CNBC’s Jim Cramer on Monday made the case for owning shares in two traditional automakers instead of younger, riskier competitors as the economy enters expansion mode and investors look to trading electric vehicles.
In today’s market environment, where high-growth names are losing momentum from last year’s trip, Cramer recommended holding shares in Ford and General Motors over companies like Tesla and other picks fueled by the EV SPAC craze.
“If you want to bet on electric vehicles with much less risk, I tell you to buy Ford or General Motors,” said the host of “Mad Money”. “Despite the bones of their internal combustion engine, they have significant exposure and, just as important, they fit into the current moment in a way that Tesla or SPACs just don’t.”
Tesla’s dominance in the US electric vehicle market appears to be waning: Domestic EV sales are on the rise as more automakers put their own electric products on the road, according to research by Morgan Stanley. The firm found that domestic electric vehicle sales increased 34% in February from a year earlier and that Tesla’s market share dropped by double digits to 69% over the same period.
Ford and GM have introduced their own all-electric consumer vehicles, and Cramer believes their products will offer a competitive advantage.
Ford built an electric version of its Mustang, the Mach-E, a rival to Tesla’s Model Y crossover. The company also has an electric F-150 in the pipeline that Cramer believes will be a hit with small businesses looking to buy trucks as the economy expands.
GM is looking to put 30 models of electric vehicles on the road by 2025. The Detroit-based manufacturer is also investing heavily in better battery technology, which could help solve a bottleneck for electric car components. Cramer pointed out.
“These are huge, established companies with better balance sheets and real profits, profits that are exploding right now,” he said.
So far this year, GM’s market value is up 39% and Ford’s is up 50%. Tesla, after a 743% increase in 2020, is almost on par on the year.
As for Tesla and the many blank check offerings (battery company QuantumScape, plug-in hybrid electric vehicle maker Fisker, and Lucid Motors join Churchill Capital IV), Cramer says they have turned into battlefield stocks. and difficult to own.
“The honeymoon period for SPAC electric vehicles is over. Even the good ones have been hit hard,” Cramer said. “The market is much more skeptical now regarding speculative growth stocks.”
“If you want to expose yourself to EVs, but don’t want to risk betting on junior growth stocks, you can stick with what works” at Ford and GM, he said.
Disclosure: Cramer’s charitable trust owns Ford stock.
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