The competition in the electric car industry is getting fiercer. Goldman Sachs said since the start of the year, price declines are accelerating, the market is growing and government subsidies are shrinking – testing the business models of EV companies. The investment bank said in a note issued on August 10 that it sees the two groups of companies “dominating in a period of intense competition.” The first consists of companies backed by “sound finances” and aiming to build “vertically integrated business models” including batteries. Companies with such models control more processes in the supply chain rather than relying on other suppliers. According to Goldman, such companies include Tesla, Chinese electric car maker BYD and automaker Toyota Motor. Second, Goldman covers companies that capitalize on new technology and business opportunities, naming stocks such as Panasonic, Toyota Industries and Hon Hai Precision Industry. 6 stocks Here’s what Goldman had to say about six stocks, one of which is on his buy list. Hon Hai: Hon Hai, the world’s largest contract electronics maker, is a “prime 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 can also benefit from experience operating factories in 24 countries for ICT products, reflecting its ability to manage labor, supply chain, logistics and government relations on a global scale,” Goldman wrote. Goldman gave Hon Hai a buy rating and a 12-month target price of NT$151 ($4.73), implying a potential upside of about 42%. The stock is also on Goldman’s buy list. Tesla : In addition to partnering with battery suppliers, Goldman noted that Tesla is increasing its in-house battery manufacturing capabilities. “Tesla believes that its battery strategy and capacity expansion plans will help support its long-term growth goals and reduce costs,” the bank said. Goldman gave Tesla a neutral rating and a 12-month target price of $275, which represents a potential upside of about 25%. Toyota Motor : Goldman said strong EV products are the “missing piece” for Toyota, but it’s a “potential catalyst for a stock price revaluation.” “Toyota is lagging behind Tesla and BYD in EV sales, but we still see great potential for Toyota to catch up,” Goldman wrote. He added that unlike Toyota, not all EV makers “will be able to sustainably spend significant amounts of money” to cope with various technological changes. Goldman also said Toyota’s ability to cut costs will be its strength in EVs. “Sustaining profitability in electric vehicles requires true cost competitiveness in an environment without government subsidies,” Goldman said. Goldman gave Toyota a buy rating and a 12-month target price of ¥2,800 ($19.25), implying a potential upside of about 19%. Panasonic : Goldman called Panasonic a “pioneer” in cylindrical car batteries, saying it has a track record of superior capacity and safety. This gave Panasonic a buy rating and a 12-month target price of JPY 2,100, implying a potential upside of around 32%. Toyota Industries : Last year, Toyota Industries developed a bipolar nickel-metal hydride battery for hybrid vehicles. Goldman said it is partnering with Toyota Motor in this area, which is “central” to Toyota’s EV battery strategy. “Toyota Industries is a major player with a global market share of around 50% in electric compressors, the added value of which is increasing with advances in EVs,” the bank said. He added: “Toyota Industries has a solid dividend yield on its shares in Toyota and Denso, ensuring a stable revenue stream and cash flow for the financial year. The company has adequate financial position to fund any needs for larger investments in bipolar batteries. Goldman gave Toyota Industries a neutral rating and a 12-month target price of ¥9,200, representing a potential downside of about 7%. BYD : Goldman gave BYD a buy rating and a 353 CNY ($48.40 ) gave a price target that represents a potential upside of about 47%.— CNBC’s Michael Bloom contributed to this report.