High valuations and geopolitical risks have led to some correction in stock prices this year. the Nasdaq Compound The index is still down nearly 10% year-to-date, even after recovering in recent sessions.
Shares of electric vehicle (EV) companies have also seen a considerable correction, which makes them attractive. Here are three downed electric vehicle stocks that are looking attractive right now.
Among new EV companies, Nio ( NI 6.53% ) seems particularly interesting. Founded in 2014, the Chinese electric vehicle manufacturer has already delivered around 183,000 electric vehicles until there. In 2021, Nio delivered 91,429 vehicles, an impressive 109% year-over-year increase. The company’s revenue for 2021 was $5.7 billion, up 122% from 2020. Nio generated a gross margin of 18.9% for the year. Overall, Nio turned in a strong performance in 2021.
Despite solid growth, Nio’s share price has been plunging widely for over a year. Increasing competition in the EV space is a key contributing factor to the stock drop. Nio faces fierce competition from established players, including You’re here, volkswagenand BYD, all of which are developing rapidly in China. At the same time, Nio also faces competition from newer companies, such as Li-Auto and XPeng, both of which have been growing their sales faster than Nio in recent times. Nio stock, which rose sharply in 2020, corrected last year on the above concerns.
It’s important to note that, despite the competition, Nio captures part of the growing EV pie. It has established itself as a premium brand for electric vehicles through its innovation and superior vehicles. Li Auto’s vehicles, for example, are equipped with a range extender similar to plug-in hybrids. These are not fully electric and their demand could drop once fully electric vehicles become mainstream. By comparison, Nio’s vehicles are fully electric.
Nio’s battery-as-a-service model – where drivers can quickly replace a depleted battery rather than recharging it – has also helped drive demand growth for its vehicles. The service also allows buyers to replace a battery with a larger or smaller battery if their needs change. Nio is positioning itself for the long term with its own charging stations. Overall, concerns about Nio seem overblown, and the stock looks like a steal right now.
Rivian ( RIVN -0.39% ) the stock has fallen about 53% year-to-date at the time of writing. The correction comes after the stock’s dramatic rise following its IPO.
Rivian has key advantages over the competition. First, it targets two of the most profitable and fastest growing automotive segments: SUVs and pickup trucks. Likewise, demand for electric delivery vans – another goal for Rivian – is expected to grow significantly as logistics and e-commerce companies work to decarbonize their fleets.
Secondly, Rivian’s van received very positive feedback and also won MotorTrend’s Truck of the Year Award. Third, quality products and brand image attracted potential buyers. Rivian has 83,000 pre-orders for its truck and SUV. Additionally, the company has an initial order for 100,000 delivery vans of Amazon.
Rivian is facing hurdles to ramp up production, which is hurting its stock price as well. The company cites supply chain challenges as the reason for its lower-than-expected production numbers. It also halved its 2022 production target. Rivian is working tirelessly to overcome the growing challenges and should be successful in doing so over time.
Overall, Rivian’s operations in a fast growing segment, the positive response for its vehicles and a strong backlog make it a worthy buy at current prices.
Lucid Group’s ( LCID 0.87% ) the stock has fallen 31% in 2021, at the time of this writing. Lucid has captured a lot of attention with its market-beating range of its Lucid Air model. The company’s drivetrain expertise is backed by years of experience supplying technology to world EV racing championships.
Like Rivian, Lucid also faces challenges in ramping up vehicle production. The company has cut its planned delivery figures for 2022 from 20,000 units to between 12,000 and 14,000 units. Notably, reservations for Lucid Air rose to more than 25,000 from 17,000 in mid-November.
The company is establishing a plant in Saudi Arabia with a capacity of 150,000 vehicles per year. The Saudi government is focused on reducing the country’s dependence on oil, and with a factory there, Lucid will also have access to nearby markets. As Saudi Arabia’s Public Investment Fund has a nearly 62% stake in Lucid, the planned expansion shouldn’t be a challenge for the company.
Even though Lucid is struggling with supply chain issues, it is increasing its production capacity. Along with the Saudi factory, the company is expanding its facilities in Arizona to produce 90,000 units, up from its current capacity of 34,000 units. As supply chain issues resolve, which Lucid is working on, the company should be able to quickly utilize the additional capacity.
Overall, while scaling challenges are hurting Lucid stock’s performance, it should pick up once the company resolves them. Now might be a good time to buy Lucid stocks to take advantage of the upside once they rally.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.