For anyone that has been either investing or trading in the EV sector over the past 12 months, I hope you were wearing a seatbelt. The volatility that has been seen in this market, as a lot of the risk capital switched into AI growth names has been nothing short of staggering.
When looking for the best EV stocks to buy, I’m sure many are wondering whether this is a sector you should be considering at all right now. The answer to that is not an easy one, but the risk-reward ratio in electric vehicle stocks is right up there near the top.
The Best Electric Vehicle Stocks to Consider
There have been various names that were mooted as being the next big thing that have had to move in bankruptcy proceedings, and plenty more that are 90% + down from all time highs. The hype around the sector definitely popped, but that does not mean that the whole industry is a bust.
There are notable names that are still worthy of consideration, and if you are a real believer in the sector long-term, then you are able to get some stocks at amazing discounts from previous highs, similar to that of the EV charging sector.
Of those that were previously highly spoken about, Fisker, Lordstown Motors, Protera, Arcimoto, and Arrival are all names that have been moved into bankruptcy.
Workhorse, Nikola, Lucid, Nio, Xpeng, and Rivian are 90% or more down from ATHs achieved not too long ago in real terms.
Any list in 2024 is going to be made up of stocks that are on a downturn, but taking strategic legacy automakers with EV focus, or catching those that have longer term staying power is key to building a portfolio of electric car stocks that can stand the test of time.
EV manufacturers have sprung up across the globe. The below list includes stock names from different regions and with different approaches. They offer investment opportunities for both speculative traders and long-term investors.
Tesla (NADAQ:TSLA)
Without doubt the EV manufacturer with the greatest brand recognition is Tesla (NASDAQ: TSLA). Such factors are important in ground-breaking markets and holders of the stock will hope Elon Musk’s firm is one day held in the same regard at Hoover or Thermos. In the most recent quarter, Tesla produced 433,400 units, which is a 12% dip from the previous Q.
In the interests of looking for value in EVs, this is the first time in a very long time that you would have been able to buy Tesla stock on a pullback. 50% below all time highs, and down 20% over the past year may not look like the ideal time to get in but what you are waiting for is a shift in sentiment. As and when the trend on Tesla shifts, and the sentiment around EVs and the business more generally turns bullish, this is likely to be one that you will want to consider having in your portfolio in 5 or 10 years.
Recently, Cathie Wood’s Ark Invest came out with some very bullish price targets on Tesla in the upcoming decade that would deliver more than 20x from current levels, but this needs to be taken with a huge pinch of salt. There is a lot to do at Tesla to shift the tide of momentum, but the early signs are that this may be coming. A shift of the business to Robotaxi’s, future AI development, and infrastructure plays are all aspects to consider with this one.
The Tesla Model 3 was in fact the world’s best-selling EV in 2020, the vehicle sold more than three times as many units than the second-place entrant. The culture of innovation has not been slowed down by the stock becoming part of the S&P 500 equity index, as taking billion-dollar positions in bitcoin and looking to use the crypto for purchases testifies. This review offers a step-by-step guide on how to buy Tesla stocks.
NIO (NYSE:NIO)
Chinese EV firm NIO (NYSE:NIO) also has a listing on the New York Stock Exchange. Available in ADR form under ticker NIO the firm designs and manufactures EVs and is also a lead player in the autonomous driving market. It offers exposure to a broad range of new technologies and electric vehicle-related services. NIO Service is a network of vehicle service centres, NIO Power is a network of battery swap centres and NIO Life is the firm’s clothing range.
Nio stock is down 90% from all time highs, and has pulled back 50% in the last 12 months. Analysts forecasts on Nio remain bullish, but the upcoming tariffs on Chinese EV’s into Europe may make this a more difficult path to tread. The Chinese market in itself is huge, but there are also growing competitors in that space, with BYD carving out a pathway. Any consideration of Nio will have to take a longer view, but they are making inroads on production. Having recently celebrated their 500,000th vehicle rolling off the production line at its NIO Factory Two earlier in 2024, there is clearly a market for Nio.
Renault SA (RNO.PA)
Renault SA (RNO.PA) leads the pack of traditional auto manufacturers looking to switch to the new way of doing things. The Renault Zoe claimed 100,000 sales in 2020, making it the third most popular EV in the world.
When it comes to EVs, small cars make sense due to their efficiency. If the switch from carbon-fuelled cars to electric ones also sees consumers downsize, then Renault will be well-positioned to pick up market share.
Hyundai Motor Co (HYMTF:OTCPK)
Hyundai (HYMTF:OTCPK) is also looking to capitalise on its early adopter status. The firm had 24 EV models in 2019 and is looking to expand its offering to 44 by 2025. It plans to invest $87bn over five years and match the success of its Kona model, which in 2020, was one of the top-5 EVs in terms of global sales (65,000).
This is a legacy name, that has a broader business model than pure EV’s and as such has been able to ride out a lot of the volatility in a much smoother fashion. Whilst Hyundai shares were not absolutely booming like pure EVs during the hype phase, they are also not pulling back so much during more normalised market conditions.
Why Invest in EV Stocks Now?
The best investment strategies include a catalyst, a special factor that can lead to stocks really taking off. In terms of electric vehicle stocks, there’s not one potential catalyst, but four.
Tipping Point
One of the biggest drags on adoption rates has been a lack of infrastructure to maintain and run EVs. Practical issues may soon be appearing in the rear-view mirror. In September 2020, sales of plug-in electric cars reached an all-time high of 345,000. That’s almost double what was sold in September the previous year and means that 1 in 20 new cars is rechargeable.
Green Deal / New Deal
There’s little doubt that, due to the environmental impact of electric vehicles, governments around the world are about to dramatically increase the amount of public investment in EV infrastructure. Following the global pandemic, such plans simultaneously tick two boxes. They jump-start economies after lock-down and help them demonstrate a willingness to meet carbon emission targets.
Consumer Appetite
Ethical lifestyles and investing are no longer about putting your heart above your head. It’s one of the big trends in the market and some ethical investment stocks are outperforming the general market, as this report explains.
Improved Technical Spec
Electric car battery manufacturer stocks look particularly ripe for investment. The products being made are getting better and cheaper. The firms that push the technical limitations the furthest can quite rightly hope to secure a foothold in a sector worth billions of dollars. Revolutionising modern transport infrastructure will be a major operation, but it’s now one that looks certain to take place. Firms such as Tesla, which went all-in, generated stellar returns for shareholders with that stock increasing in value by 1,377% between Jan 2019 and Jan 2021. There appears to be plenty of reasons to think the electric car stocks as a whole might continue to soar.
What to Know Before Investing in Electric Car Stocks
It’s important to keep a few factors in mind when trading electric car company stocks.
- It’s high risk-return — Even NIO almost went bust in 2020 before then seeing its share price sky-rocket.
- Diversification might help — Taking smaller positions in a wider range of companies will mitigate against single-stock risk.
- Holding periods — Even if EVs take off, there’s no guarantee of when.
- Greatest fool risk — It’s a hot sector and a lot of professional investors are active. Make sure you’re not the last to know when there is good or bad news released.
