In the last two years, Tesla stock has surged more than 1,000%. Investors who missed investing in Tesla two years back could be disheartened. Yet it is worth noting that it is difficult to foresee stocks that can generate Tesla-like returns. The best approach is to invest in companies that you believe can perform well in the long haul. Stocks of such quality companies should generate market-beating returns if you hold them long enough.
Let's look at three electric vehicle (EV) stocks that have the potential to generate outsize returns in five years, or more.
Lucid Group
There is a plethora of electric vehicle stocks to choose from right now. Of these, Lucid Group (LCID -2.86%) looks promising. There are several reasons to like Lucid Group. Users like the cars' features and designs, and within a short time, Lucid has succeeded in establishing itself as a luxury electric car brand.
The company not only boasts leading-edge EV technology, but also has solid growth plans. Though Lucid started as a luxury car maker, it has plans to launch EV models for the mass market in the coming years. With one of the most efficient EV technologies, Lucid can potentially generate recurring revenue by licensing its technology to other car companies. The stock will be included in the Nasdaq-100 index on Dec. 20.
On the risk side, Lucid is still to prove that it can deliver cars profitably. Investors should also keep an eye on the progress of a recent Securities and Exchange Commission (SEC) investigation relating to its merger with Churchill Capital Corp. IV.
Image source: Lucid Group.
BYD
Founded in 1995, BYD (BYDDY 0.49%) (BYDD.F 0.30%) entered the automobile business in 2003. Apart from automobiles, BYD manufactures mobile handset components, rechargeable batteries, and solar products. Berkshire Hathaway (BRK.A 0.99%) (BRK.B 0.91%) holds a nearly 8% stake in BYD.
Image source: Getty Images.
BYD started as an internal combustion engine vehicle manufacturer. Yet, sensing the broader trend, it has quickly shifted to making electric vehicles. In November, more than 90% of BYD's vehicle deliveries were fully electric or plug-in hybrids. Sales of BYD's fully electric models rose 153% year over year in November.
The company has captured roughly 18% of China's EV market. A leading position in the fast-growing, huge potential Chinese EV market places BYD well for long-term growth.
BYD stock trades at an attractive valuation compared to several top EV stocks right now. All of the above makes this Warren Buffett stock attractive.
QuantumScape
Batteries are a key component of electric vehicles. All leading auto and battery companies are focused on making batteries more efficient, which will help enhance an EV's range. QuantumScape (QS 0.56%), which went public in November 2020, is a battery start-up working on the next-generation battery technology.
Currently, lithium-ion batteries are used in electric vehicles. QuantumScape is developing lithium-metal solid-state batteries, using a proprietary ceramic separator. The company believes that its batteries will offer greater energy density, longer life, and faster charging than lithium-ion batteries currently in use.
Image source: Getty Images.
QuantumScape has the backing of leading automaker Volkswagen (VWAGY -0.47%), which has invested $300 million into the battery technology company so far. The two companies have formed a joint venture for a production capacity of 21 gigawatt-hours per year. In September, QuantumScape entered an agreement for 10 megawatt-hours of batteries with another top ten automaker by revenue. The company didn't disclose the name of the automaker. All the above lend credibility to QuantumScape's plans. If successful, QuantumScape's batteries could see immense demand from automakers worldwide.
QuantumScape believes it is progressing as per its plan to start commercial production in 2024. That's a long time and the company's batteries are not yet developed. Investors should bear the risks in mind before deciding to invest in QuantumScape stock.
