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Why Is BorgWarner Inc. (BWA) the Best Small Cap EV Stock to Invest In?
We recently compiled a list of the 11 Small Cap EV Stocks to Invest In. In this article, we are going to take a look at where BorgWarner Inc. (NYSE:BWA) stands against the other small-cap EV stocks.
An Overview of the Global Electric Vehicle Market
The global electric vehicle (EV) market continues to expand, driven by the need for sustainable transportation and advancements in technology.
According to the International Energy Agency (IEA), nearly 14 million electric cars were sold worldwide in 2023, marking a 35% increase from the previous year, with 95% of these sales occurring in China, Europe, and the United States. This surge brought the total number of electric vehicles on the road to 40 million. Electric cars represented about 18% of all car sales in 2023, up from 14% in 2022 and just 2% in 2018. The growth is primarily driven by battery electric vehicles, which made up 70% of the electric car stock in 2023. The electric vehicle market is expected to expand rapidly as consumer demand for cleaner transportation grows.
Electric car sales are expected to rise to about 17 million in 2024, which would be an increase of over 20% compared to 2023. Electric vehicles could make up more than 20% of all car sales in 2024. This forecast is supported by current trends, government policies, and the usual seasonal patterns seen in EV sales.
China remains the largest market for electric vehicles, accounting for nearly 60% of new electric car registrations in 2023. Europe follows with approximately 25%, and the United States accounts for around 10%.
There is significant potential for growth in emerging markets, where EV adoption is taking off. We could soon see a shift from early adopters to mass-market consumers. The introduction of new models and innovations, such as improved battery technologies and charging solutions, will play a crucial role in this transition.
Additionally, government policies and incentives continue to support the transition to electric mobility, further fueling demand. To compete with China in the EV market, the US is focusing on localizing its EV supply chain and increasing production capacity. Reuters reported on October 22 that US Energy Secretary Jennifer Granholm announced that the Department of Energy is quickly working to finalize $1.7 billion in grants aimed at converting automotive plants for electric vehicle production. This funding will help automakers change their existing facilities to make electric vehicles and their components.
With continued advancements, investments, and increasing acceptance among consumers, the future looks promising for the electric vehicles market.
Methodology
To compile our list of the 11 best small-cap EV stocks to invest in, we reviewed our own rankings and consulted various online resources to compile a list of the best small-cap EV stocks. Please note that we defined small-cap stocks as those with a market capitalization between $500 million and $10 billion.
From an initial pool of more than 20 small-cap EV stocks that met our criteria, we focused on the top 11 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 11 best small-cap EV stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? 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 BorgWarner Inc. (BWA) The Best Small Cap EV Stock to Invest In?
A technician wearing a safety suit and goggles working on a battery pack for an electric vehicle.
BorgWarner Inc. (NYSE:BWA) is a key player in the automotive and e-mobility sectors, providing essential components for internal combustion, hybrid, and electric vehicles. The company is strategically expanding its presence in the electric vehicle (EV) market with innovative technologies. BorgWarner Inc. (NYSE:BWA) has secured three significant contracts for its High Voltage Coolant Heater (HVCH) technology in major Asian markets.
In China, a top automaker selected BorgWarner’s (NYSE:BWA) HVCH for a fully electric SUV, with production starting in Q2 2025. This partnership highlights the company’s commitment to tapping into China’s booming EV industry. In Korea, BorgWarner’s (NYSE:BWA) HVCH will be integrated into an electric pickup truck, with production expected to begin in March 2025. This technology will enhance cabin comfort and energy efficiency, crucial for improving the overall driving experience. Similarly, in Japan, BorgWarner’s (NYSE:BWA) HVCH will be used in a battery-electric vehicle starting production in 2028, marking the company’s entry into the Japanese market.
BorgWarner Inc. (NYSE:BWA) is also focused on innovation, recently showcasing advancements at the IAA Transportation 2024 event in September. These innovations include Lithium Iron Phosphate (LFP) battery packs designed for commercial vehicles and a new DC fast-charging station that supports rapid charging needs and commercial EV fleet applications.
These strategic wins and innovations are expected to support the company’s long-term profitable growth. This positions BorgWarner Inc. (NYSE:BWA) as a strong contender in the EV market. BWA is one of the best EV stocks to buy.
Overall, BWA ranks 2nd on our list of the small-cap EV stocks to invest in. While we acknowledge the potential of BWA 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 time frame. If you are looking for an AI stock that is more promising than BWA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
