Key Points
- Tesla shares are up 140% this year so far.
- Ford offers a solid low-risk alternative to those looking for EV exposure.
- NIO is riskier but has greater potential for higher returns.
- 5 stocks we like better than Tesla
The electric vehicles (EV) industry has been one of the hottest out there in recent years. And even though the rising interest rate cycle has made it more expensive for EV stocks, which are growth stocks by definition, to fund their expansion, it feels like it’s an unstoppable force at this point.
At this stage, all of our readers will be familiar with Tesla Inc NASDAQ: TSLA, with many surely having already owned shares at some point.
But while Tesla, in our view at least, remains the out-and-out leader in the space, competition has been heating up. Just because Tesla has a first-mover advantage and is many years ahead of its peers doesn’t mean there’s not still an opportunity to be had in alternative EV stocks. Here are two worth keeping on your watchlist.
Ford is arguably the most established of Tesla’s competition. It has a history going back 120 years, as well as a brand name that is just as recognizable. In addition, it’s already turning over tens of billions in revenue every quarter, which effectively removes the business continuity risk that has plagued many of the not-yet-at-market alternative EV stocks.
It took some time for their EV plans to get off the ground, but the past two years have seen them starting to close the gap to Tesla seriously. Ford is targeting an EV production run rate of 600,000 vehicles by 2024 as part of its longer-term goal of hitting 2 million. These are astonishing numbers and indicate how seriously Ford is taking its EV business. Investors haven’t ignored it either.
The past year has been tough for both stocks, but Ford avoided the 60% haircut that Tesla investors had to stomach. To be fair, Ford’s rallies have also been less aggressive, but it’s still only down 18% compared to last August, while Tesla is down 13%. If we rewind the clock to August 2020, both stocks are neck and neck with gains of 85% each.
The last week of July saw Ford beat their Q2 earnings estimates while also raising their forward guidance. Forecasted EV demand is playing a prominent role in this, and investors looking at an alternative to Tesla have a strong option with Ford.
If Ford is to be considered the most established alternative to Tesla, then NIO represents the newer wave of EV stocks that are still winning investors’ confidence. While Ford has effectively traded sideways for the past year, NIO shares were down as much as 65% coming into the summer.
A recent rally has taken the edge of that drop, but they’re still trading lower by 35% versus where they were this time last year. This is indicative of falling confidence in the market that NIO can ever live up to the hype that sent their shares on a 3,000% rally in 2020.
But with a clear bottom having been put in, those of us on the sidelines can get a clearer picture of where things might be going in the near to medium term. For starters, NIO’s July deliveries out of China saw a 90% jump month on month. This helped drive a 103% year-on-year jump, with a cumulative delivery number for the year of 364,579.
By any measure, these are good results, which makes the recovery potential in NIO particularly appetizing. As recently as June of this year, NIO shares were trading back at their 2018 levels. For context, their quarter revenue has increased 42,000% in the five years since.
NIO’s chart over the timeframe doesn’t make for pretty viewing, but there’s an argument to be made that they’ve had their baptism of fire and are actually starting to mature as a bonafide EV company. They remain the riskier of the two alternatives but, at the same time, hold the greater potential for another eye-watering rally.
Before you consider Tesla, you'll want to hear this.
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