Competition in the electric vehicle industry is getting fiercer. Price declines have been accelerating since the start of the year, the market is growing and government subsidies have shrunk — putting EV companies’ business models to the test, Goldman Sachs said. The investment bank said in an Aug. 10 note that it sees two groups of companies “prevailing in an era of intense competition.” The first is made up of companies that are backed by “robust finances” and aim to set up “vertically integrated business models,” including batteries. Companies with such models take control of more processes across the supply chain, rather than relying on other suppliers. Goldman said such companies include Tesla, Chinese EV maker BYD and automaker Toyota Motor. The second comprises companies that tap opportunities leveraging new tech and business, said Goldman, naming stocks such as Panasonic, Toyota Industries and Hon Hai Precision Industry. The 6 stocks Here’s what Goldman said about the six stocks, one of which is on its conviction buy list. Hon Hai : Hon Hai, the world’s largest contractor electronics manufacturer, is a “key beneficiary” of the “rising EV outsourcing trend,” Goldman said. The bank highlighted its “global footprint,” significant manufacturing experience and comprehensive products and services in areas such as EV design, semiconductors and software. “Hon Hai could also leverage its experience in operating factories in 24 countries for ICT products, which we think reflects its strong ability to manage labour, supply chain, logistics, and government relations globally,” Goldman wrote. Goldman gave Hon Hai a buy rating, and 12-month target price of 151 New Taiwan dollars ($4.73), representing about 42% potential upside. The stock is also on Goldman’s conviction buy list. Tesla : Goldman noted that Tesla is ramping up its in-house battery manufacturing capabilities — in addition to its partnerships with battery suppliers. “Tesla believes its battery strategy and capacity expansion plans will help to support its long-term growth targets and lower costs,” the bank noted. Goldman gave Tesla a neutral rating, and 12-month target price of $275, representing about 25% potential upside. Toyota Motor : Goldman said strong EV products are the “missing piece” for Toyota, but it’s a “potential catalyst for share price re-rating.” “Toyota lags behind Tesla and BYD in EV sales, but we still see a large possibility of Toyota catching up,” Goldman wrote. It added that unlike Toyota, not all EV manufacturers will be able to spend “a substantial amount of money sustainably” to cope with the various technological changes. Goldman also said Toyota’s ability to reduce costs will be its strength in EVs. “Sustainable profit-making in EVs requires true cost competitiveness in an environment without government subsidies,” Goldman said. Goldman gave Toyota a buy rating, and 12-month target price of 2,800 Japanese yen ($19.25), representing about 19% potential upside. Panasonic : Goldman called Panasonic a “pioneer” in cylindrical automotive batteries, saying it has superior capacity and safety track record. It gave Panasonic a buy rating, and 12-month target price of 2,100 Japanese yen, representing about 32% potential upside. Toyota Industries : Last year, Toyota Industries developed a bipolar nickel-metal hydride battery for hybrid vehicles. It’s cooperating with Toyota Motor in that area, which is a “centerpiece” of Toyota’s EV battery strategy, Goldman said. “Toyota Industries is a major player with a global market share of roughly 50% in electric compressors, the value added for which is increasing alongside advances in EVs,” the bank wrote. It added: “Toyota Industries receives reliable dividend income on its shareholdings in Toyota and Denso, ensuring a steady stream of income and cash flow for the fiscal year. The company has an adequate financial position to fund any needs for greater investments in bipolar batteries in the future, in our view.” Goldman gave Toyota Industries a neutral rating, and 12-month target price of 9,200 Japanese yen, representing about 7% potential downside. BYD : Goldman gave BYD a buy rating and a price target of 353 Chinese yuan ($48.40), representing about 47% potential upside. — CNBC’s Michael Bloom contributed to this report.