The automotive industry remains in transition as automakers around the world shift their production to EVs as they grab for market share. The stakes are high. Fortune Business Insights forecasts that global sales of electric vehicles will triple to $1.5 trillion by 2030. Automakers are working overtime to make changes that will convince the public to make the switch from their gasoline-powered vehicles. The race has led to billions of dollars of investments in not only vehicles, but the battery technology needed to power them. The companies are also implementing discounts, price incentives and more than a few executive changes. The changes have been monumental and volatile – and they are not done yet. As the automotive industry’s frantic pace continues, let’s look at the three best auto stocks to buy now.
Toyota (TM)
Admittedly, Toyota (NYSE:TM) has run into a production issue. The world’s top-selling automaker recently halted operations at all 14 of its Japanese assembly plants due to parts sourcing issues. These impacted factories account for one-third (33%) of Toyota’s global automotive production. For sure, this is a problem. However it shouldn’t take away from the company’s impressive electric vehicle strategy released in June of this year.
Toyota produces an average of 13,500 vehicles daily when things are running optimally. The company aims to sell 1.5 million EVs a year by 2026 and 3.5 million battery-powered vehicles annually by 2030. The company is planning to convert nearly its entire line-up of cars, trucks and SUVs to electric versions. It also plans to manufacture the batteries needed to power them. Toyota’s new CEO, Koji Sato, made an agreement with its unions to the biggest base salary increase in 20 years.
TM stock has gained almost 27% this year as investors applaud the electric vehicle strategy. The share price is up nearly 50% over five years.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is facing near-term headwinds but a long-term growth trajectory. TSLA had a volatile summer, selling off sharply after the company’s Q2 earnings print and forward guidance underwhelmed Wall Street. The company’s share price recovered at the end of August, only to fall more than 5% at the start of September due to the company cutting prices on its electric vehicles to boost sluggish sales.
The company has been offering discounts and incentives to attract consumers who have begun delaying purchases of big ticket items such as vehicles. Most recently, Tesla announced that it is lowering the prices on its Model S and Model X electric vehicles by more than $30,000 each to qualify for U.S. government tax credits. The company also continues to cut prices in China, its second biggest market. While the lowered prices might impact short-term profits, long-term Tesla still looks like a good bet.
The company just launched a restyled Model 3 electric sedan with a longer driving range, which is debuting in China ahead of the U.S. The long-awaited Cybertruck is also expected this fall and Tesla is reportedly developing a supercomputer. Despite the summer volatility, TSLA stock is up 137% this year and almost 1,400% over five years.
Ford (F)
Tesla isn’t the only automaker lowering prices on its electric vehicles. In July, Ford (NYSE:F) announced plans to cut the price of its fully electric F-150 Lightning pick-up truck by as much as $10,000. It was news that also didn’t sit well with investors. However, Ford said the discounts are needed to boost sales. A shutdown in production due to a fire in one of the vehicles resulted in Ford selling less than 5,000 Lightning trucks in this year’s second quarter.
More bad news came with the Detroit automaker’s Q2 financial results as Ford pushed back the timing of its EV rollout. The company is now expected to be building electric vehicles at a rate of 600,000 a year in 2024, a delay from earlier estimates that it would reach that target this year. However, despite these issues, Ford’s latest print managed to exceed Wall Street expectations on the top and bottom lines. The company also raised its full-year guidance, as well as expected free cash flow that is now estimated to reach $7 billion by year’s end.
Ford is in labor talks with the United Auto Workers (UAW) right now but has an offer on the table with the union. F stock is down nearly 20% over the last 12 months. Buy the dip!
On the date of publication, Joel Baglole did not have (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.