The electric vehicle (EV) industry has been one of the fastest-growing segments in 2020 and is expected to grow at a CAGR of 21.1% over the next six years. Rising climate change concerns across the world have pushed world leaders to take necessary steps for different industries. And the automobile industry is getting significant attention in the move to reach carbon-neutrality over the next couple of decades.
However, despite the explosive growth potential of this industry, the EV sector has remained synonymous with Tesla, Inc. (TSLA) for a while. Despite the company’s internal problems and low profitability, investors have been attracted to the stock like a moth to a flame. TSLA’s CEO himself admitted to the low profitability of the company over a series of leaked emails, which are a potential threat for the stock.
TSLA being in the limelight, investors have ignored many burgeoning companies that have the potential to take the EV industry by storm with their unique designs and innovative technology. While Ayro, Inc. (AYRO) and Arcimoto, Inc. (FUV) are two US-based startups that have substantial growth potential, China Automotive Systems, Inc. (CAAS) is expected to benefit as a major OEM supplier.
China Automotive Systems, Inc. (CAAS)
CAAS is a leading automobile systems developer based in China, operating through its subsidiary Great Genesis Holdings Ltd. The company exports automotive parts to Original Equipment Manufacturers (OEMs) across North America and Brazil, as well as provides after-sales support and customer services.
The robust recovery of the Chinese economy driving the demand for EVs across the country has led to a substantial increase in orders for automotive parts placed with CAAS. It sold approximately 700,000 units in November alone, accruing to rising demand from Chinese OEMs and North American markets.
CAAS shipped 120,000 units of steering equipment for EVs in the first 11 months of 2020. The company expects to sell over 140,000 steering units by the end of this year, and over 200,000 units in 2021.
CAAS’ net sales increased 13.8% year-over-year to $114.40 million in the third quarter ended September 2020. This can be attributed to a 9.8% year-over-year rise in product sales to North America to $37 million. Net income from the “Other” segment rose 104.7% from the same period last year to $3.50 million.
The consensus EPS estimate of $0.36 for fiscal 2021 indicates an 820% improvement year-over-year. CAAS has an impressive earnings surprise history as well, as it beat the street EPS estimates in three out of the trailing four quarters. Analysts expect revenues to rise by 22.7% next year to $475.12 million.
CAAS has gained more than 495% since hitting its 52-week low of $1.43 in March. The stock hit its 52-week high of $13.69 on December 1st.
How does CAAS stock up for the POWR Ratings?
A for Trade Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating.
It is currently ranked #28 out of 115 stocks in the China industry.
Ayro, Inc. (AYRO)
AYRO specializes in light-duty trucks designed for short trips and urban commutes. The company’s distinctive car designs, target audience, and industrial application make it stand out in a sea of EV start-ups.
Founded in 2015, AYRO went public through a reverse merger with DropCar on May 29th. Before making its market debut, the merged company undertook a reverse 1-for-5 stock split, as well as paid dividends.
AYRO recently raised $10 million through a direct offering of 1.65 million shares to Carnegie Hudson Resources. The company also issued approximately 2.06 million stock warrants in the name of Carnegie Hudson in two tranches exercisable in six months and five years, respectively.
Earlier in September, AYRO entered into a strategic partnership with Karma Automotive Innovation and Customization Center (KICC). This allows AYRO to leverage KICC’s industry knowledge, expertise, and state-of-the-art equipment for manufacturing its next generation vehicles. through this joint venture, AYRO aims to manufacture 20,000 light-duty trucks and delivery vehicles worth approximately $300 million over the next three years.
AYRO’s revenues increased by 46.4% year-over-year to $388,654 in the third quarter ended in September 2020. Net income from the ‘Other’ segment increased 1432.7% from the same period last year to $17,503, while EPS increased 83.1% from the same period last year.
AYRO gained more than 485% to hit its 52-week high of $10.60 in November, since hitting its 52-week low of $1.80 in April.
Under POWR Ratings, AYRO has an “A” for Industry Rank and a “B” for Trade Grade. It is currently ranked #28 out of 34 stocks in the Auto & Vehicle Manufacturers industry.
Arcimoto, Inc. (FUV)
FUV specializes in three-wheeled “fun utility vehicles” or FUV, tailor-made for specific uses. FUV Deliverator, as the name suggests, is ideal for transportation and delivery, while FUV Responder is designed for first responders for security and law enforcement services. FUV is currently developing its latest product, the recreational motorcycle Arcimoto Roadster, since November 16th.
FUV launched roadside assistance services through Agero on December 2nd. This partnership allows FUV to extend roadside customer services for all FUV vehicles across the country, scaling up the benefits of its after-sales services.
The company partnered with DHL in the third quarter to facilitate home delivery of Arcimoto vehicles across the country, boosting the company’s direct-to-customer sales channel. It also launched high visibility pilot programs for Arcimoto vehicles.
FUV announced a direct offering of 1 million shares to institutional investors priced above the market on November 24th, raising approximately $15.25 million in gross proceeds. Earlier this year, FUV raised $10 million through a common stock offering of 1.37 million shares, which should fund the company’s production and working capital related expenses, thereby accelerating its supply capacity. On November 20th, FUV announced another public offering of 1.13 million shares to raise approximately $15 million. The gross proceeds from the equity offering are expected to accelerate the production of proprietary vehicles, thereby increasing the working capital turnover.
The company partnered with the city of Orlando to test FUV vehicles across six departments, and upon successful verification, these would be deployed across the city as a part of its clean energy drive.
FUV’s total revenue increased 1,953.1% year-over-year to $683,895 in the third quarter ended September 2020. The company produced 31 vehicles in September. EPS improved by 31.8% from the same period last year over this period.
Analysts expect FUV’s EPS to rise 40% in the current quarter ending December 2020. The consensus revenue estimate of $1.46 million for the current quarter indicates a 54.7% improvement year-over-year.
FUV gained more than 1,980% to hit its 52-week high of $20.20 in November, since hitting its 52-week low of $0.97 in March.
Under POWR Ratings, FUV has been accorded an “A” rating for Industry Rank. Within the Auto & Vehicle Manufacturers industry, it’s ranked #27.
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CAAS shares were trading at $7.60 per share on Friday afternoon, down $0.91 (-10.69%). Year-to-date, CAAS has gained 141.27%, versus a 16.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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