The only stock of electric cars to buy

Electric car stocks may well be in a bubble. You’re here (NASDAQ: TSLA) The stock has climbed about 600% this year, pushing the market capitalization of the Elon Musk-led automaker to around $ 540 billion. That’s over 20 times annual sales and nearly 35 times book value. Tesla is now profitable, but in large part thanks to the sale of regulatory credits. Tesla’s price-to-earnings ratio is so high that it’s not even worth mentioning.

Yes, Tesla does more than build cars. And yes, there is an ongoing cult and intense loyalty around the brand. But ultimately, Tesla is more of a car maker than a tech company. It is valued like Google when it should be more like Ford.

There are other stocks of electric cars that have defied reality this year as well. Chinese electric car maker NIO is now worth more than $ 70 billion despite delivering just over 12,000 cars in the third quarter. Nikola still worth over $ 10 billion despite fraud charges and no revenue at all. Electric Truck Company Shares Workhorse have climbed nearly 800% this year and are now worth more than $ 3 billion, despite virtually no sales and a production target of just 1,800 vehicles by 2021.

If it’s not a bubble then I don’t know what it is.

If you buy any of these EV stocks, there is a good chance that you will lose your shirt. Now I could be wrong. Perhaps, one way or another, making cars electric will fundamentally change the economics of the capital intensive, cyclical and brutally competitive auto industry. But I seriously doubt it.

This is the EV stock to buy

If you want to invest in electric cars but don’t want to be exposed to what looks like a huge bubble, there is still a really good option: General Motors (NYSE: GM). GM will invest $ 27 billion over the next five years in electric and autonomous vehicles, and there is simply no reason to believe that the legendary automaker will be crushed by its young rivals.

GM’s plan is to launch 30 electric vehicles globally by 2025, with more than two-thirds of those vehicles expected to be available in North America. All of GM’s major brands – Cadillac, GMC, Chevrolet and Buick – will have EV models available, and GM is promising options across the price spectrum.

This plan is based on GM’s Ultium battery technology. The company has already achieved an almost 40% reduction in battery costs compared to its Chevrolet Bolt EV, which launched a few years ago and has met with some success. GM expects its next-generation Ultium batteries, which are expected to be available by the middle of this decade, to double the energy density of today’s batteries at half the price.

In addition to injecting resources into electric vehicles, GM is already ahead of the curve when it comes to driver assistance systems. In October, Consumer Reports concluded that GM’s Super Cruise system was at the top of its test of 17 systems. While Tesla’s much-publicized autopilot has scored well for its capabilities and performance, Tesla has lost a lot to GM in other areas, including keeping the driver engaged, making it clear when he’s safe to go. ‘using and dealing with an unresponsive driver.

Another thing to remember: GM is now profitable, while other EV companies may just keep burning money. GM generated more than $ 4 billion in third-quarter net profit on sales of $ 35.5 billion. GM shares have tripled since the bottom of the pandemic-induced liquidation earlier this year, and stocks are still trading below 10 times the analysts’ average estimate for annual earnings and less than 8 times the estimate of next year’s profits.

If you want to gamble, buy one of the EV bubble stocks that have garnered so much attention this year. If you want to invest, buy GM stocks.