
Electric vehicles, or EVs, are automobiles powered by electricity. These battery-powered vehicles have gained significant traction globally in recent years. For instance, a report from Statista estimates EV sales to have risen from 760,000 units in 2016 to 7.13 million units in 2022 and forecasts EV sales to touch 16.2 million units in 2027.
This rapidly expanding addressable market makes publicly-traded electric vehicle manufacturers an enticing long-term bet. In addition, several governments are also providing subsidies and grants to accelerate the shift towards clean energy solutions, acting as a tailwind for the EV industry.
Keeping these factors in mind, let’s look at some of the best EV stocks in the world and if they are worth investing in right now.
Tesla stock
Tesla (TSLA) currently enjoys a first-mover advantage, enabling the company to ship more than one million cars in 2022. But it is now losing market share due to competition from both legacy manufacturers and new entrants.
Valued at a market cap of $570 billion, Tesla stock is currently trading 56% below all-time highs. Yet, despite the ongoing pullback, it has returned a staggering 7,600% to investors in the last ten years.
Between 2020 and 2022, Tesla almost tripled its vehicle deliveries and revenues, allowing the stock to enjoy a trillion-dollar valuation in late 2021. Tesla eventually aims to sell 20 million vehicles each year, providing it with enough room to keep increasing its sales and deliver outsized gains to investors.
Lucid Group stock
Down 87% from all-time highs, Lucid Group (LCID) has burnt massive investor wealth. In its first year of production, Lucid ended 2022 with $608 million in sales, and in Q4 of 2022, its revenue stood at $257.7 million. But its cost of sales was much higher at $613 million. As a result, Lucid Group reported a cash balance of $1.7 billion at the end of the December quarter, significantly lower than the figure of $6.3 billion in 2021.
Despite a challenging macro-environment, LCID is a top EV stock to own due to the investment of Saudi’s sovereign fund. Saudi Arabia has a 65% stake in Lucid Group and placed pre-orders for 100,000 vehicles which will be delivered in the upcoming decade.
Priced at a market cap of $14.3 billion, Lucid is forecast to increase sales to $1.3 billion in 2023 and $3.2 billion in 2024.
Rivian Automotive stock
Backed by Amazon, shares of Rivian Automotive (RIVN) are also down 92% from all-time highs. Similar to most other companies, Rivian is wrestling with rising costs due to elevated levels of inflation, an uptick in interest rates, and supply chain disruptions.
But during its Q4 earnings call, the company claimed it might report a positive gross margin in 2024 due to cost optimization efforts and rising demand for its EV portfolio. Further, it expects to manufacture and ship 50,000 vehicles in 2023, an increase of around 100% year over year.
Valued at $11.5 billion by market cap, Rivian’s sales are forecast to increase from $1.66 billion in 2022 to $4.1 billion in 2023 and more than $8 billion in 2024.
Nio stock
One of the largest EV companies in the world, Nio (NIO), is a China-based manufacturer. In Q4 of 2022, Nio increased sales by 60% year over year despite missing vehicle delivery targets. It continues to invest heavily in research and development, and associated costs more than doubled in the December quarter. These investments will allow Nio to expand its portfolio of vehicles and further improve product features, resulting in higher sales over time.
The sell-off in EV stocks has dragged Nio shares lower, resulting in a compelling valuation right now. Nio stock is priced at less than two times forward sales and is among the cheapest EV stocks globally.
Ford stock
The only legacy manufacturer on the list, Ford (F) offers an enviable risk-reward profile for shareholders. Ford is aggressively investing in the EV space and aims to deploy $50 billion through 2026 to increase market share in this sector.
Ford disclosed its plans to end 2025 with at least 30 new EV models with annual shipments totaling two million by 2026. Comparatively, it expects to ship 600,000 units in 2023. The company’s flagship EV model is the F-150 Lightning which already has around 200,000 orders.
Ford is a legacy auto manufacturer that also pays investors a dividend. The current dividend yield for Ford stock is well over 5% making it an attractive buy for both income and growth investors. Its payout ratio is below 50%, providing the company with enough liquidity to fuel expansion plans, raise dividends, and strengthen its balance sheet.
The final takeaway
Electric vehicle stocks remain compelling bets for long-term investors. But there are certain risks associated with investing in EV stocks.
First, manufacturing automobiles is hugely capital intensive as you need to invest heavily in capital expenditures. Companies need to allocate significant resources towards research and development and setting up manufacturing facilities before they benefit from economies of scale.
So, in the first few years of operations, EV companies will report huge losses. To support high cash burn rates, they must raise capital via debt or equity. But raising money comes at a cost. For example, equity capital will dilute the wealth of existing shareholders, while debt capital needs to be serviced with regular interest payments.
In case you are bullish on EV stocks, you can identify companies that are market leaders that are equipped with a robust balance sheet, improving margins, and stellar top-line growth.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.