The biggest detractors from performance during the quarter were Harley-Davidson, Inc. (NYSE:HOG), Henry Schein and Expedia. Harley’s share price declined 23% during the quarter after a strong run in Q1. We had significantly reduced our position at higher share prices over the past 12–18 months. The shares have been weak over concerns that higher interest rates are impacting affordability and retail sales. We share these concerns. Harley is likely to reduce its forecasts for the year when it reports, though this now appears to be discounted in the valuation. Famous last words. The shares now trade at a single-digit multiple of earnings. We believe the brand is strong, and management is able to adjust production and costs to meet various demand environments. If interest rates begin to decline as anticipated, demand should improve.”
Overall, HOG ranks 3rd on our list of the small-cap EV stocks to invest in. While we acknowledge the potential of HOG 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 HOG 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.