The electric vehicle sector is witnessing continuous innovation these days, and a shake-out could be in the offing. It's an environment that offers interesting opportunities for investors, but the situation is not without its risks. As such, it makes sense for investors in this segment to spread out their bets.

Among the top EV companies, Tesla (TSLA -2.04%), Nio (NIO -4.48%), and Toyota Motor (TM 0.33%) look attractive. If you're looking to invest $10,000 in this niche, you might start by investing the bulk of this amount into those three stocks. Moreover, stocks of Lucid Group (LCID -3.20%) and QuantumScape (QS 1.26%) look promising. Notably, as pre-revenue companies, these entail higher risks.  

Here's why each of these stocks looks attractive.


Though electric vehicles have been around for decades, Tesla can be credited for making them mainstream. It paved the way for their broader adoption with its robust charging network and efficient models. With a focus on continuous innovation, Tesla looks well-placed to lead the auto industry in the future. However, its valuation could concern value-focused investors. At the same time, the company faces some key risks, especially when it comes to its autonomous driving efforts.

Father and son attaching electrical plug to an electric car.

Image source: Getty Images.

Though as a business, Tesla looks well-equipped to continue growing, its stock may not generate the kind of returns that it did in the past. Even so, it looks poised to generate market-beating returns over the long term. Despite the risks, if you want exposure to the EV market, you wouldn't want to miss out on this stock.


Within three years of its IPO on the NYSE, Chinese EV maker Nio has grown its quarterly revenues from $7.2 million to $1.3 billion. What's more, the company is expected to continue growing sales rapidly in the coming years. It continues to narrow its losses as it grows its vehicle deliveries. In the latest quarter, it more than doubled its deliveries year over year to 21,896 vehicles.

The automaker plans to further expand its addressable market by launching lower-priced models. Nio is expanding in Europe, too, with plans to start selling its latest electric sedan in Germany by the end of 2022. A huge domestic market and lower production costs offer it some edges over its global peers. It all adds up to make Nio stock a promising long-term buy.

Toyota Motor

Toyota Motor sold 9.5 million vehicles in 2020, taking the title of world's top-selling automaker from Volkswagen (VWAGY -2.03%), which sold 9.3 million vehicles. In 2020, Toyota generated net profits of $21.2 billion on sales of $256.7 billion. For perspective, last year, it sold nearly 20 times as many vehicles as Tesla. Though Toyota isn't growing as fast as Tesla, that's mainly due to the difference in their scales. Value investors will surely find Toyota stock attractive.

Though Tesla gets more attention for its efforts to develop autonomous driving systems, Toyota is focused on that goal as well, and has partnered with Aurora to advance its plans. And, it's planning to launch 15 new EV models by 2025.

Overall, buying shares of this top legacy automaker would be a smart part of one's overall EV investing strategy.

Lucid Group

Given that Lucid Group has yet to begin commercial deliveries to customers, it's a riskier EV stock to own than those discussed above. It could encounter technical difficulties bringing its vehicles to market, or its offerings may not perform as well as expected in the real world. Another question mark is whether Lucid will be able to ramp up production as rapidly as it plans to.


Image source: Lucid Group.

On the positive side, the Environmental Protection Agency has credited the Lucid Air Dream Edition R model with a range of 520 miles on a single charge. That's a new record for an electric car. So, the company is close to delivering what it has promised and looks to be progressing well. Models with improved range could help Lucid carve a place for itself in the auto markets. All in all, Lucid stock looks like an attractive long-term bet.


QuantumScape does not make electric vehicles. It's researching solid-state battery technology, which could make EVs far more efficient than they are now. It expects its lithium-metal batteries to offer higher energy density at lower cost than the currently used lithium-ion batteries.

The company expects to start commercial production of batteries in 2024. That's a long time in a rapidly evolving industry, and the company will need to overcome several engineering challenges before it can start producing batteries at a scale.

Solid-state batteries have been under development for decades, but no company has been able to successfully commercialize them so far. Also, several companies, including Toyota, are working on developing solid-state batteries, and could beat QuantumScape to the market.

Still, QuantumScape has Volkswagen's backing, and it has recently signed an agreement with another top automaker. That lends credibility to QuantumScape's plans. Overall, QuantumScape stock looks like a promising bet in the EV space.