In this article, we will discuss: 8 Most Promising Car Stocks According to Hedge Funds.
U.S. new-car sales in 2024 continued to grow from their pandemic lows, backed by replenished inventories, increased reductions, and surging demand for hybrid vehicles, as reported by Reuters. According to Wards Intelligence, new car sales in the United States reached 15.9 million in 2024, up by 2.2% from 2023, marking the highest number since 2019. Sales momentum is anticipated to continue into 2025, but demand could be disrupted by proposed policy changes, such as the possible elimination of EV tax benefits. Sales of conventional hybrid vehicles grew by 36.7% year over year, surpassing the growth of electric vehicles as buyers favored trucks, SUVs, and hybrids with gasoline engines over fully electric ones. While several competitors struggled to adjust to the slowing demand for electric vehicles and changing consumer preferences, the top-selling manufacturer of cars delivered 2.7 million vehicles last year, up by 4.3% YoY.
According to S&P Global’s report, US car sales ended 2024 strongly, with December sales anticipated at 1.45 million units, or 16.5 million (seasonally adjusted annual rate: SAAR), which was in line with November’s pace. This caused the average SAAR for Q4 to rise from 15.6 million for the previous three quarters to 16.4 million units, the highest since Q2 2021. Sales are projected to total 16.18 million units in 2025, up 1.2% from the previous year. Nonetheless, affordability, high prices, and persistent inflation continue to be major obstacles. Since June, the battery-electric vehicle share has risen above 8%, reaching 8.6% in September 2024. As purchasers rush to take advantage of the Federal EV subsidies that expire in early 2025, the December BEV share is forecast to surpass 9%.
Looking ahead, Chris Hopson, manager of North American light vehicle sales forecasting for S&P Global Mobility, commented:
“2025 brings with it mixed opportunities and uncertainty for the auto industry as a new administration and policy proposals take hold.” “Unfortunately, the new vehicle affordability issues that coalesced to constrain auto demand levels for much of 2024 will not be resolved quickly in 2025. Vehicle pricing levels are expected to decline but remain high; interest rates are expected to shift further downwards, but inflation levels are anticipated to remain sticky, and new vehicle inventory should also progress, but careful management is expected too. Combined with an uneasy consumer, we project this translates to mild growth prospects for US auto sales.”
Recently, on February 1, 2025, US President Trump announced three Executive Orders restructuring trade with Canada, Mexico, and China, imposing sweeping new tariffs that turned the existential danger to the stability of the North American automobile ecosystem into a reality. The United States imposed a 25% tax on Canadian and Mexican imports, including automobiles, with effect on March 4, 2025. Furthermore, a 10% tariff was imposed on Chinese goods, raising the overall tariff on certain Chinese imports to 20%. A 2.5% MFN tax, a 25% automobile tariff, and a 100% electric vehicle tariff are already applied to some Chinese products. Canadian energy (natural gas and oil) was the only exception, receiving a 10% tariff. In response, Canada imposed a 25% tax on US imports valued at CA$30 billion, with plans to raise the tariff to CA$125 billion after 21 days. Mexico is expected to shortly announce countermeasures in the wake of China’s severe import taxes on non-automotive US goods. The immediate interruption of more than 20,000 vehicles per day across North American production, which consists of 63,900 light vehicles per day (41,700 in the US, 17,600 in Mexico, and 4,600 in Canada), is put at risk by these taxes.
Three scenarios are projected by S&P Global Mobility. According to the firm, there is a 70% chance that the tariffs will be lifted in two weeks with little long-term harm. Secondly, a 20% probability that the disruption will last six to eight weeks, delaying product launches and reducing short-term production before rebounding within a year. Lastly, a 10% “Tariff Winter” scenario with extended tariffs will reduce US vehicle sales by 10%, Mexico by 8%, and Canada by 15% in addition to plant underutilization, sourcing changes, and labor shortages. Mexican production plans are already being reexamined by automakers such as Honda. President Trump used the International Emergency Economic Powers Act (IEEPA) to defend the tariffs, claiming that fentanyl smuggling and illegal immigration were national crises that permitted their implementation without the consent of Congress.
