Electric vehicle (EV) sales are expected to be robust this year. And demand is set to accelerate over the next decade, according to a new International Energy Agency report. If so, investors may want to investigate some of the top EV stocks to buy on the dip.
As noted by Electrek.co, “Rising EV sales are set to remake the global auto industry and significantly reduce oil consumption for road transport, according to the new edition of the IEA’s annual Global EV Outlook, released today.”
Also, according to the report, global EV sales could reach 17 million by the end of the year. Sales in China are projected to jump to about 10 million, it added. In the U.S., about one in nine cars sold will be electric. And in Europe, about one in four. In addition, if the world is serious about greater adoption, charging stations will need to grow about six-fold by 2035.
If correct, you may want to start accumulating some of the top EV stocks to buy on the dip.
Tesla (TSLA)
Tesla‘s (NASDAQ:TSLA) earnings were a disaster. Its adjusted earnings per share (EPS) of 45 cents missed expectations of 51 cents. Revenue of $21.3 billion was also below expectations for $22.15 billion.
“In its shareholder deck, Tesla reiterated a pessimistic outlook for 2024, telling investors that “volume growth rate may be notably lower than the growth rate achieved in 2023,” said CNBC. Free cash flow went negative with a deficit of $2.53 billion — which it attributes to a $2.7 buildup of inventory and a $1 billion in capex spending on AI infrastructure.
However, Tesla did mention that it will speed up the launch of new models, including a lower-cost vehicle. Elon Musk also said Tesla is now an AI robotics company, which boosted hopes for a next-gen vehicle.
Also, analysts at Bank of America just upgraded TSLA to a buy rating, noting the latest results were “better than feared” and “cleared the deck of negative catalysts.”
Li Auto (LI)
After topping out at around $47.50, Li Auto (NASDAQ:LI) plunged to a recent low of $23.87. While Li is excessively oversold on RSI, MACD, and Williams’ %R, it’s still dropping thanks to a fierce price war.
As noted by CNBC, “These price reductions come at a time when competition in China’s EV space has intensified, with local automakers pushing to outsell U.S. rival Tesla with fancy tech and competitive pricing.”
The current pullback is overkill at the moment. Still, until it bottoms out, stay on the sidelines. In the long term, once it does bottom out, I’d like to see Li Auto retest its prior high of $47.50.
At the same time, analysts at Macquarie are out with an outperform rating on the LI stock, with a price target of $40. The firm believes the company could see more than a million in unit sales by fiscal year 2026. Plus, as noted by the analysts, Li Auto “stands alone in the wave of new Chinese EV players due to having the highest volumes, vehicle margins, and cash generation among peers,” as noted by Seeking Alpha.
Again, though, don’t race to buy just yet. Wait for this falling knife to bottom out first.
KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)
I also like the latest dip in the Krane Shares Electric Vehicles and Future Mobility Index ETF (NYSEARCA:KARS). With an expense ratio of 0.72%, this ETF provides exposure to companies involved in the production of EVs and their components.
It’s also benchmarked to the Bloomberg Electric Vehicles Index, which includes stocks involved with EV “production, autonomous driving, shared mobility, lithium and/or copper production, lithium-ion/lead acid batteries, hydrogen fuel cell manufacturing and electric infrastructure businesses,” according to KraneShares.com. Some of its top holdings include Tesla, Li Auto, Albemarle (NYSE:ALB), Rivian Automotive (NASDAQ:RIVN), Nio Inc. (NYSE:NIO), and XPeng (NYSE:XPEV) to name a few.
What’s nice about this ETF is that I can buy 100 shares and gain access to about 65 holdings for less than $2,100. Or, I could just buy one of its holdings — let’s say 100 shares of Tesla for just over $16,200 while also losing the ability to diversify at a lower cost.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
