High valuations and geopolitical risks have resulted in some correction in stock prices this year. The Nasdaq Composite Index is still nearly 10% down year to date, even after recovering in the last few sessions.
Stocks of electric vehicle (EV) companies have also seen considerable correction, making them attractive. Here are three beaten-down EV stocks that look appealing right now.
Nio
Of the new EV companies, Nio (NIO 8.72%) looks particularly interesting. Founded in 2014, the Chinese EV maker has already delivered around 183,000 electric vehicles so far. In 2021, Nio delivered 91,429 vehicles, rising an impressive 109% year over year. The company's revenue for 2021 was $5.7 billion, up 122% from 2020. Nio generated gross margin of 18.9% for the year. Overall, Nio delivered a strong performance in 2021.
Image source: Nio.
Despite solid growth, Nio's stock price has largely been plunging for more than a year. Increasing competition in the EV space is a key factor contributing to the stock's fall. Nio faces stiff competition from established players, including Tesla, Volkswagen, and BYD, which are all expanding rapidly in China. At the same time, Nio also faces competition from newer companies, such as Li Auto and XPeng, both of which are growing sales faster than Nio lately. Nio stock, which rose steeply in 2020, corrected in the past year on the above concerns.
It is important to note that, despite competition, Nio is capturing a portion of the growing EV pie. It has established itself as a premium brand for EVs thanks to its innovation and superior quality vehicles. Li Auto's vehicles, for example, come with a range extender similar to plug-in hybrids. These aren't fully electric, and their demand may fall once fully electric vehicles become mainstream. By comparison, Nio's vehicles are fully electric.
Nio's battery-as-a-service model -- where drivers can replace an exhausted battery quickly rather than recharging it -- has also contributed to the growth in demand for its vehicles. The service also allows buyers to replace a battery with a bigger or smaller one if their requirements change. Nio is positioning itself for the long term with its own charging stations. Overall, concerns relating to Nio seem overblown, and the stock looks like a steal right now.
Image source: Rivian.
Rivian
Rivian (RIVN 6.10%) stock has fallen roughly 53% year to date as of this writing. The correction comes after the stock's dramatic rise following its initial public offering.
Rivian has some key benefits over competition. First, it targets two of the most profitable and fast-growing auto segments: SUVs and pickup trucks. Likewise, the demand for electric delivery vans -- another focus for Rivian -- is expected to rise substantially as logistics and e-commerce companies move to decarbonize their fleets.
Second, Rivian's pickup truck has received very positive feedback, and has also won MotorTrend's Truck of the Year award. Third, quality products and brand image have attracted potential buyers. Rivian has 83,000 pre-orders for its truck and SUV. Additionally, the company has an initial order of 100,000 delivery vans from Amazon.
Rivian is facing hurdles in ramping up production, which is hurting its stock's price as well. The company cites supply chain challenges as the reason behind its lower-than-expected production numbers. It has also cut its production target for 2022 to half. Rivian is working tirelessly to overcome ramping up challenges and should succeed in doing so over time.
Overall, Rivian's operations in a fast-growing segment, positive response for its vehicles, and a strong backlog of pre-orders make it a worthy buy at current prices.
Image source: Lucid Group.
Lucid Group
Lucid Group's (LCID 0.41%) stock has fallen 31% in 2021, as of this writing. Lucid drew loads of attention with the market-beating range of its Lucid Air model. The company's drivetrain expertise draws upon years of experience providing technology to the world championship EV racing series.
Like Rivian, Lucid too is facing challenges in scaling up vehicle production. The company slashed its expected delivery numbers for 2022 from 20,000 units to between 12,000 to 14,000 units. Notably, reservations for Lucid Air have risen to more than 25,000 from 17,000 in mid-November.
The company is establishing a plant in Saudi Arabia with a capacity of 150,000 vehicles per year. Saudi government is focused on reducing the country's dependence on oil, and with a plant there, Lucid will gain access to neighboring markets as well. As Saudi Arabia's Public Investment Fund holds a nearly 62% stake in Lucid, the planned expansion should not be challenging for the company.
Even as Lucid is struggling with supply chain issues, it is expanding its production capacity. Apart from the Saudi plant, the company is expanding its facility in Arizona to produce 90,000 units, up from its current capacity of 34,000 units. As supply chain issues resolve, which Lucid is working on, the company should be able to utilize the additional capacity quickly.
In all, while scaling-up challenges are hurting Lucid stock's performance, it should recover once the company resolves them. Now could be a good time to buy Lucid stock to capture upside once it recovers.
