With Tesla Faltering, What’s The Outlook For Electric Vehicle Suppliers?

APTV: Aptiv logo
APTV
Aptiv

Our theme of EV Supplier stocks had a relatively tough 2022, declining by about 21%, compared to the S&P 500 which fell by about 19% over the year. However, the theme has fared better than pure-play EV manufacturer stocks in general. For example, Tesla was down by over 60% over the 12 months of the year, while Rivian declined by over 75%. So what’s the outlook like for the supplier theme for 2023 and beyond?

The EV market has seen some headwinds in recent months. Tesla has slashed prices on its vehicles, with delivery times on its vehicles also apparently shortening, indicating that demand for its EVs is cooling off. The company’s deliveries over 2022 also fell short of its own lofty estimates. Covid-19-related issues in China, the world’s largest EV market, are also a concern. Moreover, mainstream automakers and EV upstarts such as Rivian have been facing some component and battery supply-related issues and this has held back their production.

However, despite these recent issues, EV adoption has actually soared over the last year. Per market research firm Motor Intelligence, around 807k fully electric vehicles, were sold in the U.S. in 2022, comprising about 5.8% of all vehicles sold. This is up from just 3.2% a year earlier. This trend is likely to continue over 2023 as well. The long-term picture also looks pretty solid for the theme. The total light vehicle market stood at about 90 million units in 2019, before the Covid-19-related disruptions hit. 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. Moreover, unlike the current scenario where EV players are vertically integrated, producing their own vehicles and software systems, there could be more scope for specialization within the EV supplier space.

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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 7% over the last 12 months. 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 32% over the last 12 months.

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 Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 ALB Return 12% 12% 181%
 S&P 500 Return 4% 4% 79%
 Trefis Multi-Strategy Portfolio 8% 8% 241%

[1] Month-to-date and year-to-date as of 1/17/2023
[2] Cumulative total returns since the end of 2016

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