Tesla (NASDAQ: TSLA) might be the market leader for electric vehicles, but it's going to be more than the automaker that reaps the benefits of CEO Elon Musk's success. It's a fledgling industry with minimal global sales penetration and only the sky as the limit. The new Shanghai factory is ramping up operations to feed China's demand for battery-powered cars. As one of the largest economies in the world – it's believed that it will be profitable sometimes this year.
Analysts from Morgan Stanley (NYSE: MS) estimate that market saturation for electric vehicles sits at about 2 percent globally and forecasts that figure will quickly climb to 11 percent in five years, 24 percent by 2030, and a whopping 70 percent by 2040. They say that the best idea for taking advantage of that shift towards electric cars is "through large-cap, credible battery companies with a proven track record such as Samsung SDI, Panasonic (OTC: PCRFY), and LG Chem."
As the team wrote, there is a multitude of secondary players that feed into the EV ecosystem and integrate with several other industries around the world. Morgan Stanley's group anticipates that if Tesla can prove EVs can make a profit at scale, this would likely remove one more barrier to legacy auto manufacturers shifting capacity to the electric car market. What would likely follow is a cascade of investment into the battery-powered auto production infrastructure and supporting systems.
Here are some of the top players that Morgan Stanley recommends for investors wanting to cash in on the EV market:
- Samsung SDI
Region: Asia-Pacific
Ticker: 006400.KS
Sector: Batteries
Samsung SDI is a Korean-based arm of the electronics manufacturer that operates two business segments – display segment and energy segment. The organization’s energy segment makes batteries for both the domestic and international markets. It has a healthy market cap and could be a promising payoff once EVs become profitable. The company already makes an automotive battery for electric vehicles that are lighter, more efficient, and reliable than the competition.
- Zhejiang Sanhua Intelligent Controls Co.
Region: Asia-Pacific
Ticker: 002050.SZ
Sector: Autos
This Shaoxing-based company produces electronic expansion valves, water pumps, oil pumps, water valves, water cooling plates, thermostatic valves, thermal expansion valves, and other parts required for air conditioners, refrigerators, and autos. Founded in 1984, the company makes products for both the domestic and overseas markets.
- LG Chemicals
Region: Asia-Pacific
Ticker: 051910.KS
Sector: Batteries
LG Chemicals is a battery-maker operating out of South Korea. The company struck a deal with Tesla in August 2019 to supply the company's Model 3s with batteries coming out of its Shanghai factory. LG Chem stands to be a direct beneficiary of the Tesla profitability win. The company does USD 141.8 billion in sales and employs over 230,000 people around the world.
Photo by John Cameron on Unsplash
Source:
https://www.reuters.com/article/tesla-china-lg-chem/tesla-to-buy-batteries-from-south-koreas-lg-chem-bloomberg-idUSL4N25J1K1
https://www.reuters.com/companies/002050.SZ
https://www.bloomberg.com/quote/002050:CH?sref=Z8rrm62K
https://www.crunchbase.com/organization/samsung-sdi#section-overview
https://www.marketwatch.com/investing/stock/002050?countrycode=cn
https://www.samsungsdi.com/automotive-battery/innovation.html
https://www.businessinsider.com/25-stock-picks-to-buy-electric-car-recommendations-morgan-stanley-2020-2#20-posco-chemical-6
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
