Electric vehicles have gone from a backwater industry to a full-blown revolution over the last few years. Spurred on by the huge growth of Tesla, companies have committed to investing tons of money into the fast-growing sector of the economy. So much so that Ark Investment Research estimates that global automakers have committed to investing $1.2 trillion in electric vehicles, up from just $90 billion four years ago. Start-ups and legacy automakers alike are going full throttle into this new market, and investors have gone into a frenzy buying these stocks for their portfolios.

But how do investors separate the wheat from the chaff? Here's one electric vehicle (EV) stock to buy right now, and two that will likely be poor investments going forward. 

Buy Rivian Automotive

An EV stock with great prospects is Rivian Automotive (RIVN -0.10%). The stock went public at a bubbly valuation of $100 billion in 2021 but has since come back down to earth to a market cap of $29.3 billion. The company makes premium EVs with three initial vehicles that include an SUV, truck, and commercial delivery van.

Unlike other EV start-ups, Rivian has multiple advantages that should help it over the next few years as it scales up production. First, it has plenty of pre-orders for its consumer SUV and truck, which are getting rave reviews from journalists and regulators. As of last quarter, it had just under 100,000 pre-orders for its R1T truck as it moves to scale up production this year and next.

Second, the company has a long-term partnership to power Amazon's last-mile delivery fleet with its commercial vans. The e-commerce giant has committed to buying 100,000 delivery vans from Rivian, providing it with a floor with customer demand in its early years. This should equate to a few billion dollars in revenue. Of course, it will need to find other customers for its commercial vans, but this is a great first business partner to have in its early years. 

As it scales up manufacturing, Rivian will likely be losing money for at least the next few years. Luckily, it has raised a ton of money from investors over the years in preparation for this huge cash burn. It currently has $15 billion in cash on its balance sheet. At its current burn rate of $1.5 billion a quarter, the company has 2.5 years to improve its profitability before needing to raise more money.

With steady demand and a huge cash position, Rivian Automotive is in a great position to succeed over the next decade as a next-generation EV manufacturer. 

Avoid Lordstown Motors

On the other end of the EV start-up spectrum is Lordstown Motors (RIDE 8.75%), which is trying to manufacture a luxury truck, similar to Rivian. The company also went public during the bull market in 2020 but has been marred by scandals and setbacks with its business.

First, it has two official investigations from government agencies, including the Securities and Exchange Commission (SEC) and the Justice Department. The Justice Department's investigation is not public, but the SEC and other law firms are looking into the company's misleading claims about orders for its Endurance truck. 

This brewing scandal has set back Lordstown in its production timeline. In late 2020, management was saying that it would start producing vehicles in September of 2021, but this has been continuously pushed back. With less than $250 million in cash on its balance sheet, the company is going to struggle to ramp production without raising tons more in outside capital. 

Opposite of Rivian, with a small cash position and federal investigations underway, Lordstown Motors is an EV stock you'll want to stay far away from. 

Avoid Nio

If you just looked at the revenue of Nio (NIO -0.69%), you'd think it was a great stock to own. Revenue is up 447% in the last three years, and its stock price is up 400%. The EV manufacturer has grown its market share in China every year since 2019, hitting 0.43% in 2021.

But there are a few problems with Nio. It is a Chinese company, which makes it much riskier than other EV stocks based in the U.S. and capitalist nations. Chinese political leaders have recently increased their crackdown on corporations and the country's brewing conflict with the U.S. has intensified. This is not a situation where foreign investors will likely get a good outcome.

On top of the political risk, Nio is still highly unprofitable, losing 28 billion RMB last quarter even though it generated over 100 billion RMB in revenue. Its vehicle profit margin is moving in the wrong direction, hitting 16.7% last quarter versus 18.1% a year ago. 

Nio could become a much larger business from here if it continues to gain market share in the Chinese EV market. However, with the recent track record of the Chinese Communist Party and how it treats corporations, there's no logic in buying any Chinese stocks today. Doing so with the historical evidence in front of you is just asking for trouble.