2 Commercial Vehicle Stocks To Buy, 2 To Sell

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Rebounding demand from the resumption of infrastructure, construction, and mining activities has propelled commercial vehicle sales this year. Although major automakers have announced production cuts for the rest of the year owing to the global semiconductor chip shortage, increasing capital investments in the semiconductor industry and rising vehicle prices should buoy the industry.

Furthermore, in addition to rising demand, efforts to integrate technologies and electrification should keep driving the industry’s growth. The global commercial vehicles market size is expected to grow at 5.2% CAGR to $1.82 trillion by 2028.

With strong fundamentals and global market reach, we think Volvo AB (VLVLY) and Hino Motors, Ltd. (HINOY) are well-positioned to capitalize on the industry tailwinds. Conversely, Proterra Inc. (PTRA) and Workhorse Group Inc. (WKHS) might fail to benefit from the growing demand due to intense competition and their weak fundamentals.

Stocks to Buy: Volvo AB (VLVLY)

VLVLY is a Sweden-based company that designs, manufactures, and markets commercial vehicles worldwide. The company manufactures trucks, buses, engines, and construction equipment, and provides financing, insurance, rental, spare parts, repair, preventive maintenance, service agreement, and assistance services.

Maersk Line’s Performance Team company, a warehousing and distribution company, has placed an order for 16 of VLVLY’s Volvo VNR Electric Class 8 trucks. Expected to be on the road by the end of this year, these zero-tailpipe emission trucks are designed for local and regional freight distribution, offering more truck power to meet high volume delivery demands. Both companies are looking forward to a long-term partnership.

As part of expanding its business operation in China, VLVLY’s Volvo Trucks has agreed to acquire JMC Heavy Duty Vehicle Co., Ltd., a subsidiary of Jiangling Motors Co., Ltd. (000550.SZ), for SEK1.1 billion. By commencing the production of the new heavy-duty Volvo FH, Volvo FM, and Volvo FMX trucks in the Taiyuan facility from the end of 2022, VLVLY expects to capitalize on the growing demand for its fleet in China.

VLVLY’s net sales came in at SEK90.56 billion ($10.51 billion) for its fiscal second quarter ended June 30, 2021, representing a 23.7% year-over-year rise. The company’s gross income increased 9.3% year-over-year to SEK21.72 billion ($2.52 billion).

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