2022 eletric vehicle predictions: Betting on the suppliers

Tesla set the 2022 tone for electric vehicles (EV) — soaring 13% after reporting record deliveries.

What’s the big deal? Last year, the biggest auto narrative was a supply chain crisis preventing carmakers from sourcing materials and achieving full production capacity — leading to higher costs and lower earnings.

Despite these challenges, Tesla managed to pull off record vehicle deliveries in the last quarter of 2021 — 28% higher than the previous quarter.

After a difficult year for car makers, what comes next in 2022? Recapping the past two years:

• In 2020, EV stocks soared to record highs — but performed poorly in 2021 — with Tesla being one of the few EV stocks pulling off a gain.
• In 2021, legacy car makers took the spotlight with — General Motors (NYSE:GM) and Ford (NYSE:F) rising 40% and 136%.

In 2022, the best news for both automakers will be supply chains easing and finally being able to source computer chips — an important car component.

Instead of predicting which car maker will overcome their supply issues or be favored by consumers — investors can bet on the suppliers.

Prediction time: Chip suppliers will outperform car makers. The average EV has double the number of computer chips than a non-EV and the continued shift towards EVs will benefit specialized auto chip makers.

• Suppliers include: NXP Semiconductors (NASDAQ:NXP) and Ambarella (NASDAQ:AMBA).

Electronic leaders and analysts expect supply chains to last well into 2023, but if we get any signs of improvements in 2022 — both chipmakers and auto makers could rise on the news.