Share prices of Nio (NIO 7.81%) and Ford (F 1.03%) have been rocked in recent weeks as geopolitical tensions clash with growth concerns and rising interest rates. Both stocks are now under $20 compared to all-time intraday highs of $64.60 for Nio and $24.37 for Ford.
Here's why Nio and Ford are two electric vehicle (EV) stocks worth considering now.
The Ford Mustang Mach-E electric SUV. Image source: Ford Motor Company.
A transitional year
Howard Smith (Nio): Nio's American depositary shares recently dropped below $15 for the first time since the summer of 2020. At that point in time, Nio had just surpassed its 50,000th delivery of an electric car. By the end of February 2022, the company had delivered more than 182,000 vehicles.
Demand remains strong enough for the company, along with its state-owned manufacturing partner, to more than double production capacity to up to 300,000 vehicles per year. Part of the reason it that the company has new products coming this year.
Its ET7 luxury sedan is due to begin shipping this month, followed by the smaller ET5 sedan later in the fall. Nio is also expanding outside of China. Europe is expected to be one of the largest EV markets globally, and the company has already established a presence there.
Nio's ET7 luxury sedan is scheduled to begin deliveries later this month. Image source: Nio.
In a further sign of its expansion plans outside of China, Nio reportedly has a new agreement with the state-owned China National Technical Import and Export Corporation to pursue the construction of EV infrastructure and support services in overseas markets, according to industry follower CnEVPost.
The report says the agreement will focus on Europe to "provide solutions for the export, installation, commissioning, and delivery of Nio's battery swap stations." Those swap stations allow Nio customers to purchase vehicles with lower up-front costs along with a subscription plan for battery replacements at the swap stations. The company says it takes only minutes, and is another form of income for Nio as it works to grow its customer base.
While risks related to both the business and outside factors have driven Nio shares to a multi-year low, some investors might feel those risks are now priced in, making it a good time to consider buying the stock.
NYSE: NIO
Key Data Points
Both of Ford's business units have their advantages
Daniel Foelber (Ford): Like most EV stocks, Ford has been absolutely hammered in recent weeks. We aren't even through the first three months of the year, and the stock has already climbed as high as $24.37 per share and as low as $15.51.
Due to heightened market volatility and Ford's heavy investment in the EV industry, it could continue to be a volatile stock. However, investors would be better-suited turning their attention to Ford's long-term future, which is brighter than ever before.
On March 2, Ford announced it was splitting its business into two divisions: the Model e division, which will focus on EVs; and the Blue division, which will be responsible for Ford's legacy internal combustion engine (ICE) business. The business units are expected to work in tandem, with Ford Blue supplying the bulk of the profit to support Ford Model e, which is expected to contribute the majority of Ford's long-term growth.
Ford is an attractive automotive stock because it is already profitable and is less vulnerable to short-term supply chain challenges that have stunted the growth of other automakers like Lucid Group and Rivian Automotive and resulted in unsustainable cash burn.
Ford also pays a quarterly dividend of $0.10 per share for an annualized yield of 2.5%, which makes it one of the few electric car stocks that is also a worthy dividend stock. And to top it all off, it's not expensive relative to its earnings and growth rate.
Lastly, Ford has been much more vocal than its competitors when it comes to making sizable EV investments early and setting short-term, medium-term, and long-term goals. It expects to produce 600,000 EVs per year by the end of 2023 and more than 2 million EVs per year by 2026. By 2030, it aims to have EVs represent half of its global production volume, which is higher than its earlier estimate for them to make up 40% of global volume by that year.
By setting a variety of goals with different time horizons, investors are able to hold Ford accountable and better track its progress, which is better than companies that only have vague 2030 or 2050 goals with little to no clarification of how those goals will be achieved.
Add it all up, and Ford stands out as the single most-balanced automaker to buy now.
A low entry point
For less than $20, an investor can pick up a share of Nio or Ford and become a part owner in an exciting business.
One of the advantages of being an individual investor is that you get to decide the timing and extent of your exposure to a company. Lower nominally-priced stocks like Nio and Ford make it easier to gradually accumulate shares to make sure a position doesn't become overweight in a portfolio.
Nio and Ford have both drummed up healthy demand for their EV products. But both companies still need to prove their models are good enough to stand the test of time, especially as competition heats up in the EV industry.
