Which Automotive Brands Will Be the Most Valuable in the EV Future?

March 15, 2022

The automotive future is on the way, and it looks increasingly like it is going to be fully electric. The news feeds and the trade papers are full of announcements about the simultaneous rise of electric vehicles (EVs) and planned extinction of the internal combustion engine (ICE) at some point in the coming years:

  • At the 2021 United Nations Climate Change Conference in Glasgow, six automakers and 30 governments pledged to end the sales of new ICE vehicles in leading markets by 2035, with global markets following by 2040.
  • Dozens of fleet operators (including Uber) also joined in, pledging to use only EVs or hydrogen fuel cell vehicles by 2030.

While the US, China, and Japan did not take the non-binding pledge, GM, Ford, and Mercedes-Benz did. Other noteworthy signatories were Volvo, Jaguar Land Rover, and Chinese carmaker BYD, as well as the states of California and Washington.

Along with the news from the political sphere, the vehicle manufacturers have promoted their future product plans. While these plans continue to include ICEs in the coming years, the long-term trajectory is clearly focused around EVs. Within the near future, the showrooms of nearly all major and minor automakers will prominently feature EVs, including:

With all this in mind, let’s take a deeper dive into some of the topics surrounding the coming transition to EVs, along with which vehicle brands could benefit most from it.

Which brands are the current favorites of market analysts?

There are a few select auto manufacturing companies whose stocks have been catching the eyes of stock analysts, largely because of their EV-related actions:

  • BMW
  • Ford
  • General Motors
  • Honda
  • Hyundai
  • Jaguar Land Rover
  • Kia
  • Mazda
  • Mercedes-Benz
  • Nissan
  • Stellantis
  • Subaru
  • Tesla
  • Toyota
  • Volkswagen
  • Volvo

Tesla: The initial frontrunner that has set the bar

Of course, Tesla does not operate franchise dealerships, but it’s impossible to say “stocks” and “EVs” in the same sentence without mentioning the company that has taken the initial lead in the EV market.

A lot of the stock-market hype around EVs has centered on Tesla and its successful move to become the production leader of the EV world. Tesla and its leader, Elon Musk, are masters at setting expectations and then exceeding them, time after time. Tesla’s gyrations on the way to its current $1 trillion-plus market cap have not gone unnoticed by the legacy vehicle manufacturers now entering the EV arena.

Both Ford’s Jim Farley and GM’s Mary Barra have gone to great lengths to reposition their companies as technology leaders ready for the future, and thus worthy of much higher valuations. They appear to be succeeding.

Ford: Making the commitment to an EV future

Ford under Farley appears to have achieved this to an appreciable degree. Ford became the highest-performing auto stock in 2021, boasting a 140% increase in price. Its successful launch of the Mustang Mach-E, announcement of the F-150 Lightning pickup, and a new restructuring plan with a serious commitment to EV production have all helped to lift its shares. Analysts have responded, including Ford as one of their top automotive picks.

GM: Putting all its chips on Ultium

General Motors and its CEO Mary Barra have been steadily pushing the GM family of brands to go all in on EVs. The market has rewarded this with a 40% increase in its stock price in 2021. The announcement of its flexible Ultium skateboard, revival of the Hummer brand as totally electric, making the Cadillac brand its luxury EV leader, opening up reservations for the new Silverado EV pickup truck, and revealing an affordable $30,000 Chevrolet Equinox EV has made analysts sit up and notice. Its commitment to Michigan as the site of its future EV and battery manufacturing facilities puts a new spotlight on the old Motor City.

Other legacy automakers who have, in their EV transitions, made the greatest impressions include Volkswagen, Toyota, Porsche, and Honda.

Which brands are best positioned to support their dealerships when inventories and supply chains return to “normal”?

Let’s step away from the EV conversation for a moment.

This is a tough question. The massive disruptions from the microchip shortage and other supply chain issues have affected nearly every automotive manufacturer, and it’s not over yet. Millions of units of production have been lost.

Both GM and Ford were forced to park incomplete pickups that needed microchips in huge lots until supplies arrived. In other cases, some vehicle features powered by microchips were simply removed from vehicles and deducted from the invoice.

Toyota excelled during the crisis. Unlike most others, Toyota kept several months’ worth of microchips stockpiled, allowing them to keep their production lines running at close to full capacity. This helped Toyota to achieve the 2021 US sales crown, surpassing GM for the first time ever. It bodes well for them going forward.

