Electric vehicle (EV) stocks are all the rage these days. Ever since Telsa (NASDAQ: TSLA) entered the S&P 500, capping a 4,000-plus percentage point rally over the span of a decade, everybody has wanted to find the “next Tesla.” Those looking to find such a company have plenty of options to choose from. The EV space is getting increasingly competitive, with American, Chinese, Japanese and European companies throwing their offerings onto the market. In light of this, it’s unlikely that the EV companies of the future will deliver returns similar to those of Tesla in its early days, as competition tends to shrink profit margins. Nevertheless, investors continue the hunt for the next unicorn.
If you’re looking for Canadian companies involved in the EV space, you won’t be disappointed. There are plenty of Canadian EV companies out there, and most of them have side stepped the electric sedan market. This is a positive, because designing and selling electric cars has become very competitive. The Canadian EV players have unique industry niches that can’t easily be replicated. In this article, I will explore three Canadian EV stocks that are making a splash in the world’s hottest industry.
Magna International
Magna International (TSX: MG) can be considered an EV stock by way of a joint venture, LG-Magna E-Powertrain, which it operates with LG Electronics.
LG-Magna e-Powertrain is an EV parts company. It makes electric motors and other miscellaneous EV components. Many companies that want to break into EV manufacturing lack the capabilities required to make these parts. So, LG-Magna e-Powertrain has an important industry niche.
Magna International has not exactly been a red-hot growth story lately. The company’s earnings have declined over three-, five- and ten-year timeframes. However, the company has grown its revenue in the last 12 months, so perhaps things could turn around.
Lion Electric
Lion Electric (TSX: LEV) is a manufacturer of electric school buses and trucks. This is a unique industry niche that is much less competitive than manufacturing electric sedans. Most of the big companies in the EV space want to sell cars directly to consumers. Lion Electric’s niche allows it to collect recurring revenue from governments and large corporations.
How is Lion Electric doing as a company? Pretty well. In the trailing 12-month period, it grew its revenue by 131%, showing that it is increasing its orders at a rapid pace. The company is deeply unprofitable, of course, but that’s to be expected for a startup that’s not even five years old. This is certainly a riskier-than-average name, but it’s worth mentioning as a Canadian EV stock to watch.
NFI Group
NFI Group (TSX: NFI) is a Canadian manufacturer of electric buses. Like Lion Electric, it’s going after the recurring government/corporate revenue, and staying out of the crowded consumer fray. It’s a smart move. By going after “industry” users rather than individuals, NFI Group sidesteps much of the competition that’s been plaguing EVs lately.
NFI is much closer to profitability than Lion Electric is. In the trailing 12-month period, the electric bus maker had positive gross profit. It had positive operating income and net income in past years, as well, but has been spending more money lately to ramp up its EV investments. Certainly, there are real risks with this name, but it’s nevertheless a stock worth watching.
