Electric vehicle (EV) companies, for the most part, are still reeling from a broader slump in the market. Some EV makers have seen their sales decline and others their margins. Ever since the U.S. Federal Reserve decided to raise interest rates in order to combat rising inflation, new car buyers have struggled to take on increasingly expensive car notes. In turn, EV companies, including Tesla (NASDAQ:TSLA), BYD (OTCMKTS:BYDDY) and many others have had to resort to discounts to entice new customers.
Thankfully, the ongoing slump will not last forever. EVs have become a significant consideration for new car buyers, and the demand for them most likely is not going anywhere. Moreover, inflation in the United States appears to be going downward. The last few inflation reports have come in lower than many economists expected. If more good news on the macroeconomic front comes out, there is a good chance the Federal Reserve will begin cutting rates. With that in mind, some EV stocks at all-time lows or 52-week lows are worth a buy.
BYD (BYDDY)
BYD is on its way to being the largest EV maker in the world, again taking the crown away from its American counterpart, Tesla. Despite a slow start to the year, BYD ended the first quarter with sales jumping 46% on a year-over-year (YOY) basis to 301,631 vehicles. Pure battery vehicles made up 139,902 of those sales. Hybrids made up the other significant portion. Tesla, on the other hand, reported its first deliveries decline since the pandemic years. In the second quarter, BYD continued to astound analysts. BYD EV sales increased 21% YOY to 426,039. Again, Tesla’s deliveries figure experienced a decline during the same period. In particular, Tesla deliveries declined 4.8% YOY to 443,956.
BYD saw its shares fall nearly 9% over the past 12 months, meaning the stock is heading toward its 52-week low. The EV maker’s international expansion and dominance in China’s dynamic EV market make BYD a Strong Buy. Also, BYD trades 21x forward earnings, a valuation multiple that is a fraction of Tesla’s.
Li Auto (LI)
Li Auto (NASDAQ:LI) is another Chinese EV maker that has seen its share price decline due to investors feeling skittish about Chinese stocks in general. The Chinese EV maker is a specialist in developing and manufacturing high-end electric SUVs and the company also competes directly with Tesla. While Tesla has seen delivery declines in recent quarters, Li Auto has continued to expand deliveries growth. In the first quarter, deliveries increased 52.9% YOY to 80,400 vehicles. Despite strong sales growth, however, margins and net income did suffer. The price war has definitely taken a toll on Li Auto’s bottom line, especially as the EV maker tries to compete in an increasingly competitive market.
The second quarter also saw Li Auto gain more success in delivering new vehicles. LI’s deliveries figure increased 25.5% YOY to 108,581 vehicles. While this bout of good news sent LI shares into rally mode in recent weeks, the Chinese premium EV maker’s share price has declined 42%. Li Auto’s success in capturing market share in China and keeping Tesla on its toes make it a good long-term bet. It also doesn’t hurt that LI shares trade at a relatively cheap 12.9x forward earnings.
Sociedad Química y Minera de Chile (SQM)
Investing in EV stocks does not just have to do with buying up the shares of EV makers. Diversifying to the materials and resource companies that extract lithium carbonate — the rare earth mineral necessary to develop lithium-ion batteries — could also make a lucrative bet for long-term investors. Of course, the shares of lithium miners, who have benefitted from supplying large EV makers with the rare earth mineral, have experienced downward pressure. The glut in the lithium market as well as tapering demand in the EV end-market have sent the profits of lithium miners plummeting. Still, large miners like Sociedad Química y Minera de Chile (NYSE:SQM) are trading at a 52-week low and an attractive valuation multiple.
For those unfamiliar, SQM is the world’s second-largest lithium provider, and the miner has control of the Salar de Atacama mining operation in Chile, one of the largest in the world. The Chilean government is becoming more involved in the sector. It forced SQM to give up some operational and revenue rights. In exchange, SQM will have additional extraction capacity and operations through 2060, according to analysts.
Despite having to deal with the government in this case, more mining capacity will be positive for SQM going forward. The miner trades at only 11x forward earnings and has seen its shares plummet by 45.2% over the past year.
On the date of publication, Tyrik Torres 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
