The well-being of electric vehicles drives investors to traditional carmakers

Ford is up 49% so far this year, while GM shares have gone up 48%. VW stock is up 55% and even rose 29% in intraday trading one day this week when the company held a “Power Day” event, saying it would build six EV battery factories in Europe. -only over the next 10 years. VW this week has also overtaken SAP SE to become the most valuable stock on the German DAX index.

In comparison, the S&P 500 index is up just 7.4% so far this year.

The new information by established car manufacturers, many of which have been in business for more than a century, follows an earlier journey into electric vehicle stocks that have led Tesla shares. Inc.

and other electric and battery vehicle manufacturers to land that some analysts say resembles the dot-com bubble of the 1990s.

Conventional carmakers have long led under the umbrella of Tesla, whose market capitalization is still twice that of VW, GM and Ford combined. But as owners deepen their commitment to electric cars, they are beginning to persuade investors that they are actually turning away from fossil fuels and embracing green technology.

As a result of increased investor confidence in the EV plans of conventional automation manufacturers, industry analysts say that the shares of these companies are going through a fundamental reversal. Meanwhile, Tesla shares have fallen nearly 4% since January and some analysts are questioning the resurgence of Big Auto rings in a new era: Tesla Peak.

As traditional carmakers make deeper passages into their electric fields, it will be more difficult for Tesla and newcomers to justify their high values, said Michael Muders, senior manager property with Union Investment. “What we are seeing is a re-evaluation of the traditional industries by the financial markets. ”

Tesla did not immediately respond to requests for comment.

Investors began to reconsider the prevailing wisdom – that legacy carmakers would be out of business in 10 years – after VW, Ford, GM and others made it clear that they were not just building new models but transforming their businesses.

GM recently won praise from investors when it said it would stop selling gas-powered cars by 2035 and accelerated plans to make EVs and batteries. VW has converted several factories into specialized EV plants and the six newly renamed battery factories in Europe would be enough to power nearly four million new EVs each year, analysts said.

There is also enthusiasm in figures over the past few months, suggesting that cars and lorries with internal combustion engines are still profitable enough despite what the pandemic is funding to make large investments in electric vehicles finance and still pay dividends.

“I would like to confirm that the [combustion engine] cars are cash machines, ”Daimler AG head of finance Harald Wilhelm told reporters last month when they reported on earnings last year. “Cash machines will build the bridge [electric] future. ”

Mr. Wilhelm long refused to accept among industry analysts that electric vehicles would always generate lower margins than conventional vehicles. He said Daimler was working hard to bring down their costs and boost their profits.

Daimler shares are up more than 25% this year.

But not all traditional car manufacturers have benefited. A survey of investors by Bernstein Research, a bankruptcy company, showed that 75% of respondents said a clear message and a strong EV strategy were very important or crucial in making investment decisions.

“The strong market response to GM’s presentation of its EV services and software plans is a good example of what matters to institutional and retail investors today,” Bernstein analyst Arndt Ellinghorst wrote in note to clients.

That explains the rise in VW shares after explaining in more detail than before how it intends to seize Tesla and become a major player in the global EV market. Other beneficiaries of the move include Mitsubishi Corp.

, whose shares have risen about 27% since January, and Hyundai Motor Co.

, up 12%.

Just as soon as traditional carmakers have won the love of global investors they could easily lose again if they do not make the lofty promises of building and selling millions of EVs at a profit similar to their current business with gas-guzzlers, analysts warn.

Proving the point, those automation makers with a stronger commitment to EVs have overtaken those who are pushing strongly into EVs. Toyota Motor Co.

, the world’s largest car manufacturer by retail, has relied on their hybrid vehicle technology to meet worldwide emissions regulations. Its shares have risen nearly 5% so far this year, far behind the broader stock market.

BMW AG

was one of the first conventional car manufacturers to develop and bring to market an electric vehicle, launching an i3 city car in 2013. But after undeveloped success, it withdrew on EVs for several years.

While VW has created a standard technology platform for their range of EVs, BMW has relied heavily on converting traditional models to EVs and building plug-in hybrids. Oliver Zipse, the company’s chief executive, said Wednesday that BMW would accelerate its EV plans, but would not fully guarantee battery-powered electric vehicles.

“We can assume that certain technologies will dominate all markets,” said Mr Zipse. “It will be expensive when you bet on one solution too early.”

BMW shares are up about 19% so far this year, outperforming the overall market behind strong earnings during the pandemic, but lagging behind German rivals VW and Daimler.

Write to William Boston at [email protected]