Electric cars -- commonly called electric vehicles or EVs -- are automobiles with engines powered by electricity rather than gas. Electric car stocks comprise companies primarily focused on manufacturing electric cars. Companies that manufacture the components used in electric cars -- such as batteries or autonomous vehicle systems -- can also be considered part of the electric car industry.
Even though all the major car companies, including Ford (F -3.01%) and General Motors (GM -0.91%), are developing and/or manufacturing at least one model of electric car, they're not usually considered electric car companies because their primary products aren't electric. The best electric car company stocks are generally companies focused solely on electric cars rather than traditional automakers producing primarily gas-powered vehicles.
Electric car stocks on the map
Electric car stocks on the map
| Company | Headquarters | Notable Models |
|---|---|---|
| Tesla (NASDAQ:TSLA) | Palo Alto, California | Model 3 and Model S sedans, Model X and Model Y crossovers |
| NIO (NYSE:NIO) | Shanghai, China |
ES8 and ES6 SUVs, EC6 crossover |
| Rivian (NASDAQ:RIVN) | Irvine, California | R1T truck, R1S SUV |
1. Tesla: The industry leader
1. Tesla: The industry leader
Any list of electric car stocks should include the granddaddy of them all, Tesla. Elon Musk's electric car company delivered more than 1.3 million vehicles in 2022. Most of the vehicles were Model 3 sedans and Model Y crossover SUVs, and the rest were Tesla's older, pricier models.
Despite a tough macroeconomic backdrop, Tesla continues to aggressively expand production. Production is currently ramping up at Tesla's factories in Texas and Germany, and the company is building a new factory in Mexico.
Tesla has resorted to price cuts to sell vehicles this year as consumer demand faltered, a move that has hurt the bottom line. In the first quarter of 2023, Tesla's overall gross margin plunged by almost 10 percentage points year over year to 19.3%. The company is still profitable, but profits are trending lower.
So far, Tesla stock has soared in 2023, mostly recovering from a brutal decline in 2022. The stock is expensive by any measure. With a market capitalization currently topping $800 billion, Tesla stock trades at lofty price-to-earnings and price-to-sales ratios. The valuation makes the stock risky, but there's no denying the company is the undisputed leader in the electric vehicle industry.
2. NIO: A Chinese SUV specialist
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 (LI -2.69%) and Xpeng (XPEV -3.48%) -- have increased investor interest in NIO.
NIO is facing a challenging environment in China. While deliveries were up 20.5% year over year in the first quarter of 2023, deliveries were down 22.5% from the fourth quarter. Total vehicle revenue dipped year over year, and gross margin almost vanished amid higher costs. Deliveries are expected to decline in the second quarter.
NIO launched a new ES6 electric SUV in China in May, and the company is hoping the updated vehicle will help drive deliveries higher. But for now, NIO is muddling through a tough demand environment and posting big losses in the process.
3. Rivian: A lot to prove
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, a tiny number compared to Tesla and other large automakers. Deliveries reached just under 8,000 in the first quarter of 2023, and the company says it's on track to produce 50,000 vehicles this year.
Rivian is taking a risk by vertically integrating critical components like electronics, the propulsion platform, and software. The strategy may pay off if the company can rapidly grow production over the next few years, but it also means costs will be higher in the near term.
Rivian is nowhere near profitable, with a negative gross margin in the first quarter of 2023. It reported a net loss of $1.35 billion on revenue of $661 million. Rivian has almost $12 billion in cash on its balance sheet, so it can afford to lose vast sums as it ramps up production. But if the company hits a roadblock, it could be in serious trouble.
Revenue
Rivian stock dove in 2022 and hasn't recovered. The company is valued at just under $14 billion, which is still extremely expensive relative to sales. A lot will need to go right for Rivian to deliver for investors.
Other companies in the electric car space
Other companies in the electric car space
Building a successful electric vehicle business is an expensive proposition, and the recent bankruptcy of Lordstown Motors (NASDAQ:RIDE) is a good reminder that investing in this sector is inherently risky. After struggling with production issues, Lordstown filed for Chapter 11 bankruptcy in June. The once high-flying stock is now down 99.5% from its all-time high.
