We recently compiled a list of the 8 Most Undervalued EV Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Toyota Motor Corporation (NYSE:TM) stands against the other undervalued EV stocks.
In 2024, the worldwide EV (electric vehicle) market value was roughly $1.32 trillion, as reported by Grand View Research, and it is expected to expand at a CAGR 32.5% between 2025 and 2030. Worldwide governmental rules and rewards are boosting EV sales. Numerous nations enact strict pollution laws and give rebates, tax cuts, and other benefits to buyers and producers, which pushes a change from gas-powered cars to electric ones. Furthermore, battery tech gains are improving EV range, power, and cost. New ideas like solid-state cells and better lithium-ion cells cut costs and boost energy storage, thus making EVs more attractive.
The EV sector navigated a turbulent 2024 due to macroeconomic pressures. Tradu recently reported that elevated inflation and surging interest rates globally constricted consumer spending, particularly on high-value items like EVs. This economic strain translated into a noticeable deceleration in battery electric vehicle (BEV) sales across key markets, notably Europe and the US. In Europe, BEV registrations experienced a decline, while hybrid vehicle sales surged. This reflected a consumer shift towards more affordable and range-extended options. The US market, while still growing, witnessed a slowdown compared to the previous year’s expansion. China, however, grew, with new energy vehicle (NEV) sales, which included BEVs, plug-in hybrids, and fuel cell vehicles, and surpassed 50% of total sales. This regional disparity underscored the varied pace of EV adoption worldwide.
Entering 2025, the EV industry anticipates a year of transition, marked by both challenges and opportunities. A risk lies in potential policy shifts, particularly in the US, where a change in administration could jeopardize existing EV incentives and regulations. The potential repeal of the federal tax credit, for instance, could impact EV affordability and demand. Furthermore, trade tensions, especially between China and Western nations, pose hurdles to market access. Increased tariffs and import restrictions could disrupt supply chains and limit consumer choice. However, there’s optimism for improved macroeconomic conditions. As inflationary pressures subside and central banks begin to lower interest rates, EV affordability is expected to improve. Moreover, the long-term trajectory towards electrification, driven by emission regulations and industry investments, appears irreversible.
A pivotal factor influencing EV adoption in 2025 will be the introduction of more affordable models. Recognizing the need to expand their customer base, major automakers are developing sub-$30,000 EVs. Chinese manufacturers, using their cost advantages and established supply chains, will play a role in this segment and offer competitive pricing and a wider range of models. The availability of affordable EVs is expected to be a major catalyst for market growth. Additionally, the advancements in autonomous driving technology are anticipated to revive the EV sector. While regulatory hurdles and safety concerns remain, 2025 could witness accelerated deployment of autonomous driving features. This will enhance the overall user experience and expand the potential applications of EVs. The convergence of electrification and autonomy will reshape the automotive landscape and drive innovation.
Our Methodology
We sifted through online rankings and stock screeners to compile a list of the top EV stocks that had a forward P/E ratio under 20. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
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).
Workers assembling a car in a modern manufacturing plant, emphasizing the company’s sense of progress.
Toyota Motor Corporation (NYSE:TM)
Forward P/E Ratio as of March 7: 9.22
Number of Hedge Fund Holders: 13
Toyota Motor Corporation (NYSE:TM) is a global automotive manufacturer. It operates through automotive, financial services, and other segments and designs, produces, and sells a range of vehicles. These include passenger cars, commercial vehicles, and EVs, under the Toyota and Lexus brands.
The company is transitioning from a hybrid-heavy portfolio to increasing its EV presence. However, 2024 saw less than 200,000 EV sales in the first 9 months. Still, the company targets 3.5 million annual BEV sales by 2030, with at least 30 BEV models in its lineup. Toyota Motor Corporation (NYSE:TM) is also investing $13.5 billion in EV battery development by 2030 and aims for solid-state battery commercialization by the same year.
On March 7, Toyota Motor Corporation (NYSE:TM) launched the Bozhi 3X in China, which is the company’s cheapest smart EV, with prices starting at 104,800 yuan and the smart version at 139,800 yuan. The launch saw over 10,000 orders within an hour of its release. Earlier on February 6, Macquarie analyst upgraded the company from Neutral to Outperform. Analysts expect the company’s near-term earnings to be weak due to slow volume recovery, but also predict that production stabilization will lead to steadier future earnings.
Overall TM ranks 6th on our list of the most undervalued EV stocks to buy according to hedge funds. While we acknowledge the potential of TM as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TM 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.
