The automotive industry is on a steady growth path, with the electric vehicle (EV) segment leading the charge. Growing momentum and technological advancements are there to adhere to consumer demands, alongside new government policies. As the industry moves towards a cleaner and sustainable future, it opens the door for investors to profit from it.
Around the end of 2024, the number of EVs sold globally was predicted to surpass 17 million, which is a significant jump from 13 million in 2023. Though the electric vehicle witnessed an increasing number of challenges last year, 2025 could bring new opportunities for the industry. Stepping into the new year could help revitalize investor sentiment for the EV market, and bolster investor confidence going forward.
Ford Motor Co.
Ford Motor Company (F) has been aggressively entering the EV sector. With models like the Mustang Mach-E and F-150 Lightning, the company has become a strong contender for other legacy automakers. Ford’s Q3 2024 report shows an upward trend. For the reported period, revenue of $46 billion rose 5% compared to Q3 2023. This marks the 10th consecutive quarter with a year-over-year (YoY) increase.
The share performance throughout 2024 saw a good amount of ups and downs. At the beginning of the year, F prices were below the $12.00 mark and showed a gradual increase for the first three quarters. In the past 12 months, Ford has managed to remain profitable, despite the increased competitive market landscape.
Additionally, the company has reported a positive free cash flow for the last five years, however in the last reporting quarter, EBITDA of $2.63 billion declined 14.16% year-over-year. Based on the current Return on Equity (ROE), F delivers a value of 7.96%, outperforming a robust 77% of industry leaders, and delivering an ROE above industry average.
Li Auto Inc.
China-based Li Auto (LI) has been supplying electric vehicles for over a decade and has shown significant growth in the past years, a trend that should continue throughout 2025. To put that into perspective, the company delivered over 500,000 vehicles in 2024 and currently projects a 40% increase for this year.
Looking at Li Auto’s Q3 report for 2024 shows growth across the board. The company delivered over 150,000 vehicles in 2024, which is a 45.5% increase YoY. Total sales for the reported period was $5.9 billion, an increase of 22.9% compared to Q3 2023, and up 36.3% quarter-over-quarter (QoQ). Quarterly revenue of $6.1 billion and gross profit of $1.3 billion delivered a significant increase compared to Q3 2023.
Share prices peaked at over $46.00 at the end of February 2024, before sliding, and ending the year at $24.75 per share. Li Auto’s strong market share, coupled with a slow, but modestly growing presence in Europe could be crucial to its near-term price performance.
A fundamental analysis by investment research firm Validea, shows that LI managed to deliver positive ratings for its total debt to equity ratio, while maintaining solid free cash flow per share performance. In Q3 2024, total EBITDA reported of $3.88 billion was an impressive improvement of 40.79% YoY.
However, on the near-term three year outlook, Validea analysts see a decline in the company’s net average profit margin, which could further deteriorate the company’s free cash flow, which has been on the decline year over year, falling 49.07% in the recent reporting quarter.
Stellantis
One of the larger players in the EV market is Stellantis (STLA). With 14 iconic brands in its portfolio, the company is following ambitious EV plans. As part of its Dare Forward 2030 initiative, Stellantis plans to invest over €50 billion ($51.53 billion) in electrification and is aiming to offer over 75 different electric vehicles in primary markets.
Stellantis’ Q3 2024 report shows a drop in numbers when compared with previous periods. Total net revenue for Q3 2024 declined by 27% to $34.01 billion (€33 billion) compared to Q3 2023. The drop in revenue was largely attributed to lower vehicle shipments and the impact of foreign exchange fluctuations.
Despite these challenges, the reception of new products has been positive, showing an increase in interest in new models, including several electric powertrains. Despite showing numbers below the company’s potential, Stellantis remains dedicated to addressing operational issues and further electrifying its upcoming vehicle line-ups, including several legacy models.
STLA started 2024 around $23.00 and had an upward trend for most of Q1, nearly peaking at $30.00 per share. However, throughout much of last year, share performance waned, falling down to $13.00 per share during the last three months of 2024.
