As gas prices soared to unprecedented levels in the past year, the spotlight on electric vehicles (EVs) intensified. The International Energy Agency revealed a remarkable surge in global EV sales, exceeding 10 million in 2022. This impressive growth trajectory continues in 2023, further amplifying the allure of EV stocks before the bounce back. Introducing subsidies through the Inflation Reduction Act has only added fuel to the fire, potentially propelling sales to even greater heights.
But what exactly are EV stocks? They encompass electric vehicle manufacturers, battery producers, charging station creators, and electric motor innovators. In a broader sense, EV stocks may encompass mining companies and semiconductor manufacturers that play a pivotal role in producing vital EV components.
While numerous options are available for those seeking to invest in electric vehicle stocks, it’s crucial to remember that individual stock investments often carry more risk than diversified index funds or exchange-traded funds. It’s worth noting that many EV stocks lack a robust performance track record, rendering the EV market somewhat speculative.
So, if you’re ready to delve into the electrifying world of EV stocks, buckle up and embark on this exhilarating journey with caution and savvy decision-making.
General Motors (GM)
General Motors (NYSE:GM) emerged from bankruptcy a decade ago as an underwhelming automotive stock. But now, it’s transformed its weaknesses into strengths, making it a top choice for investors.
GM’s strong demand has eliminated the need for heavy incentives, driving significant cash flow and profits. With over 600,000 vehicles sold in the US during Q1, their success is undeniable.
Moreover, GM’s reign in customer satisfaction and vehicle dependability highlights its commitment to excellence. Loyalty to the manufacturer is steadfast, solidifying its position.
GM swiftly responded to changing consumer preferences with its electric vehicle (EV) offerings, recognizing that bigger isn’t always better. In Q1 alone, the iconic American automaker sold 20,670 EVs and is on track to double production by year-end.
BrightDrop, GM’s subsidiary, is revolutionizing commercial EVs, attracting prominent clients like Walmart (NYSE:WMT) and FedEx (NYSE:FDX). Expected to generate up to $10 billion in revenue by 2030, BrightDrop showcases GM’s flexibility. It is also projected to achieve 20% profit margins by the decade’s end.
Not to be overlooked, Cruise, GM’s autonomous driving subsidiary, aims to generate billions in revenue annually. According to a recent statement by the CEO of Cruise Automation, the division is expected to achieve or exceed its target of reaching $1 billion in annual revenue by 2025.
Overall, with a visionary outlook, GM has positioned itself for success. GM has evolved, becoming a shining star in the automotive market. And with a modest P/E ratio of 6 times, it presents a remarkable opportunity for investors.
Finally, on a side note, General Motors is also a favorite among Warren Buffett stocks. If you want to learn more about gems from the Berkshire Hathaway (NYSE:BRK-B) portfolio. Explore this article to discover Warren Buffett’s most undervalued stocks, including potential opportunities in the EV sector.
Ford (F)
Ford Motor (NYSE:F), a distinguished American institution, has unfortunately not received the recognition it truly deserves in recent years. While larger and more dynamic companies have been stealing the spotlight, Ford’s contributions seem to have gone unnoticed. Still, it’s revving its efforts to secure a spot in the flourishing electric vehicle (EV) market.
Ford has undergone a significant business transformation, streamlining operations and focusing on lucrative opportunities. The division of its automotive business into separate units, including the Ford Model E for EVs, shows its commitment to innovation.
However, Ford’s journey into EV has hit a few bumps. Intense competition and aggressive pricing strategies from Tesla (NASDAQ:TSLA) have presented challenges.
Yet, the future of EVs is undeniably promising. According to estimates, it is projected that electric vehicles (EVs) will account for over two-thirds of global passenger vehicle sales by the year 2040. This suggests a significant shift towards EVs as a preferred choice among consumers worldwide. Ford has the potential to capitalize on this trend.
Despite Ford’s struggles in the EV segment, its overall financial performance is rising. With a low forward price-to-earnings ratio of 9.12 times, Ford’s stock offers an affordable opportunity.
Investors must be patient and strategically assess EV stocks, including Ford, before the anticipated bounce back. As Ford continues to refine its EV business and competes with industry frontrunners, its stock emerges as a promising choice. Ford’s attractive valuation and potential for growth in the EV market make it an enticing option for investors seeking opportunities in the sector.
Keeping an eye on EV stocks before their bounce back can prove beneficial. Ford’s progress positions it favorably in the evolving landscape of electric vehicles.
Rivian (RIVN)
Investors were enthralled by Rivian’s (NASDAQ:RIVN) 2021 IPO, making it one of the largest in the US, raising nearly $12 billion and briefly valuing the company at over $150 billion.
Rivian, though lacking significant vehicle deliveries, drew faith-driven investors with over 1,000 units produced in 2021 – a modest figure compared to industry giants like Tesla.
By Q3 of 2022, Rivian boosted production to over 7,000 vehicles per quarter, targeting an impressive 25,000 for the entire year.
With almost 100,000 preorders by Q2 2022, Rivian faced uncertainty as these refundable orders didn’t fully reflect the true market demand. Nonetheless, the brand reputation suffered due to temporary price hikes announced in March 2022, impacting preorder customers negatively.
Like Tesla, Rivian’s stock plunged around 80% from its peak in late 2021, resulting in a market cap decline to approximately $26 billion. Despite this, conservative investors must consider Rivian’s inconsistent profitability when evaluating its optimistic valuation.
Despite its setbacks, Rivian remains an undervalued growth opportunity, trading at a substantial discount to its IPO price. It produces three vehicle models, has a promising partnership with Amazon (NASDAQ:AMZN), and plans to increase its production capacity significantly.
With a strong financial position and continued support from major stakeholders, Rivian, like other EV stocks before bounce back, has the potential for a successful recovery. Therefore, it may still be a favorable time to consider investing in Rivian’s stock.
On the publication date, Faizan Farooque did not hold (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.
