Believe it or not, electric vehicles do outperform their fossil fuel counterparts in some ways. From the perspective of sheer performance, that most obviously manifests as dramatically faster acceleration times. EV stocks to buy also outperform their fossil fuel counterparts in several important ways.
I’ll explain that in more depth throughout the article but it essentially all boils down to pricing. The average cost of an electric vehicle was greater than $55,000 in April 2024. The average price for a new gasoline-powered vehicle was just below $45,000.
Higher prices generally lead to higher margins, creating all kinds of strong business economics in the process. Although the price gap between EVs and gasoline-powered vehicles is narrowing, it is still significant, creating appreciable margins.
That simple fact is a strong reason to believe that the EV stocks to buy discussed below have a significant advantage over their non-EV competitors.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is arguably one of the most maligned stocks best positioned to reward investors at the moment. Everyone is aware that Tesla is under substantial pressure to reduce its prices on its vehicles to become more competitive. That has caused a lot of fear around the EV industry in general.
2023 was a year marked by tremendous slowdowns in EV sales activity overall. Tesla’s revenues grew by more than 51% in 2022. Sales grew by less than 19% in 2023. 19% sales growth, as strong as it sounds, is still comparatively weaker.
However, that still equates to overall gross margins above 18%. Those are well above margins at Ford (NYSE:F) and General Motors (NYSE:GM), and in line with those from Toyota (NYSE:TM).
In other words, Tesla performed as well as Toyota in 2023. That’s hardly bad company to keep and still puts Tesla far ahead of the other big gasoline vehicle manufacturers. Those companies are also proving particularly poor at producing EVs, losing lots of money in the process.
BYD (BYDDY)
BYD (OTCMKTS:BYDDY) stock is entering a period of strength as it perfects its profitability recipe.
The company continues to mature and is recording margins above the 20% level. That puts its performance in that regard above Tesla. The other important thing to note is that BYD is actually the biggest producer of EVs globally. The company produced more than three million vehicles in 2023, beating Tesla for the second straight year.
So, BYD stands out as an EV stock to buy with a very strong combination of strong internal economics and incredible volume.
The result is an opportunity for investors. EV stocks continue to be maligned in general. While the average investor sits around bickering about EVs and how gasoline vehicles are always better, consider BYD’s unique advantages.
The company’s already carved out a massive share of the market overall. BYD has a bright future ahead of it. And it’s currently undervalued. Based on the factors that I just discussed, it’s hard to find a better EV stock to buy anywhere.
ON Semiconductor (ON)
ON Semiconductor (NASDAQ:ON) is among the most competitive chip companies and chip stocks overall.
Competitiveness usually manifests as an ability to sell your products at higher prices than your competitors while keeping costs low. The result is high margins. ON Semiconductor certainly has high margins, better than roughly 81% of all publicly listed chipmakers.
One of the reasons ON Semiconductor has been so successful is that it has carved out a niche as a chip provider to the electric vehicle industry. The company is currently applying some of the technological know-how it developed in manufacturing those chips to the AI industry. The company believes it may be able to increase AI chip efficiency by utilizing its silicon carbide technology.
If so, it’s logical to assume that ON Semiconductor’s margins will rise even higher as a result of higher chip prices due to AI demand. Beyond all of those positives, it should also be noted that ON Semiconductor stock is highly regarded and has substantial potential above its current price.
On the date of publication, Alex Sirois did not have (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.
