How Are Electric Vehicle Component Stocks Faring?

APTV: Aptiv logo
APTV
Aptiv

Our theme of EV Supplier stocks has fared a bit better than the broader markets this year, declining by about 13% year-to-date, compared to the S&P 500 which remains down by about 18% over the same period. While growth stocks, in general, have been hit by rising interest rates, the EV theme has fared better, as demand for electric vehicles remains robust with major OEMs aggressively transitioning from internal combustion engines to electric drivetrains.  Electric vehicle sales rose by 69% year-over-year in Q3 2022 to 114,768 units per Kelly Blue book, compared to the broader light vehicle category which largely remained flat. Now, there have been some negative developments for the sector as well. Moreover, government incentives for EVs declined considerably in the U.S. following the passage of the Inflation Reduction Act in August. Under the new rules, tax credits will apply only to vehicles under a certain price limit (up to $55,000 for sedans and $80,000 for SUVs and trucks) while individuals with a taxable income under $150,000 will be eligible for credits.

That said, there remains considerable room for growth in the EV market. The total light vehicle market stood at about 90 million units in 2019, before the Covid-19-related disruptions hit. However, electric vehicles only account for about a single-digit percentage of overall automotive sales presently. It’s very likely that the passenger vehicle market will transition almost entirely to EVs in the coming decades, providing considerable room for growth for EV suppliers. Within our theme Albemarle stock, (NYSE:ALB), a chemicals company that is also one of the world’s largest producers of lithium, a key raw material for electric vehicle batteries, has been the strongest performer, rising by about 10% year-to-date. On the other side, Aptiv stock, (NYSE:APTV), a company that provides a range of solutions for the auto industry, including autonomous driving technologies, safety technologies, components, and wiring, has been the weakest performer, declining by about 40% year-to-date.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Dec 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 ALB Return -7% 10% 200%
 S&P 500 Return -3% -17% 76%
 Trefis Multi-Strategy Portfolio -4% -21% 214%
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[1] Month-to-date and year-to-date as of 12/7/2022
[2] Cumulative total returns since the end of 2016

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