Electric vehicle manufacturers got a shot in the arm last week when California announced it would end the sale of 100% gasoline-powered cars and trucks by 2035. While the legislation will allow the sale of plug-in electric hybrids (PHEVs), the news can only help already hot EV stocks.
The California Air Resources Board (CARB) approved the requirements, although the Biden administration must give its blessing for the plan to take effect. The requirements also set annual rising zero-emission vehicle rules starting in 2026.
Ford (NYSE:F) is not likely the first name that comes to mind when you think of hot EV stocks. But the established automaker has some ambitious electric vehicle goals.
By the end of next year, Ford said it will be able to deliver 600,000 EVs a year. By 2026, the company plans to be producing 2 million EVs a year. Last month, Ford said it secured enough electric battery supplies to support its 2023 production goal and about 70% of the battery capacity needed to support its 2026 goal.
The company said it will begin offering vehicles with lithium iron phosphate (LFP) batteries, which are 10%-15% less costly than its existing batteries. It plans to start using these battery packs in the Mustang Mach-E in 2023, followed by the F-150 Lightning pickup truck in early 2024.
“Ford’s new electric vehicle lineup has generated huge enthusiasm and demand, and now we are putting the industrial system in place to scale quickly,” said Ford President and CEO Jim Farley in a statement. “Our Model e team has moved with speed, focus and creativity to secure the battery capacity and raw materials we need to deliver breakthrough EVs for millions of customers.”
Ford’s EV focus has undoubtedly contributed to the stock’s outperformance in recent months. Since the market bottomed in mid-June, F stock is up 42% compared to a 10% rebound in the S&P 500. In the month of July alone, shares gained 32% in their best monthly performance since 2009. Yet, it’s quite possible this is just the start of an extended push higher for this hot EV stock.
In addition to the legislative catalysts mentioned above, Nio (NYSE:NIO) has benefitted recently from two pieces of company-specific news.
On Aug. 26, the Securities and Exchange Commission said it had reached an agreement with Chinese regulators that would allow the Public Company Accounting Oversight Board to inspect Chinese companies listed on U.S. exchanges, thus likely averting a delisting of shares of Nio and others.
The second piece of good news occurred on the same day, with Nio’s rebuttal of allegations of improper accounting made by a short seller earlier this year. Nio said an independent internal review found no improprieties regarding how it accounted for profits and profit margins in its battery-swapping business.
Shares of Nio have rallied nearly 70% from their 52-week low, made in May. Yet, they remain well below their 52-week high of $44.27, set in November 2021. I like NIO’s chances for outsized gains over the next 12 to 18 months.
While companies that manufacture electric passenger cars and trucks tend to get the most attention, makers of commercial EVs also stand to benefit immensely from climate initiatives. Proterra (NASDAQ:PTRA) makes zero-emission electric transit vehicles such as buses, delivery trucks and shuttles, and also sells battery systems to car makers.
Shares rallied sharply earlier this month following the release of the company’s second-quarter earnings report. Revenue was up 27% year over year to $75 million, exceeding analyst estimates. This was due in part to a more than 10x increase in battery system deliveries to a record 348. Proterra also delivered 52 electric buses in the second quarter, 30% higher than its deliveries in the first quarter.
The company’s new factory in South Carolina is expected to start production before the end of the year. This should help alleviate delays, improve scale and efficiency, and deliver higher margins and, ultimately, profitability.
Shares rallied as much as 26% in the two weeks following the earnings announcement, briefly touching the $7 level. Since then, they have given back much of those gains but still sit about 8% higher.
For investors looking to profit from the commercial side of the electric push, PTRA is one of the hottest EV stocks out there.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.