As electric vehicle adoption gains traction, Volkswagen (OTCMKTS: VWAGY), Toyota (NYSE: TM), Ford (NYSE: F) and Volvo (STO: VOLV-B) are a force to be reckoned with. Does Tesla (NASDAQ: TSLA) have what it takes to stay ahead and retain its position as the world's most coveted EV manufacturer?
Tesla has become a household name and frontrunner in the race to electrification. It's not just cultivated a sleek covetable range of vehicles but cornered solar power and off-grid electrification too. Along the way, it's built a community around the brand and its founder Elon Musk. At times this has been described as cult-like, but at a trillion-dollar market cap, it's doing something right.
Nevertheless, despite a slow start, legacy carmakers are set to up their game and make a concerted effort to challenge Tesla to the top spot. While die-hard Tesla fans may not be quaking in their boots, these stalwarts have money, engineering prowess, legacy brands and the power to scale at their fingertips, so Tesla's crown may well be set to slip.
Last month Volkswagen and Toyota unveiled plans to spend $170bn on remaining relevant in the age of the EV.
While Tesla recently celebrated a record 936k global vehicle sales in 2021, its old-school competitors sold more than double that in the US alone. In fact, Toyota overthrew General Motors (NYSE: GM) to the top spot, selling 2.3m cars in the US. And it's a particularly notable event because it's the first time in nearly 120-years that a non-US manufacturer has done so.
Unfortunately, we don't know how many of Tesla's sales are US-based as it doesn't disclose the breakdown. But with Tesla EVs appearing throughout Europe and China, it's safe to assume there's some spread.
Legacy brands become electric car stocks
Volkswagen, GM, Jaguar Land Rover and Volvo are squarely focused on electrification, while Toyota is also trialing hydrogen engines and carbon-neutral propellants.
Meanwhile, Mercedes-Benz just unveiled its VISION EQXX prototype, which it says can go 1,000km (621 miles) per charge. EV range is one of the main points of contention for widespread adoption, so it will be a game-changer for the industry if this can be overcome.
Furthermore, electronics giant Sony (NYSE: SONY) is also speculating on entering the EV market.
Andy Palmer, former chief of Aston Martin and ex-Nissan Motor Co. executive, recently said: "I expect the shift to electric to be faster than everyone expects."
With activity coming from every angle, this seems an accurate statement.
Should Tesla shareholders worry?
Despite endless scrutiny, Elon Musk appears to be as popular as ever, and Tesla fanboys are out in force. Meanwhile, Tesla EV sales account for more than one in six EVs sold worldwide.
But all may not be so rosy under the hood. YouTube is littered with videos of Tesla crashes, and social media is filled with tales of woe from disappointed and horrified customers.
In mid-December, Paris' largest taxi firm, G7, suspended the use of Tesla Model 3 cars in its fleet after one was involved in a fatal accident. And two weeks later, Tesla recalled nearly half a million Model 3 and Model S vehicles in the U.S. over safety issues related to the rearview camera and the trunk.
Its lasting success in China is also being questioned as tensions between the East and West are heightened. Activists are appealing to Tesla to close a new showroom in China's northwestern region of Xinjiang, where officials are accused of abuses against predominantly Muslim ethnic minorities.
Of course, for all the bad stories, there are many good reports, but consumers need to stay convinced and enticed by the Tesla brand if it is to continue on its growth trajectory. With a growing abundance of EV car choices, this will become much more difficult.
But all is not lost for Tesla, far from it.
The company has been ramping up its production facilities and surprised investors at its ability to cope with the chip shortage better than many others in the game. Tesla plans to invest $188m in its Shanghai plant to improve equipment, increase jobs, and raise production. Plus, its customer waiting lists exceed six months, and it's far ahead of competitors in the software stakes.
Will Chip Shortage Bust EV Boom?
While 2021 was an extraordinary year for electric car sales, the overall vehicle market suffered as the international chip shortage affected manufacturing targets.
According to the Society of Motor Manufacturers and Traders, more EVs were registered in 2021 than in the previous five years combined.
But COVID-19 raging on continues to impact the automotive chip shortage this year too. In fact, China expects a partial freeze on its EV industry during the first half of 2022. That's in anticipation of a shortfall of at least one million electric cars amid soaring demand.
Cars manufactured nowadays require between 1,500 and 3,000 semiconductors.
Electric Vehicle Stocks to Invest In
Whether it's hybrid, plug-in, or battery EVs, the choice available to consumers is rapidly rising. Here are some of the top Tesla-challenger stocks to watch.
Volkswagen
Volkswagen is one EV stock not to underestimate. Despite enduring the global emissions scandal several years ago, VW remains one of the world's most highly respected auto brands. From the Polo to the Passat, the Tiguan to the Toureg, VW also makes Lamborghini supercars and Scania heavy trucks. Its EV entrants include the Audi e-Tron, Porsche Taycan, ID.3 hatchback and ID.4 sport utility vehicle.
In recent years, the company has already extensively invested in EVs and newly announced a further $100bn pledge to EV and software development during the next five years.
It is believed VW will have fallen short of its 600k EV sales goal for 2021, by around 150k, due to the challenging market environment.
VWs CEO Herbert Diess is a big fan of Elon Musk and regularly compares their progress to that of Tesla. He is supremely ambitious and intends to challenge his rival head-on.
The company currently makes its electric cars at five factories which it intends to increase to eight in the coming year.
VW EVs appeal to many consumers because they're not too unlike regular automobiles. This familiarity helps ease the transition for those unsure about the change.
Entering new territory is bound to come with its share of teething problems. But VW has the long-standing experience necessary to keep consumers sweet and guide them through the challenges.
Toyota
Toyota plans to roll out 30 EVs by the end of the decade. It has pledged $70bn to electrify its fleet, with half of those produced fully electric and the rest a mix of hybrid and hydrogen-powered.
While it was later to commit to building fully electric vehicles, Toyota holds the accolade for number one seller of electrified vehicles for the 22nd consecutive year. Indeed, it sold over 583k electrified powered vehicles in 2021, covering plug-ins, hybrids and fuel cells.
Meanwhile, it intends to invest $1.29bn in a US battery plant.
Senior Vice President of TMNA, Jack Hollis, said:
"Thanks to our phenomenal dealers and world-class purchasing and manufacturing teams, our inventory continues to improve and we're preparing to introduce 21 all-new, refreshed or special edition vehicles in 2022."
FactSet analyst consensus gives Toyota an Overweight rating with a target share price of $211.
Ford
Ford Motor's December and fourth-quarter sales pleased analysts, and the company ranked in second place, after Tesla, for 2021 full EV sales. Ford also announced its plans to double its annual production target of the all-electric F-150 pickup truck.
The brand is synonymous with quality rugged terrain vehicles and therefore sure to be an automatic favorite among long-standing Ford fans.
Its F- Series truck has achieved best-selling truck status for the 45th straight year and the best-selling vehicle in America for the 40th year in a row.
FactSet analyst consensus gives Ford an Overweight rating with a target share price of $20.94.
The EV space is enormous and growing more and more competitive by the day. But with governments pushing for complete electrification, the total addressable market is massive.