We recently compiled a list of the 8 Fastest Growing Auto Stocks to Invest in Now. In this article, we are going to take a look at where Li Auto Inc. (NASDAQ:LI) stands against the other auto stocks.
Auto Sector Outlook 2025
On December 20, 2024, S&P Global released its auto sales forecast for 2025. The report forecasts a slight decrease in global light vehicle production for 2025, estimating a 0.4% decline to 88.7 million units. Moreover, the production is also expected to fall slightly by 1.6%, with production levels finishing at 89.1 million units. The report predicts this decline to be across all regions except mainland China and South America. The primary factor influencing the 2025 outlook is the anticipated implementation of a widespread tariff regime by the incoming US administration, which includes a universal 10% tariff on all goods entering the US and a 30% tariff on goods from mainland China. You can read more about it in our article titled, 11 Best Undervalued Stocks to Invest in Now.
While elaborating on the expectations from a regional point of view, the report highlights stable production levels in Mainland China for 2025. The production level is anticipated to rise slightly by 0.1% to 29.6 million units. This will be driven by strong domestic demand for New Energy Vehicles and robust exports, though tempered by EU import tariffs on Chinese-made BEVs. On the other hand, in North America, the overall production is set to decrease by 2.4% to 15.1 million units. The report highlights that the US administration’s policies are expected to influence overall demand and challenge vehicle mix assumptions. Deregulation could provide tailwinds for the North American auto industry later in the administration’s second term.
Production in Europe is expected to reach 16.6 million units in 2025, a 2.6% decrease from the estimated 17.0 million in 2024. This reflects adjustments in the propulsion mix in preparation for the 2025 EU emissions rules, along with new tariffs associated with the Trump administration, which particularly impacts premium vehicles.
Despite concerns around electrification, the report expects electric vehicles to remain a significant growth sector. Global sales for battery electric passenger vehicles are projected to reach 15.1 million units in 2025, indicating a 30% increase compared to 2024 and accounting for an estimated 16.7% of global light vehicle sales. Moreover, in 2024 an estimated 11.6 million BEVs were sold globally, representing a 13.2% market share.
Our Methodology
To compile the list of 8 fastest growing auto stocks to invest in now, we used the year-over-year sales growth and 3-year sales growth as our primary indicators. Using the Finviz stock screener, we looked for auto manufacturers, auto parts, and auto and truck dealership companies that have a year-over-year sales growth of more than 15%, followed by a positive 3-year sales growth. We cross checked these figures from Seeking Alpha and ranked the eligible stocks in ascending order of the number of hedge fund holders sourced from Insider Monkey’s Q4 2024 database.
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).
A factory worker welding a car body with precision.
Li Auto Inc. (NASDAQ:LI)
Year-Over-Year Sales Growth: 42.25%
3-Year Sales Growth: 90.48%
Number of Hedge Fund Holders: 28
Li Auto Inc. (NASDAQ:LI) is a Chinese smart electric vehicle manufacturer. It makes electric SUVs and MPVs, with notable models including Li MEGA, Li L9, Li L8, and Li L7. The company also offers other services such as vehicle servicing, pick-up and delivery, data plans, and charging station installation.
On February 25, JPMorgan analyst Nick Lai upgraded the stock from Neutral to Overweight and also upgraded the price target from $22 to $40. The analyst noted that the decision was influenced by the unveiling of a photo of Li Auto’s second battery electric vehicle. Lai believes the i8 signifies Li Auto’s long-awaited BEV strategy. He anticipates Li Auto Inc. (NASDAQ:LI) sales volume will double to approximately 1 million units by 2027, with over 35% coming from new BEV models. Lai also noted the company leads in L2+ semi-autonomous driving technology compared to its Chinese competitors.
During the fiscal third quarter of 2024, the company grew its deliveries by 45.4% year-over-year to reach 152,831 vehicles. As a result, proceeds from vehicle sales grew 22.9% year-over-year with margins improving from 18.7% in Q2 2024 to 20.9% in the recent quarter. It is one of the fastest-growing auto stocks to invest in now.
Overall LI ranks 3rd on our list of the fastest growing auto stocks to invest in now. While we acknowledge the potential of LI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