A closer look at STLA fundamentals shows that the company has been struggling to maintain a positive balance sheet. The negative results have mostly been attributed to slower demand and sales in major markets, including the United States. However, the company projects that a more business-friendly friendly environment under the Trump administration would help them to bolster income and near-term profitability.
For the period ending June 30, the company reported a 48.51% decline in year-over-year net income at $2.81 billion. Return on Assets has remained in the positive range at 4.78%, with return on capital of 8.63%. Looking ahead, there’s plenty of room for improvement, and the changing political scene in the U.S. could bring much-needed relief for the automaker.
Toyota Motor Corp.
For many people, Toyota (TM) isn’t the first name that comes to mind when talking about electric vehicles. The company manufactures several electric-only and hybrid models, including hybrid versions of the popular Corolla and Yaris models, as well as the electric bZ4X. As a legacy automaker, the company focuses primarily on delivering high-quality powertrains and providing consumers with increased digital innovations in their line-ups.
The FY2025 semi-annual report shows mixed results. Sales revenue totaled $147.6 million (JPY 23.28 billion), an increase of 5.9% compared to the same period of 2024. North America and Europe were largely responsible for the increased sales performance; however, Toyota reported a decrease in parts of Asia, including Japan.
On the other hand, total operating income of $15.60 billion (JPY 2.46 billion) decreased by 3.7% due to higher operational costs and material costs. Despite the not-so-impressive numbers, Toyota’s position in the EV segment is cemented in its approach to growing the number of options, which is evident from the announced models for 2025.
Fundamental delivery shows that there is long-term potential for the Toyota Group. Shares of the company have remained largely undervalued by an average of 19%, according to one analysis. Despite this, the company holds a modestly positive balance sheet, but there is still room for improvement.
In the last couple of years, EBITDA delivery has been making steady progress. In 2023, the company reported EBITDA of $33.12 billion, a decline of 16.3% the year before. However, in 2024, conditions improved, with an EBITDA of $46.42 billion, and posting a 40.1% increase. Return on capital remains on the lower end at 3.92% for the period ending September 30.
BYD Company Ltd.
Contrary to popular belief, BYD, which is short for Build Your Dreams, has been on the market for longer than most people think. With over 3 decades, it positioned itself as a leader in the EV segment. To put that into perspective, in 2024, BYD managed to surpass Tesla (TSLA) in revenue numbers, something we haven’t seen from other brands. Strong global presence, and a surge in new vehicle deliveries could make BYD a leading competitor for Musk-owned Tesla.
The company’s Q3 report for 2024 shows just how much it has grown. BYD had a reported income of $1.58 billion (RMB 11.61 billion) , which is 11.47% more than the same quarter of 2023 and a 28.08% increase in Q2 2024. The reported revenue of $27.43 billion (RMB 201.12 billion) is an increase of 14.16% compared to Q2 and a 24.04% increase to Q3 2023.
BYD delivers an impressive balance sheet. Starting off with the return on capital which was 10.45% for the period ending September 30. Similarly, return on assets remained stable at 9,08% for the same reported period. Elsewhere, investors might have noticed the modest improvements in EBITDA, which rose 5.66% to $298.4 million in the last reporting quarter.
During Q3, the company sold over 1.13 million vehicles, which is a 15.02% increase over the previous quarter. Earnings Per Share (EPS) rose 6.72% in Q3 2023, and provides an attractive short-term investment return. However, limited dividend opportunities stand as one of BYD’s biggest drawbacks, but analysts are positive that the P/E ratio of 14.55 will present larger long-term returns.
Conclusion
As the EV market continues to expand at a fast pace, investing in EV stocks offers a unique opportunity for investors to capitalize. The transition towards sustainable transport, followed by the supporting industries, means that the EV segment is on a growth path. This is good news for investors looking to invest in this segment, and today’s five stocks can be an excellent option that can result in a solid profit.
While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Disclosure: I have a tiny position in Tesla. No positions in any other stocks.