Another bright spot was Tesla, who also did well through the crisis. Their ability to reprogram their vehicles’ software allowed them to use different microchips that were available. Thanks to this and their new Chinese plant, Tesla achieved a new production record in 2021.

Overall, American and European manufacturers were hit the hardest, while Japanese and Korean carmakers had fewer issues. Manufacturers worldwide continue to be affected, with relief expected to come no earlier than 2023, according to industry analysts.

It’s hard to say who will make the best transition back to “normal” production levels, but the carmakers who have best navigated the chip shortage will have the momentum, with less of a need to play catchup.

Which brands are going to do well in the transition to EVs?

Most manufacturers are going all-in on EVs. If by “do well” we mean who gets to market first (not counting Tesla, who’s already there), it looks like GM and Ford are the early leaders among US brands.

The Chevrolet Volt and Bolt, though not very successful at launch, have given GM a head start in the EV space. Meanwhile, the Mustang Mach-E and F-150 Lighting have given Ford a strong entry into the market. Several more EVs will follow soon from both.

Among European brands, Volkswagen is a power to be reckoned with, thanks to their total EV conversion in the wake of Dieselgate. Mercedes-Benz and BMW will be strong contenders in the luxury field, each with several EV models here or on the way. Volvo is also going all-electric.

The Japanese brands will likely be led by Toyota, which has announced a broad lineup of EV models covering Toyota, Lexus, and Subaru (where the company owns a 20% stake). Nissan, an early EV leader, is releasing a new EV that is better suited for today’s market. Honda, which has a production partnership with General Motors, will use GM’s Ultium platform for its first practical US EVs.

The Korean brands Hyundai and Kia have already launched their offensive, recently releasing dedicated EVs with both style and value.

Which brands are doing the best to help dealerships transition their facilities?

The transition to EVs will not be an inexpensive one for dealers. There will be tools, safety equipment, and training required, as well as high-voltage EV chargers to purchase and install. Then there’s the expense of floorplanning a decent selection of expensive EVs to have in inventory. And once it’s all done? There will be a reduced income stream in the service department, since EVs need much less maintenance and are likely to last longer than ICE vehicles.

It is in the manufacturers’ best interests to make the dealers’ adoption of EVs as easy and financially pain-free as possible. Some may require dealers to become EV-certified in order to sell and service EVs. Consumers will have to be educated about EVs in the showrooms, while thorough test drives will be needed to show them the superior driving characteristics of EVs. As long as the product is right, the pricing is right, and dealers can answer all of the customers’ questions properly, the transition should go smoothly. 

EV adoption will be fastest on the West Coast and slowest in the heartland, so dealers should expect a wide variation in EV uptake, based on their locations and the consumer characteristics of their market areas.

GM has been preparing its Chevrolet, GMC, and Cadillac dealers for their present and upcoming lineup of EVs. Cadillac dealers were given the ultimatum of investing $200,000 in the all-electric future or giving up their franchises. Most stayed. GMC dealers who wanted to sell the new Hummer EV were asked to invest in training, tools, and chargers if they wanted to sell the vehicle.

Ford has seen 2,100 of its 3,000 dealers sign up to become EV-certified so that they can sell the Mustang Mach-E. This requires investment in specific charging capabilities, plus EV-suitable service facilities and the training needed to properly service EVs.

Most other manufacturers have not provided any public information about how they plan to assist their dealers in making a smooth transition to EVs. The best solution may be for you to discuss this with your district sales and service reps, as well as other dealers in your region.

Which automotive brands will be the most valuable in the EV future?

Predicting the future can be extremely hazardous, especially where today’s automotive business is concerned. We are in the early days of the EV transition. It will be several years before most manufacturers’ lineups are mostly or completely made up of EVs. Once this happens and we have some useful information about customer acceptance of these strange and wondrous new vehicles, we will then see who the winners and the losers are.

In the meantime, it is key that the manufacturers associated with the franchises that you represent are open, honest, and helpful in resolving the issues that you as a dealer will face as we all make this unprecedented transition together. It is in everyone’s interest to succeed, because so many peoples’ livelihoods and futures depend on it.

DCG is here to help you prepare for the EV future

Whether you plan to embrace the EV market by expanding or see it as a great opportunity to sell, DCG Acquisitions is here to help. And if you need capital to invest in your dealership’s transition to the EV market, DCG Capital has the connections and the expertise to get you the right loan to facilitate that transition.

At DCG, we understand what it takes to align your plans for the future with the reality of what’s coming next. 

Contact the Dave Cantin Group to speak directly with an Automotive M&A or growth specialist.