Several electric vehicle (EV) makers ended 2023 in a slump due to the slowdown in demand for EVs.
The trend seems to have continued as the sales of most of the EV makers fell in February month over month. It can be attributed to the Chinese New Year holiday, low consumer spending, and a prolonged cold snap. While there is little economic uncertainty, the Fed rate cut could soon follow, and we might see the demand pick up.
The EV industry is highly competitive with companies fighting for a higher market share. They are opting for price cuts and launching new models to keep the consumers hooked to their brand. While the overall EV delivery numbers are down, these companies aren’t done yet. They will report bigger numbers in the coming months.
So let’s now delve into the EV stocks to buy if you want to make long-term gains.
Li Auto (LI)
One of my favorite EV makers, Li Auto (NASDAQ:LI) has had an excellent 2024. It managed to report impressive delivery numbers and strong financials. However, the February deliveries have seen a drop with 20,251 vehicles in the month, up 21% YOY but down month over month. The management is highly optimistic about March and expects to rebound to monthly deliveries of 50,000 cars.
It will start deliveries of Li MEGA this month, and the Li L series cars will be launched soon. With these new models, Li Auto aims to remain at the top of the Chinese EV industry and see a strong sales number.
LI is exchanging hands for $37 and is up 8% year to date (YTD). The stock has seen a 50% upside in the past year and looks reasonably valued. The EV maker reported a blowout fourth-quarter report, and its EV sales grew 180% year over year (YOY) in the quarter. Its revenue soared over 100%, and while the sales seem to have slowed down, they still look better YOY.
For the first quarter, it expects deliveries in the range of 100,000 and 103,000 vehicles. It has already delivered over 51,000 vehicles in the two months.
Overall, Li Auto is a very strong EV maker and could continue to rally upward. Bank of America analyst has a buy rating with a price target of $60.
BYD Company (BYDDF)
A major global EV player, BYD Co Ltd (OTCMKTS:BYDDF) managed to dethrone Tesla (NASDAQ:TSLA) last year. The current industry slowdown has impacted BYD which reported February deliveries of only 122,311 vehicles. This is its lowest sales since June 2022 and over a 39% drop month over month.
However, BYDDF launched eight low-cost cars in the past two years. Also, it implemented price cuts to entice customers. But the drop in sales could be attributed to the holiday season and low consumer sentiment.
Trading at $24 today, the stock is down 10% YTD and 16% in the year. A strong competitor of Tesla, BYDDF is also the second largest battery maker in the world. This could be the biggest EV stock in the next five years.
BYD Company has an impressive lineup of products that are affordably priced, and its exports are growing. The past few years have seen the revenue grow sky-high while the company ramps up production to achieve higher efficiencies. It has cut the price by more than 10% across its offerings and is working on adding smart technology to its vehicles.
BYDDF has a factory coming up in Hungary, plans to have one in Mexico, and already sells five models across Europe.
Nio (NIO)
Nio (NYSE:NIO) isn’t the strongest EV player in the industry. But, it has benefitted from the Chinese government funding $1 billion two years ago.
In January, the company reported deliveries of 8,132 vehicles, down 19% month over month. But it looks like the company is finally getting around to reporting an improvement in numbers.
The company went public in 2018 for $6.28 but managed to soar as high as $61 in 2021. However, it has seen rough days since then, moving on a downward spree since September 2022. It is trading at $5 today.
This dip could turn out to be an excellent opportunity to buy the stock. While the month-over-month deliveries have dropped, it still has strong YOY growth. It ended 2023 with 160,038 cars which is up 31% YOY.
Once the company achieves economies of scale, it can see better margins and deliveries. The company is set to announce results in a few hours. While a negative operating margin is anticipated, some volatility is possible. With minimal downside from the current level, it also shows a strong possibility of doubling your money if you hold on to the stock.
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.
