We recently published a list of the 11 Small Cap EV Stocks to Invest In. In this article, we are going to take a look at where Plug Power Inc. (NASDAQ:PLUG) stands against the other small-cap EV stocks to invest in.
The electric vehicle (EV) industry was growing at a strong pace over the last few years. However, it’s facing some challenges that have slowed down the growth. It does not mean that the industry is at a halt. Over time, it is on track to take over the internal combustion engines entirely.
The transition to EVs is proving more difficult than anticipated, with consumer demand not matching expectations, partly due to a lack of charging infrastructure and the complexity of switching from long-established fuel technologies.
A CNBC report from September 10 states that European car manufacturers are facing a range of challenges in their shift toward EVs, which is leading several companies to rethink their timelines. Volvo recently abandoned its goal of selling only EVs by 2030. Instead of that, it is opting to remain flexible and include hybrid models in its lineup.
Other major automakers, such as Volkswagen, Ford, and Mercedes-Benz, have similarly delayed plans to phase out internal combustion engine vehicles due to market uncertainties, including slower infrastructure development and changing government incentives.
Despite these short-term setbacks, experts believe automakers will continue investing in EVs to remain relevant in the market.
The Competitive Edge of Chinese Electric Vehicle Makers
While the growth in the US and Europe is slowing down, China is picking up a significant pace and dominating the EV landscape. According to a World Economic Forum report, Chinese EVs are much cheaper than their Western counterparts, with an average price of $34,400, compared to $55,242 in the U.S. The price gap is driven by lower labor costs, favorable government subsidies, and more affordable battery sourcing.
Chinese automakers now produce more than half of the world’s EVs and are using their cost advantages to potentially dominate the global market. As Chinese brands gain scale and expertise, their competitive pricing could allow them to challenge Western automakers.
The Western EV Market Compared to China
While Tesla remains a strong competitor to China, other U.S. and European automakers have been slower to compete effectively due to high prices and limited EV options. However, the US government and the private sector are also trying their best to expand the industry and become a dominant force in the EV industry.
According to a Reuters report published on September 23, Monroe Capital LLC announced its intention to launch a new fund, the Drive Forward Fund LP, aimed at raising up to $1 billion to provide loans for smaller auto suppliers as the industry transitions from ICE vehicles to EVs.
The White House supports the intention and said that this fund will help small and medium-sized auto manufacturers to access affordable capital to refinance, grow, and diversify their operations and will benefit the over 250,000 employees in this sector.
The recent implementation of new U.S. tariffs on Chinese EVs, along with the need for compliance with strict emissions regulations, is pushing automakers to adapt their supply chains.
Monroe CEO Ted Koenig stated that the fund would be vital for stimulating growth and innovation in the automotive supply chain. Many small and medium suppliers currently struggle to secure financing, which limits their ability to move toward EV part production.
Apart from that, we also discussed DOE’s move to boost EV operations in the US in our article about the 8 Best EV Stocks to Buy According to Short Sellers. Here is an excerpt from the article:
“…the U.S. Department of Energy (DOE) said on July 11 that the Biden administration, through the DOE, announced $1.7 billion in grants aimed at converting 11 at-risk auto manufacturing facilities across eight states to produce electric vehicles (EVs) and their components.
This move is part of President Biden’s broader “Investing in America” initiative, which seeks to revive manufacturing communities and protect union jobs. The grants are designed to keep the U.S. auto industry competitive, especially as global rivals invest heavily in EVs. The program, funded by the Inflation Reduction Act, will help retain over 15,000 union jobs and create nearly 3,000 new positions across the selected facilities. These facilities will manufacture a wide range of EV-related products, from parts for electric motorcycles to batteries for heavy-duty trucks.”
Erin Keating of Cox Automotive is also bullish on the US EV industry as she pointed out in a CNBC Power Lunch interview that competitive lease deals are putting downward pressure on used EV prices. She sees it as a positive, as more leased vehicles will eventually enter the used market, and ensure a steady supply of affordable EVs.
Addressing concerns about EV infrastructure and range anxiety, Keating reassured consumers that used EV batteries are holding up well, with minimal degradation. As infrastructure improves, she expects consumer confidence and EV adoption to grow.
Our Methodology
For this article, we made a list of 20 small-cap companies that are involved in the EV industry, as of September 25. Our small cap threshold is between $1 billion to $10 billion. We narrowed our list to 11 stocks most widely held by institutional investors. The 11 small cap EV stocks to invest in are listed in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Plug Power Inc. (NASDAQ:PLUG) the Best Small Cap EV Stock to Invest In?
Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 15
Plug Power Inc. (NASDAQ:PLUG) is a U.S. company specializing in hydrogen fuel cell systems that serve as alternatives to traditional batteries in electric-powered vehicles and equipment. It is building a complete green hydrogen system that includes production, storage, delivery, and energy generation. It takes its place among our best EV stocks to invest in.
Its GenDrive system combines fuel cells produced by the company and Ballard Power Systems with a hydrogen storage solution, which enables quick recharge times of just minutes, unlike the hours required for lead-acid batteries. This technology allows hydrogen-powered forklifts to maintain steady power while fitting into spaces designed for conventional batteries.
The company has created a market for hydrogen fuel cell technology, deploying over 69,000 fuel cell systems and more than 250 fueling stations worldwide To support its goals, the company is working on a green hydrogen highway across North America and Europe.
Plug Power (NASDAQ:PLUG) has also built a new Gigafactory to produce electrolyzers and fuel cells, with plans for several hydrogen production plants to start operating by the end of 2028. It delivers its green hydrogen solutions directly to customers and through partnerships in many areas, including material handling, electric vehicles, power generation, and industrial uses.
At its latest earnings call, management mentioned its potential growth from strong revenue potential from its electrolyzer deployment. The company is on track to deploy an additional 100 megawatts of electrolyzers by the end of 2024, building on the successful commissioning of 55 megawatts in the second quarter, which is projected to contribute $70 million in revenue.
While immediate revenue recognition may be limited, the company has already collected cash for much of this. The company’s 7.5 gigawatts in basic design and engineering contracts could yield over $1.5 billion in revenue, which shows substantial market potential.
In the second quarter, Plug Power’s (NASDAQ:PLUG) shares were held by 15 hedge funds at a combined value of $10.78 million. As of June 30, Coatue Management holds 2.6 million company shares, worth $6.073 million and is the largest shareholder of the company.
Overall, PLUG ranks 9th on our list of the small-cap EV stocks to invest in. While we acknowledge the potential of PLUG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLUG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
