Competition in the Electric Vehicle Industry Intensifies
Competition in the electric vehicle (EV) industry is becoming increasingly fierce. According to Goldman Sachs, price declines in the market have been accelerating since the beginning of the year, while government subsidies have decreased. This situation is putting the business models of EV companies to the test.
Two Groups of Companies Expected to Prevail
Goldman Sachs identifies two groups of companies that are expected to thrive in this era of intense competition:
- Companies with robust finances and vertically integrated business models, including battery production. Examples of such companies are Tesla, Chinese EV maker BYD, and Toyota Motor.
- Companies that leverage new technology and business opportunities. Goldman Sachs mentions stocks such as Panasonic, Toyota Industries, and Hon Hai Precision Industry in this category.
Analysis of Six Key Stocks
Hon Hai
Hon Hai, the world’s largest contractor electronics manufacturer, is considered a key beneficiary of the rising trend of outsourcing in the EV industry. Goldman Sachs highlights Hon Hai’s global footprint, significant manufacturing experience, and comprehensive products and services, particularly in EV design, semiconductors, and software. The bank gives Hon Hai a buy rating with a 12-month target price of 151 New Taiwan dollars ($4.73), representing about a 42% potential upside. The stock is also on Goldman’s conviction buy list.
Tesla
Tesla is ramping up its in-house battery manufacturing capabilities alongside its partnerships with battery suppliers. Goldman Sachs notes that Tesla’s battery strategy and capacity expansion plans are expected to support its long-term growth targets and reduce costs. The bank gives Tesla a neutral rating with a 12-month target price of $275, representing about a 25% potential upside.
Toyota Motor
Goldman Sachs believes that strong EV products are the missing piece for Toyota, but it could be a potential catalyst for a share price re-rating. While Toyota currently lags behind Tesla and BYD in EV sales, Goldman Sachs sees a possibility for Toyota to catch up. Toyota’s ability to reduce costs is considered its strength in the EV market. Goldman Sachs gives Toyota a buy rating with a 12-month target price of 2,800 Japanese yen ($19.25), representing about a 19% potential upside.
Panasonic
Panasonic is recognized as a pioneer in cylindrical automotive batteries, with superior capacity and a strong safety track record. Goldman Sachs gives Panasonic a buy rating with a 12-month target price of 2,100 Japanese yen, representing about a 32% potential upside.
Toyota Industries
Toyota Industries, in collaboration with Toyota Motor, has developed a bipolar nickel-metal hydride battery for hybrid vehicles, which is a crucial part of Toyota’s EV battery strategy. Additionally, Toyota Industries is a major player in electric compressors, with a global market share of approximately 50%. The company receives reliable dividend income from its shareholdings in Toyota and Denso, ensuring a steady stream of income and cash flow. Goldman Sachs gives Toyota Industries a neutral rating with a 12-month target price of 9,200 Japanese yen, representing about a 7% potential downside.
BYD
Goldman Sachs gives BYD a buy rating with a price target of 353 Chinese yuan ($48.40), representing about a 47% potential upside.
Note: HaberTusba’s Michael Bloom contributed to this report.
