Best Electric Car Stocks of 2023 | The Motley Fool

Even though all the major car companies , including Ford ( NYSE:F ) and General Motors ( NYSE:GM ), are developing and/or manufacturing at least one model of electric vehicle, they’re not usually considered electric car companies because their primary products aren’t electric. The best electric car company stocks are generally companies that are already producing and selling electric cars rather than companies just planning to do so.

Electric car stocks comprise companies that primarily focus on manufacturing EVs. Companies that manufacture the components used in electric cars — such as batteries or autonomous vehicle systems — can also be considered part of the electric vehicle industry.

Electric car stocks on the map

1. Tesla: The industry leader

Any list of electric car stocks needs to include the granddaddy of them all, Tesla. Elon Musk’s electric car company had a banner year in 2021. Tesla delivered about 936,000 vehicles. Most of the vehicles were Model 3 sedans and Model Y crossover SUVs. Management has worked through inflation, supply chain, and factory ramp up issues in 2022, with production dipping sequentially in the first and second quarters of the year. However, in the third quarter of 2022, production rose dramatically, hitting an annual run rate of more than 1.4 million vehicles.

Tesla continues to pursue an aggressive production program, looking to increase the output at existing factories in Fremont, CA, and Shanghai. However, the biggest production boost is likely to come from two newer gigafactories — meaning giant factories — in Berlin and Austin, TX, which are still in the ramp up phase.

On top of soaring deliveries, Tesla is now producing profits without relying on the sale of regulatory credits. Net income topped $5.5 billion in 2021, up from just $721 million in 2020; less than one-third of its profit came from regulatory credits. The company’s strong results have continued, in 2022, with the company highlighted record revenues, operating profit, and free cash flow in the third quarter of the year.

Despite what looks like very strong operating performance, Tesla’s stock has been in a downtrend for most of 2022. That may have more to do with an epic increase in its stock price, which peaked in late 2021 at over $414 per share. The stock’s value has been cut roughly in half since that point, though it still remains the largest automaker in the world by market cap. And by a surprisingly wide margin.

Although Tesla’s valuation metrics, such as the price-to-earnings and price-to-sales ratios, have come down materially, more conservative investors will probably continue to have some questions about its still lofty valuation relative to traditional automakers.

2. NIO: A Chinese SUV specialist

Chinese electric car maker NIO has been publicly traded since September 2018, but several initial public offerings (IPOs) by other Chinese electric car makers — such as Li Automotive (NASDAQ:LI) and Xpeng (NYSE:XPEV) — have increased investor interest in NIO.

Although the company continues to deal with broader industry headwinds and coronavirus related issues in its home market, NIO managed to increase production by roughly 20% in the first half of 2022. The bulk of those EVs are the company’s ES8, ES6, and EC6 vehicles. Production of its ES7 SUV continues to ramp up. Production of the company’s ET7 sedan is also ramping up, with the new vehicle now being sold into foreign markets.

All of that said, the company continues to bleed red ink on the bottom line. So while the company’s business progress is nice to see, it has yet to translate into sustained profitability.

3. Rivian: A lot to prove

Investors were very excited about Rivian when the EV company went public in late 2021. It was one of the biggest U.S. IPOs ever, with the company raising almost $12 billion. Rivian’s market value briefly topped $150 billion soon after its debut.

Rivian had barely delivered any of its electric trucks or SUVs when it went public, so investing in the stock was the ultimate leap of faith. The company managed to produce more than 1,000 vehicles in 2021, which is a tiny number compared to Tesla and other large automakers. In 2022 it had increased that figure to more than 7,000 per quarter by the third quarter, and expects to hit a full-year target of 25,000.

At the end of the second quarter of 2022, Rivian had nearly 100,000 preorders. These orders, however, are fully refundable, so they may not necessarily be indicative of the true demand for the company’s vehicles. That said, the company has made missteps, including in March 2022 when it announced substantial price hikes affecting future deliveries, hitting almost everyone who had preordered a vehicle. Rivian reinstated the original prices for preorders after customers complained, but the move likely damaged the brand.

Like Tesla, Rivian stock has crashed since peaking in late 2021, with the company’s shares falling by roughly 80% from their highs. The company’s market cap is now about $26 billion, which is quite the drop. However, the company isn’t consistently profitable, so conservative investors will likely still view that number as wildly optimistic. Investors need to understand that Rivian is one of the riskier ways to invest in the electric car industry.