After going all-in on electric vehicles (EVs), many automakers are facing a conundrum: EV demand is slumping and consumers across the U.S. who still haven’t made the switch to electric are now less likely to do so. For the many companies that shifted their focus to EVs in the past few years, this isn’t ideal.
Earlier this year, The Wall Street Journal predicted that the trend of increasing EV inventory for dealerships could pose a problem down the road. Now that exact scenario appears to be playing out. True, EV sales rose 50% in the first half of 2023. But this growth rate is actually slowing. It doesn’t help that many EV stocks have struggled over the past two quarters, either. Per WSJ:
“The abrupt slowdown in EV sales is a contrast to a year ago, when carmakers found themselves caught off guard by long waiting lists for battery-powered cars and trucks. It is also a troublesome sign for the car manufacturers plowing billions of dollars into building factories and battery plants to support what they hope will be a strong pickup in demand for plug-in models.”
Some EV producers will likely respond to this drop in demand by dialing back their growth forecasts for the coming quarter. This may mean more difficult times ahead. But news hasn’t been all bad for the sector. Tesla (NASDAQ:TSLA) recently began deliveries of its updated Model Y in China, for example. When an industry leader like Tesla garners momentum, it can help boost other EV stocks.
Tesla isn’t the only EV player that will survive difficult market conditions, either. In fact, several smaller EV stocks could offer investors better exposure once they rebound on resurging EV demand.
Best EV Stocks: ChargePoint (CHPT)
Even if consumers are buying less EVs, electric vehicles on the road still need to be charged consistently. That’s what makes ChargePoint (NYSE:CHPT) an excellent way to gain valuable market exposure.
CHPT stock is also down more than 60% for the past six months, creating a valuable opportunity for investors to get on board before the next EV wave takes shares higher. While President Joe Biden’s administration has launched a number of initiatives to help U.S. automakers crank out more EVs, the need for infrastructure remains clear. In fact, a lack of charging infrastructure is likely part of the reason that EV sales have dipped recently. ChargePoint is the best-positioned company to help solve this problem.
Despite falling recently, CHPT stock remains one of the most prominent EV charging stocks. InvestorPlace contributor Vandita Jadeja recently predicted that shares will turn around in 2024. Jadeja notes that the company recently “saw a revenue increase of 39%” year-over-year (YOY) but believes ChargePoint’s best edge lies in its international presence.
Rivian Automotive (RIVN)
Although it’s still recovering from a difficult month, Rivian (NASDAQ:RIVN) has displayed some impressive growth over the past two quarters. This trendy EV maker builds electric trucks that can rival the Ford (NYSE:F) F-150 and SUVs that resemble Range Rovers. RIVN stock currently enjoys a spot in TradeSmith’s “Green Zone” as well.
InvestorPlace’s Eddie Pan recently argued that Rivian has a noteworthy edge over other EV stocks:
“Rivian carries a strong competitive advantage due to its close financial relationship with Amazon (NASDAQ:AMZN). The e-commerce giant has placed an order for 100,000 Rivian Electric Delivery Vans (EDVs) by 2030 and is also the largest shareholder of the company. Another advantage that Rivian carries is that the electric truck market has just a few competitors, which provides Rivian with a first-mover advantage and a chance to disrupt the market.”
On top of that, Rivian is well-positioned to benefit from the United Auto Workers (UAW) strike. While the labor rights movement has stalled production for several leading U.S. automakers, Rivian has been able to keep putting cars on the road. This could help compel some consumers to opt for a Rivian vehicle.
Wall Street analysts still like RIVN stock. Although a few analysts have slashed their price targets, many maintain “buy” ratings for shares, indicating they believe better days are ahead for this EV standout.
Best EV Stocks: Toyota (TM)
It’s important to note that, while EV sales are slowing, the outlook is different for hybrid vehicles. For example, Ford’s hybrid vehicles have been a strong growth driver recently. For as long as the auto giant is dealing with the UAW strike, though, its growth prospects will be compromised.
This creates an important opportunity for Toyota (NYSE:TM) to secure a piece of this lucrative market. This Japanese automaker is already well-known in the U.S. as a trusted brand name. Now, the company’s strategy of going all-in on hybrids seems to be paying off. Recent data indicates that hybrid and EV sales accounted for almost one third of Toyota’s collective sales in September. Bloomberg reports that rising EV costs are helping push consumers toward purchasing hybrids instead.
Toyota is positioned to keep growing for other reasons, too. The firm recently made a deal with LG Energy Solutions to help streamline its EV battery production in the United States. Putting it all together, Toyota looks like one of the best EV stocks to buy right now, even amid a questionable market. If high EV costs are the problem, a company that produces hybrids, lower-cost vehicles and the batteries that power them is ideally poised to emerge from difficult economic times stronger than ever.
On the date of publication, Samuel O’Brient 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.
