The Future of Transportation: Investing in Canadian EV Stocks
Written by Vishesh Raisinghani at The Motley Fool Canada
The transition to cleaner energy is already gaining steam. And the adoption of electric vehicles (EVs) is a key part of this trillion-dollar transition. Across the world, millions of customers are either ditching their traditional cars for EVs or planning to do so in the near future. Meanwhile, governments are rolling out incentives to boost EV production and exports.
This is an undeniable tailwind for long-term growth investors. Here are the top two Canadian EV stocks that should be on your radar.
Canadian EV stock #1
Magna International (TSX:MGA) doesn’t seem like the most obvious candidate for a bet on revolutionary technology. But if you dig deeper, you can see why Magna has the most favourable position in this sector right now.
Magna is the world’s largest auto-parts supplier and contract manufacturer. That means car brands work with the company to create new parts and assemble them in different countries. According to industry analysts, Magna already has key EV intellectual property that makes it a preferred partner. Meanwhile, EVs require more auto parts with higher margins.
Simply put, Magna is supplying shovels in the EV gold rush. Meanwhile, tech and growth investors have completely overlooked this undervalued stock. It’s trading at a price-to-earnings ratio of just 34.7 and offers a dividend yield of 3.5%.
In fact, the management team has been consistently buying back shares for years. That’s a clear green flag for any investor seeking a rare bargain in this overheated sector.
Canadian EV stock #2
The green transition hinges on the availability of key commodities. Lithium, in particular, is essential for the car batteries in EVs.
A typical mainstream EV has about 62.6 kilograms of lithium. Unfortunately, this key metal is in short supply. Right now, only six or seven million EVs are sold annually, but to reach global net-zero targets, we need two billion EVs on the road, according to the International Energy Agency (IEA). That means demand for lithium is likely to triple by 2025, but supply will fail to keep up.
Lithium Americas (TSX:LAC) is likely to benefit from the lithium shortage ahead. The company’s operations are spread across America and Argentina. Recently, the firm has been expanding its footprint in the U.S., which should help it stabilize its supply.
The upcoming project in Nevada is backed by GM. The auto giant poured US$650 million into the mining site, which gives the company an unparalleled advantage. Meanwhile, incentives announced by the Biden administration should help miners, EV manufacturers and buyers across the supply chain.
Simply put, Lithium America is an excellent pure-play stock that should be on your radar if you’re trying to bet on the EV transition continuing.
The post The Future of Transportation: Investing in Canadian EV Stocks appeared first on The Motley Fool Canada.
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Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.