One EV maker is best positioned as the group is hit by China concerns, Mizuho says

Published Tue, Oct 25 202212:30 PM EDT

Geopolitical risks in China, coupled with concerns over weaker demand, are weighing on stocks of electric vehicle makers. One company, however, stands out from the group and is best positioned to ride out any storm in China, according to Mizuho Securities. That company is Rivian . Mizuho has a buy rating on shares of the electric vehicle maker and a $65 price target, which represents 109% upside from where the stock traded at Monday's close. Rivian surged as much as 8.2% Tuesday. Within the group, Rivian has advantages that allow it to remain safe from China concerns, according to a Mizuho research report to clients. First, it has low exposure to China, which will help shield it from weak demand. In addition, its truck and SUV models are the largest and fastest growing vehicles in their respective segments. And Rivian has a large pipeline of electric delivery trucks through a deal with Amazon. China weighing on EV stocks President Xi's re-election to an unprecedented third term this past weekend stoked fears of tighter technology controls in China and no easing of China's Zero Covid policy, sending shares of Nio , Tesla and Rivian lower. Nio was the hardest hit on Monday, down 16%, while Tesla and Rivian each shed about 2%. "President Xi's Committee, which was announced over the weekend, has more loyalists, potentially increasing the risk of further zero-Covid restrictions impacting auto production," Mizuho analyst Vijay Rakesh wrote in the Monday note. "We believe concerns of extended restrictive Covid policies and increasing U.S. technology restrictions could make upside from better fundamental outlooks for China EV OEMs less dependable." As if to prove how uneven the China market's become, Tesla cut its prices there by as much as 9% on Monday, reflecting weaker consumer demand and more competition. Tesla's move could pressure local electric vehicle makers such as XPeng and premium rivals including Nio, according to the note. "We believe used and new car pricing declining, with inventory at dealerships climbing and increased worries on auto loan delinquencies, has raised concern on weaker consumer spending against a backdrop of rising rates," said Rakesh. EV growth and Rivian's strength Even with the potential weaker demand in China, Mizuho sees strong global demand for electric vehicles with January–September sales year to date potentially up 70% and China sales up 90% in the same span. Rivian is well-positioned to be a winner amid this growth. "We see RIVN as a pure play and strong early mover in the EV market with a focus on the higher-growth SUV and light truck market and a strong commercial vehicle roadmap beginning with Amazon," said Rakesh. "Rivian is also poised to benefit from improving costs with scale and a well-laid-out path towards further vertical integration giving more control to production and delivery of vehicles."