President Biden recently made it clear that electric mobility is one of the most important levers in the fight against man-made climate change. That’s why the White House wants to invest gigantic sums in the expansion of electric vehicles over the next few years.
USA Faces Boom in E-Buses
What many often forget: EVs don’t just consist of electric cars, but also electric buses. These means of transport are still rather rare in the USA. However, with a view to government subsidies, this is likely to change dramatically in the next few years.
For example, the city of New York plans to convert its entire school bus fleet to low-emission vehicles by 2035. Other major U.S. cities have recently unveiled similar plans. Research firm Mordor Intelligence expects the market around electrified buses in North America to grow by nearly 30% annually through 2026.
Political Risk at BYD
This arguably inevitable growth is also an opportunity for you as an investor. So far, there are very few publicly traded companies focusing on electric buses in the United States. One of them is the Chinese corporation BYD. The problem: Because of the political squabbles between Washington and Beijing, BYD may not be able to count on good business relationships in the USA.
Joe Biden has also made no secret of the fact that in the future, domestic car manufacturers will be preferred over foreign car manufacturers, especially those from China. An investment in BYD is therefore associated with a high risk.
Proterra Appears to be Much More Promising
Proterra (PTRA) was only floated on the stock market in the summer of 2021 via SPAC. Before we look at the share price, a few words about the company.
Proterra was founded in California in 2004. The company is something of an all-around provider in the field of electrified buses. That is, Proterra not only builds complete electric buses, but also offers its corporate customers important components for these vehicles. Among them: Battery systems, charging and energy management solutions, and drive systems.
Daimler on Board
Among its customers is German vehicle giant Daimler (DMLRY). Its U.S. subsidiary Thomas Built relies on Proterra’s electrified powertrains in the production of e-school buses. Daimler, by the way, holds a stake in Proterra.
Another major customer, for example, is the Belgian bus brand Van Hool. And in November, Proterra signed a long-term supply contract with bus manufacturer Lightning eMotors. According to the agreement, Proterra will sell batteries to the partner on a large scale.
Proterra Showing Strong Growth Figures
In terms of the balance sheet, the company is on track. In the third quarter of 2021, Proterra increased its revenues by 30% year-on-year to $62 million. Battery production increased 95% between July and the end of September. Deliveries of complete buses increased 58%, according to the report.
For the full year 2021, Proterra expects sales of $246 million. The company also expects further growth in 2022 and beyond. It has quite a few partnerships not only in supplying complete e-buses, but also in supplying batteries and powertrains, the Q3 financial report said.
Is Proterra Stock Cheap?
So the company is poised for growth. The stock, on the other hand, did benefit from strong hype at the beginning of its stock market history, but subsequently crashed significantly. By December 20, the share price had fallen by more than 40% since the IPO.
Many analysts therefore see the share as undervalued. According to Marketscreener, the average price target of the experts is more than 50% higher than its market price in December. Thanks to its holistic approach, Proterra has the best chance of benefiting from the coming boom in electric buses in the USA. In addition, as a U.S. company, it can look forward to strong tailwinds from Washington.
Attention to Risk
As an investor, however, you should also be aware of the risk factors. For example, Proterra is currently still a comparatively small company. The share is therefore a bet on the future. And the future is not necessarily rosy. For example, there are fears that many bus manufacturers could use their own battery and drive systems in the future. This would mean that Proterra would lose a large part of its business.
Last but not least, Proterra is also caught in the maelstrom of the materials crisis. So far, the company has been able to cushion the supply bottlenecks relatively well. Whether this will also succeed in the coming year remains to be seen, despite the optimistic forecast from the company. This could lead to further short-term price setbacks.
Proterra will also have to prepare itself for increasingly strong competition in bus sales in the coming years. The traditional Canadian company New Flyer could eclipse Proterra in the USA. All in all, however, Proterra offers investors with an affinity for risk a thoroughly interesting opportunity to profit from the coming boom of e-buses in the USA.