How does a 9,000-pound tank that drives like a sports car sound? Oh, and did we mention that it’s an EV?
That’s exactly how Barron’s recently described GM’s (NYSE:GM) all-electric Hummer. The publishing firm’s lead EV reporter took it for a spin in Detroit and was blown away by its performance.
“A vehicle the size of a small tank with 35-inch tires – about the height of an average three-year-old – just shouldn’t be that smooth, quick, or comfortable.”
The reporter even said the Hummer may be his favorite EV he’s ever driven — including Tesla’s (Nasdaq:TSLA) Model Y.
Of course, that statement is bound to ruffle the feathers of the Tesla faithful. But the fact that GM- and Tesla-made EVs are even close to comparable is a huge deal.
From an investment perspective, it underscores that the best EV stocks to buy for the next five to 10 years are not named Tesla.
Tesla Has a Competition Problem
Now, I believe Tesla’s a fantastic company and think it’ll always be one of the largest EV makers in existence. And I’m confident it will also remain one of the largest solar panel and battery energy storage system providers, too.
But even fantastic companies aren’t invincible.
Tesla has been growing like wildfire in a largely competition-less EV market over the past several years. Sure, it wasn’t the only company making EVs from 2016 to 2020. But no other car in the marketplace came close to the performance and range specs of the Model S, Model X and Model 3. In a relatively uncrowded market, they were the best EVs by a long shot.
As a result, Tesla grew its share of the global EV market to over 16% last year.
Here’s the problem — and it’s two-fold:
- 16% automobile market share is unsustainable.
- Viable competition has finally arrived.
The largest automakers in the world today — Toyota (NYSE:TM), Volkswagen (OTCMKTS:VWAGY), Renault (OTCMKTS:RNLSY), Stellantis (NYSE:STLA), and Hyundai-Kia (OTCMKTS:HYMTF) — each control anywhere from 8% to 12% of the global auto market. Tesla’s sitting at 16% share. Therefore, once the EV market matures, the biggest companies will control between an 8% to 12% share.
Indeed, Tesla may remain “top dog” in the EV industry. But it’s likely staring at significant market share erosion in the coming years on the order of 400 to 800 basis points.
And since the wave of EV competition is actually on par with Tesla’s vehicles, such erosion looks increasingly likely.
Lucid’s (Nasdaq:LCID) cars drive farther than Tesla’s. Rivian’s (Nasdaq:RIVN) are just as big. Compared to the Cybertruck, Ford’s (NYSE:F) pick-up is crushing it. Fisker’s (NYSE:FSR) cars are cheaper. And Barron’s likes the Hummer best of all.
This new competition is no joke.
Therefore, Tesla’s market share will very likely to erode over the next several years. And that means the best EV stocks to buy today are the companies stealing its thunder.
Which EV Stocks Look Good?
When it comes to the best EV stocks to buy, it’s all about the companies that can successfully and sustainably grow market share. Those are the ones that have crafted defensible niches through superior products.
For example, Lucid is dominating when it comes to the luxury niche. It’s built the world’s highest-performance EV, with the most horsepower and longer driving ranges. That’s a company will grow its share of the EV market dramatically in the coming years. And as it does, Lucid stock should move higher.
Meanwhile, with top-notch cars and a genius marketing strategy, Nio (NYSE:NIO) leads in China, the world’s biggest EV market. It, too, is a company that will rapidly grow market share over the next several years. That’s especially if Nio successfully expands into Europe and North America. As that happens, the stock will move higher.
And in terms of affordability, Fisker is innovatively leveraging a platform-sharing business model to reduce manufacturing and operating costs. That allows it to produce good-performance electric vehicles at industry-low prices. We see it dominating the economic side of the EV market. That should help the company dramatically grow market share, powering huge sales growth and big stock price appreciation.
There are a lot of companies sitting idly by, hoping the rising EV tide lifts their boats. We’re passing on those stocks. Instead, we’re buying the ones actively developing defensible competitive advantages to ensure long-term growth.
And perhaps the cream of the crop in that specific sub-category of long-term winning EV stocks are next-gen battery makers.
The Final Word on EV Stocks
When it comes to an electric vehicle, the battery is everything.
It determines how far the EV can drive. It determines how many years the EV can last, how quickly it recharges and how fast it can go.
Indeed, the battery determines everything about an EV.
As such, we’re huge fans of the companies developing next-gen batteries to drive a new generation of super-powered electric vehicles. They are positioned for huge growth. And because what they’re developing is so technically challenging, they’re also protected by some huge competitive moats, ensuring all that growth lasts for years to come.
Color us bullish on EV battery stocks.
In particular, there’s one tiny EV battery stock that deserves your attention today. It’s trading for less than $2. And yet the company is working on a next-gen battery that could alter the entire course of the EV industry.
Needless to say, the upside potential in this tiny stock is enormous!
Find out its name, ticker symbol and key business details.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.