With that said, here are the 8 Most Promising Car Stocks According to Hedge Funds.
A modern car on a highway, its wheels reflecting the setting sun.
Methodology
We sifted through holdings of Car ETFs and online rankings to form an initial list of 20 car stocks. From the resultant dataset, we chose the top 8 stocks most favoured by hedge funds, using Insider Monkey’s database of 1009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
8. Rivian Automotive Inc. (NASDAQ:RIVN)
Number of Hedge Fund Investors: 40
One of the Most Promising Stocks, Rivian Automotive, Inc. (NASDAQ:RIVN) is an automaker that designs and manufactures electric vehicles as well as software and services. It launched its consumer car business with the R1 platform, which includes two vehicles: the R1T and the R1S. The company’s two reportable segments are the Software and Services segment and the Automotive segment, which generates the majority of its revenue. The manufacturing and sale of new EVs as well as the sale of regulatory credits produced by the production and sale of EVs provide the Automotive reportable segment with its revenue and cost of revenues. The Software and Services reportable segment’s revenues and costs are primarily derived from remarketing, vehicle repair and maintenance services, vehicle electrical architecture, and software development services.
The fourth quarter of 2024 saw a $170 million gross profit for Rivian Automotive, Inc. (NASDAQ:RIVN), due to increases in fixed expenses, revenue per delivered unit, and variable costs. The business believes that these improvements will help it in the long run and put it in a good position to make a small gross profit in 2025. In the fourth quarter of 2024, it announced record revenues, fueled by growth in software and services, sales of regulatory credit, and higher R1 average selling prices as the Tri-Motor offering became more accessible. Overall, Q4 2024 had a 33% YoY growth in revenue.
According to the company, it will offer a hands-free driving option later this year. Furthermore, Rivian Automotive, Inc. (NASDAQ:RIVN) reported that other automakers are considering purchasing technologies from its Volkswagen joint venture.
The financial results of Rivian Automotive, Inc.’s (NASDAQ:RIVN) joint venture with Volkswagen have been consolidated. The venture is expected to generate $2 billion in revenue over the next four years. The business raised a substantial amount of money as well, boosting its short-term investments and cash equivalents to $7.7 billion.
7. Ford Motor Company (NYSE:F)
Number of Hedge Fund Investors: 45
Revenue Growth Rate (year-over-year): 5.00%
Ford Motor Company (NYSE:F) is known to investors as a global leader in the pickup truck and commercial vehicle markets. The carmaker is currently making investments in automated and electrified cars to keep that advantage. The firm is concentrating on cutting costs and EV capacity to turn its EVs profitable, although comparatively high loan rates have slowed EV growth in recent years.
The business has been actively reorganizing its activities in an effort to increase productivity. The carmaker has reduced its presence in Europe and pulled out of weak areas like Brazil and India in an effort to lessen its worldwide footprint. Ford Motor Company (NYSE:F) is now able to concentrate more on growing its electric vehicle initiatives thanks to this strategic change. The company recorded $48.2 billion in revenue for the fourth quarter of 2024, a 5% increase over the same period the year before, making it one of the Most Promising Stocks.
Ford Motor Company (NYSE:F) manufactures, distributes, and sells automobiles. Significant losses in its electric car division, however, reduced the profits from sales of its conventional combustion engines, even though the company ended the 2024 fiscal year with outstanding overall performance. Further uncertainty has been brought about by the escalating trade tensions with Canada and Mexico, as possible tariffs on imported goods and supplies could present new dangers.
Ford Motor Company (NYSE:F) reported $15.4 billion in operational cash flow and $6.7 billion in free cash flow for 2024, demonstrating strong cash flow management. The company projects that adjusted free cash flow will be between $3.5 billion and $4.5 billion in 2025 and adjusted EBIT will be between $7.0 billion and $8.5 billion. Capital expenditures for the year are estimated to range between $8 billion and $9 billion.
