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Could EV Stocks Rise Along with U.S. Battery Manufacturing Capacity?
Stock Analysis & Ideas

Could EV Stocks Rise Along with U.S. Battery Manufacturing Capacity?

Story Highlights

EV stocks have underperformed this year due to higher battery and other component costs. EV makers and battery manufacturers are aggressively ramping up capacity, which should drive down costs and support mass adoption.

Regardless of regulatory support and strong demand, EV stocks have underperformed this year. For context, Tesla stock (NASDAQ:TSLA), Nio stock (NYSE:NIO), and Lucid stock (NASDAQ:LCID) have declined by 18%, 37%, and 57%, respectively, year-to-date. Higher battery and other component costs amid supply shortages continue to take a toll on the financials of EV manufacturers, in turn impacting their stocks. However, with battery manufacturers and EV makers aggressively building their U.S. capacity, costs are expected to go down, supporting the financials and stock prices of the companies operating in this space. That could eventually lead to a rise in the stocks of EV manufacturers.

Per a recent Wall Street Journal report, Honda Motor Company (NYSE:HMC) and LG Energy Solution have come together to build a multibillion-dollar EV battery factory in Ohio. The report further highlighted that mass production could start in 2025 at this factory. 

The report also stated that Panasonic plans to build a $4 billion EV battery manufacturing plant in Oklahoma. It also cited General Motors’ (NYSE:GM) focus on ramping up battery and EV manufacturing.  

Notably, at the beginning of this year, General Motors announced a $7 billion investment in Michigan manufacturing sites to ramp up its battery cell and electric truck manufacturing capacity. GM plans to construct a new Ultium Cells battery cell plant in Lansing. It also intends to convert its Orion Township assembly plant to produce Chevrolet Silverado EV and the electric GMC Sierra. 

What does it Mean for EV Stocks? 

As companies aggressively build battery manufacturing capacity, it will likely lower the cost of battery packs, make EVs cheap, and support mass adoption. However, it will take time for production to ramp up and positively impact sales. 

Meanwhile, EV manufacturers are increasing prices to counter the impact of higher battery and component costs on vehicle margins.

Tesla CEO Elon Musk stated during the Q1 conference call that per unit vehicle cost increased, and the company is raising prices to support margins. However, Musk expects to lower prices as inflation cools down.  

Meanwhile, Nio CEO William Li said during the Q1 conference call that battery costs continue to surge and vehicle margin in Q2 will be under higher pressure. Nio has taken countermeasures, like adjusting product prices, to mitigate the impact of higher material costs.

Bottom Line

Production and cost issues will likely restrict the upside in EV stocks in the short term. However, the long-term fundamentals of these companies remain solid, thanks to the strong secular sector trends, innovation, and demand. 

Against this setting, let’s see what analysts suggest for TSLA, NIO, and LCID. 

What is Tesla’s Target Stock Price?

Wall Street analysts are cautiously optimistic about TSLA. It has received 19 Buy, five Hold, and six Sell recommendations for a Moderate Buy rating consensus. 

Further, analysts’ average price target of $314.57 implies 9.2% upside potential.

Is NIO Stock a Buy, Sell or Hold?

Analysts are bullish about NIO stock. It sports a Strong Buy rating consensus based on 11 unanimous Buy recommendations. Moreover, the analysts’ average price target of $33.04 implies 65.9% upside potential

What is the Prediction for Lucid Stock?

Lucid stock has received one Buy and one Hold recommendation and has a Moderate Buy rating consensus on TipRanks. Further, its price target of $23 implies 41.6% upside potential

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