Electric delivery van manufacturer Workhorse (WKHS -5.8%) isn't faring all that much better. Workhorse stock is down 98% from its all-time high, and the company is producing just 16 units of its W4 CC vehicles per week. Workhorse expects to generate as much as $125 million of revenue in 2023, but that will require an enormous ramp-up. Revenue in the first quarter was just $1.7 million.
If you want to diversify your portfolio exposure to the electric car sector and stay away from controversy, an alternative is to buy stock in any of these companies:
- QuantumScape (QS -6.88%): Maker of EV lithium batteries
- Blink Charging (BLNK -7.66%): Producer of electric car charging stations
- Hyliion (HYLN -7.04%): Manufacturer of EV drivetrains
- Luminar (LAZR 2.69%): Maker of autonomous driving technologies, such as Lidar
- Ballard Power Systems (BLDP -5.1%) and Plug Power (PLUG -1.38%): Developers of hydrogen fuel cell vehicle technologies
Yet another option is to buy shares of Lucid Group (LCID -2.41%). The luxury electric car maker produced just over 2,300 vehicles in the first quarter, and it's set a goal of producing 10,000 vehicles for the full year. Lucid raised $1.2 billion in additional capital in May, which will help cover its losses as it scales up production. Lucid stock is pricey, valued at $14.6 billion despite quarterly revenue of less than $150 million, so investors should tread carefully.
Electric car ETFs
Electric car ETFs
Investors seeking portfolio exposure to the electric car market but not wanting to select individual stocks can buy shares in exchange-traded funds (ETFs). There are plenty of options when it comes to electric vehicle ETFs, although none are pure-play investments in EVs.
Fidelity Electric Vehicles and Future Transportation ETF (NYSE:FDRV) is a fairly small but focused choice and includes many of the stocks noted above. It also includes companies like Intel (INTC 1.74%), Qualcomm (QCOM -0.85%), and Garmin (GRMN -1.03%), adding to the diversification of the offering while remaining true to EV-enabling technologies. Tesla is the largest holding at just more than 5.11%.
The Invesco WilderHill Clean Energy ETF (NYSE:PBW), which tracks the performance of the WilderHill Clean Energy Index, invests broadly in clean energy. Although no single stock comprises more than 4% of the fund's holdings, the ETF owns the stocks of plenty of electric car makers. The stocks of NIO, Tesla, and Workhorse Group are all held by WilderHill. The fund also owns shares of Blink Charging, lithium-ion battery maker Livent (NYSE:LTHM), and Plug Power.
The Global X Autonomous & Electric Vehicles ETF (DRIV -1.43%) invests in makers of electric and self-driving cars. But the fund mainly focuses on traditional automakers making forays into this space, such as Toyota (TM -0.54%), and large tech companies, including Apple (AAPL -2.19%) and Alphabet (GOOG -1.8%L) (GOOG -1.8%), developing autonomous vehicles.
What makes the electric car industry different?
What makes the electric car industry different?
The electric car industry differs from the traditional automotive industry because it is so new. Until recently, very few companies manufactured any kind of electric vehicle, but every major automaker in the world is developing or producing an EV now.
Because major interest in electric cars is so recent, the only established industry leader is Tesla. Start-up EV makers can compete fairly well with traditional automakers for electric car market share, making it difficult to discern which companies will ultimately dominate the market. That unpredictability makes investing in the electric car industry riskier than adding portfolio exposure to the automotive industry as a whole.
Related investing topics
Related investing topics
The future of the electric car industry
The future of the electric car industry
Multiple major automakers have recently adopted Tesla's EV charging technology, making it likely to become the standard in the U.S. This standardization should make purchasing and charging EVs simpler, which could help drive growth in the industry.
Many companies participating in the EV sector are going public, while legacy automakers plan to release a plethora of electric vehicles over the next five years. Investing in this highly competitive and fast-growing industry is likely to be profitable, but it's important to take steps to minimize your investment risk. Don't invest in just one electric car company but hold positions in several companies of various sizes and consider buying shares in an ETF.
