Despite being a hot investment trend, the electric vehicle (EV) sector faced challenges in 2023 with softened global demand. While the long-term outlook remains positive, caution is advised as not all EV companies will survive given the competitive and capital-intensive nature of the industry. Investors must choose wisely when looking at which EV stocks to buy, but with electric vehicles gaining market share, it’s an opportune time to position portfolios for the future.
The electric vehicle sector is currently exhibiting signs of weakness, with sales growth slowing due to high production costs and restrictive prices. Naturally, this would make some investors cautious. However, the growing interest in environmentally friendly vehicles could drive future sales. Improved production processes and optimized raw material acquisition may lower costs, making units more affordable.
Investors keen on the sector should consider companies with healthy financials, optimistic outlooks and future-oriented strategies. Here are three companies I highly recommend investors look into if they are interested in purchasing electric vehicle stocks.
Li Auto (LI)
Top Chinese electric vehicle manufacturer Li Auto (NASDAQ:LI) set new sales records in November driven by the popularity of its new EV models. Li Auto delivered 41,030 units, breaking its monthly sales record for the eighth consecutive month. Li Xiang, CEO of Li Auto, stated the company achieved its full-year delivery target ahead of time and is aiming for a 50,000 monthly delivery target in December to meet growing market demand.
The Beijing-based company’s success is attributed to its upscale SUVs, including the L7, L8 and L9, priced above RMB 300,000 (US $42,000). This pricing strategy positions Li Auto as a strong competitor to Tesla (NASDAQ:TSLA) given the robust demand for its new models.
Li Auto reported Q3 2023 revenue of $4.61 billion, up 271.6% year-over-year (YOY). Free cash flow reached $1.8 billion, supporting expectations of surpassing $10 billion next year. The company will be launching its high-tech flagship car the Li MEGA in February 2024. Aided by a retail expansion in China, this new addition to the company’s lineup is expected to boost delivery growth. With a $12.13 billion cash buffer, Li Auto has ample flexibility for innovation and product development. This is a good sign that Li Auto is one of today’s top EV stocks to buy.
Surge Battery Metals (NILIF)
Surge Battery Metals (OTCMKTS:NILIF) owns the Nevada North Lithium Project in Granite Range. October 2022 drilling revealed a 5,300-feet lithium-rich clay zone. CEO Greg Reimer prioritized sustainability, seeking collaboration with Kautz Environmental Consultants and other local groups. Stock signals were positive, with the short-term moving average outpacing the long-term, a key buy signal.
In October, Surge also obtained regulatory approval from M3 Metals Corp (OTCMKTS:MLGCF) for its option agreement, potentially acquiring a 20% interest in M3M Lands. Obtaining an extra 10% interest is possible through an additional payment and share issuance to M3M.
As of Dec. 6, 2023, NILIF stock traded at 37 cents per share, indicating an upward trend since inception over the past year. So while NILIF isn’t directly an electric vehicle company, if demand for lithium stocks picks up, this is a stock with big upside potential in an adjacent industry.
Nikola (NASDAQ:NKLA) is certainly among the higher-risk, more speculative names on this list. Indeed, seeing how hard the stock has been hit since its peak, this is a company many investors have clearly lost faith in. That said, I think there are reasons why this could be one of the speculative EV stocks to at least consider adding to your watch list.
In September, Nikola CEO Steve Girsky reported successful tests of fuel cell trucks covering 900 miles daily, showcasing the vehicle’s zero-emission capability. Girsky anticipates an announcement of deals to sell a substantial number of these trucks by year-end, supported by over 210 non-binding orders. These vehicles could gain popularity in California due to state rebates for companies with small fleets.
NKLA stock also rose approximately 10% on Nov. 2 following the company’s Q3 earnings report. In August, Nikola recalled all 209 Class 8 Tre battery-electric trucks due to fire risks from leaked coolant in the battery packs. The recent report revealed an expected $61.8 million cost for recall, battery repair and re-engineering.
Despite the recall, Nikola recently received an order from a dealer for 47 battery-electric trucks. The company aims to resume deliveries in Q1 2024. The hydrogen-fuel truck garnered 277 non-binding orders. With growing demand, Nikola’s stock has the potential for significant upside making it another intriguing option for investors looking for EV stocks to buy for the next five years.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.