3 EV Stocks That Will Drive Our Electric Future
Global sales of fully electric and plug-in hybrid vehicles (PHEVs) rose as much as 31% in 2023, although this growth rate marked a slowdown compared to the robust 60% surge witnessed in 2022, according to Reuters, citing the data from Rho Motion. Hence, many investors still consider EV stocks as a compelling investment opportunity, especially after a sharp selloff in recent months.
Such deceleration is typical in maturing markets like the electric vehicle sector. Despite the moderation, global EV sales for the year aligned closely with Rho Motion’s projected 30% growth rate. Looking ahead to 2024, Rho Motion anticipates a growth range of 25% to 30% in global EV sales.
More precisely, December 2023 set a record for monthly EV sales, reaching 1.5 million units worldwide. Out of the total 13.6 million EVs sold in 2023, fully electric or battery electric vehicles (BEVs) accounted for 9.5 million, with PHEVs making up the remainder.
In terms of regional performance, BEV sales surged by 50% in the U.S. and Canada, while Europe and China experienced growth rates of 27% and 15%, respectively. However, concerns loom over potential sales stagnation in Europe due to Germany’s sudden discontinuation of EV subsidies last year.
The recent research report from Goldman Sachs also discussed the declining prices of electric vehicle batteries, a trend that is driving the growth of the EV market. The investment bank’s analysts highlighted how battery prices have significantly decreased over the past decade, largely due to advancements in technology, economies of scale, and increased competition among battery manufacturers.
The declining cost of EV batteries is a crucial factor in making EVs more affordable and competitive with traditional gasoline-powered cars. As battery prices continue to fall, the cost of EVs is expected to decrease further, leading to increased adoption and market penetration. As a result, EV stocks will benefit from rising demand for this type of cars amid falling prices.
Li Auto (LI)
Li Auto (NASDAQ:LI), a Chinese EV manufacturer specializing in hybrid electric vehicles. Founded in 2015, the company aims to become the major player in the automotive industry by offering smart electric SUVs with extended-range technology.
At the moment, Li Auto shares are one of the hottest EV stocks around. Li Auto stock surged more than 30% on two consecutive days in late February in the aftermath of the strong fourth-quarter earnings.
The company’s robust performance, with EPS of 4.23 yuan and revenue reaching 41.73 billion yuan, highlighted a three-fold increase in quarterly deliveries, reaching 131,805 units. Despite a weaker-than-expected forecast for the current quarter, optimism remains high regarding Chinese EV demand, a bright spot amidst global declines.
Earlier this year, Li Auto said it delivered 12,564 units in January, which was below analyst estimates. The management said it remains focused on expanding its product lineup and enhancing its technology remains key amid increasing competition in the EV market.
It remains to be seen whether Li Auto stock can sustain this positive momentum, however, the investor optimism is high following the recent quarterly results.
XPeng (XPEV)
XPeng (NYSE:XPEV) is another Chinese EV producer specializing in smart electric vehicles. Founded in 2014, XPeng focuses on developing and producing EVs equipped with advanced technology, including autonomous driving capabilities.
The company’s stock received a boost recently after Deutsche Bank (NYSE:DB) analyst Edison Yu delved into XPeng’s current predicament within a fiercely competitive market landscape. Yu acknowledges the immediate challenges while holding optimism for future prospects as the company prepares to introduce new products.
The analyst anticipates a gross profit margin in the range of 2-3%, contributing to an overall gross margin of approximately 4%. Despite an impressive quarterly delivery record in Q4, Yu expects XPeng’s guidance for Q1 to decline significantly, attributing it to competitive pressures and pull-forward effects from the previous quarter.
Looking ahead, Yu foresees intense competition for existing models due to aggressive discounts from other electric vehicle (EV) makers and traditional automakers. However, he remains optimistic about the latter part of the year, citing the launch of new products such as a sedan and the MONA project targeting ride-share fleets in collaboration with Didi (NYSE:DIDI).
Deutsche Bank has a Buy rating on XPeng shares, believing that this EV stock has retreated way too much and has the potential for substantial returns.
BYD (BYDDF)
BYD Co Ltd (OTCMKTS:BYDDF) is the EV giant that recently made headlines after overtaking Tesla (NASDAQ:TSLA) to become the world’s top selling electric carmaker. Backed by Warren Buffett, BYD surpassed Tesla’s production for the second consecutive year, producing 3.02 million new energy vehicles in 2023.
While Tesla announced 1.84 million cars, BYD’s figures include 1.6 million battery-only cars and 1.4 million hybrids. However, Tesla remains the leader in electric battery-only car production. In the final quarter of 2023, BYD outsold Tesla in battery-only cars for the first time, selling 526,000 compared to Tesla’s 484,000.
Most of BYD’s vehicles are priced lower than Tesla’s, with the latter generating about 20% of its sales from the Chinese market. BYD, along with other Chinese electric carmakers like Nio (NYSE:NIO), aims to expand internationally, particularly in Europe. BYD sells five models in Europe and plans to launch three more, with a new factory announced in Hungary. This is another reason why BYD remains one of the top EV stocks to own for long-term investors.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
