The electric vehicle (EV) industry has been the most talked about in 2023. While it ended the year on a slow note, I believe this year could be much better. The demand for EVs has dropped due to low consumer spending, high interest rates and other macroeconomic factors, but that does not mean it won’t pick up anytime soon. As the economy improves, we could see higher demand and better numbers. Several companies are trying to take the top spot in the industry, but only a few have been able to shine. One thing is certain, EVs are not just hype but are here to stay. If you want to make the most of the EV transition, here are three EV stocks for your must-watch list. 

EV Stocks to Watch: BYD (BYDDF)

Warren Buffett’s favorite EV company, BYD (OTCMKTS:BYDDF), is a leader in the industry and has already dethroned Tesla (NASDAQ:TSLA). The EV maker enjoys global presence and government support. That enabled it to enter other countries, including Europe. In 2023, it outpaced Tesla as the top EV company by selling 525,409 battery electric vehicles compared to 484,507 by Tesla. BYD enjoys a pricing power advantage, giving it the lead in the highly competitive sector. 

BYD is also one of the biggest exporters of EVs and saw a significant increase in international exports. It is set to have another magnificent quarter, and I am certain it will hold its position as the best EV maker. The company manufactured more than 1 million EVs in the first nine months of last year, and BYD stock is up over 370% in the past five years. Trading at $26.75, the stock is highly undervalued and could be one of the best additions to your portfolio. 

The company’s financials are impressive as well. It saw the profit soar by nearly 100% as compared to the previous year — not a small feat. One solid reason to invest in the stock is the company hasn’t reached its true potential. As it continues to enter new markets while increasing production, we will see it report impressive delivery numbers.

Tesla (TSLA)

Yes, Tesla has been dethroned and is no longer the industry leader, but there are still enough reasons to invest in the stock. The company is a global giant and is heavily investing in artificial intelligence (AI). Tesla made EVs popular across the world, and it might face a few bumps on the way, but it is not done yet. Tesla remains popular and could have a better 2024. It continues to remain one of the top EV stocks to watch.

The company hit its target of selling 1.8 million vehicles in 2023, and the deliveries exceeded that number. In the fourth quarter alone, the company delivered 484,507 vehicles, beating the consensus. The company recently produced its Cybertruck, which could work as a catalyst this year. While we should not be expecting big numbers this quarter, production and delivery could pick up in the second half of the year. 

Tesla is also making big progress in full self-driving beta technology, passing the 500 million mile mark at the end of 2023’s third quarter. Despite competition, Tesla is still dominating in the United States. Trading at $237, TSLA stock is down from the 52-week high of $299. Ark Invest’s Cathie Wood recently bought 105,201 shares of the company. The short-term road ahead could be bumpy, but if the company treads carefully, it could be a long-term winner.

Li Auto (LI)

If you just want one reason to buy Li Auto (NASDAQ:LI) stock, take a look at its delivery numbers for the year. The company was profitable in the first three quarters, and I am certain it will be profitable in the final quarter as well. This is not a company that only promises and doesn’t deliver. It under-promises and over-delivers. It sold 131,805 cars in the fourth quarter, up 184% year-over-year (YoY), and the total deliveries for 2023 stood at 376,030 cars.

Li’s cars are one of the best selling in China and it has an impressive vehicle lineup. It will also be launching Li MEGA, a multi-purpose vehicle on March 1. The car launch could be a major turning point for the business. LI’s financials are equally impressive. It beat estimates in the third quarter and reported a revenue of $4.75 billion, up 271% YoY, while net income stood at $385.5 million, a significant rise from the net loss it reported in the same quarter in 2022. 

Up 54% in the past 12 months, LI stock is exchanging hands for $34 and is steadily moving upwards. I am certain the stock will double in the year, and you could see solid returns. Goldman Sachs (NYSE:GS) has a bullish view of the stock with a buy rating and expects a 50% upside. 

This is one of my favorites and one of the best EV stocks to own. 

On the date of publication, Vandita Jadeja 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.