Are These 3 EV Stocks Good To Invest In This Year?

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Global sales of electric and plug-in hybrid vehicles grew 21% in July, driven by China’s strong performance. Despite weak European demand for EVs, and waning interest in electric vehicles from U.S. consumers who are increasingly looking at hybrids and lower-cost ICE vehicles, China remains the growth engine of the global EV market. In fact, domestic sales of EVs in the Chinese market just surpassed the 50% threshold . This means that in short order, most of the vehicles on Chinese roads could be powered by electricity, greatly reducing pollution-related issues in the country, a clear goal of the central government.

Thus, while companies like Tesla ( NASDAQ:TSLA ) continue to get most of the love from investors, there are certain Chinese EV stocks I think could be better picks in this environment. And with the Chinese stock market down considerably from its post-pandemic peak, it may be possible to invest in such names at valuations investors may not think are real.

These are companies that are seeing impressive growth. Notably, this growth is expected to continue for a very, very long time. And while U.S.-listed ADRs may not be for everyone, for those willing to take the risk, I do think there's some incredible value to be had in thinking about the EV sector as a global one.

For those willing to do so, here are three picks I think are worth considering right now.

Key Points About This Article:

• The EV market is a global one, and many U.S.-based investors may be ignoring the real engine of growth in this sector - China.
• These three Chinese EV stocks look very attractive at their current multiples, and while risks exist, could represent the best bets in this sector long-term.
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BYD Co. (BYDDF)

A BYD automobile in a showroom

In the first five months of 2024, BYD ( OTCMKTS:BYDDF ) sold 1.27 million new energy vehicles in China, surpassing Tesla as the world's highest-volume producer of electric vehicles. Given the sheer amount of press Tesla gets stateside, it may be hard to believe that's true. But BYD is on pace to dwarf Tesla over the long-run, and currently trades at a valuation that's roughly one-seventh that of Tesla ($96 billion versus $700 billion).

Tesla's CEO Elon Musk is talking a big game about his robotaxi and robotics/AI ambitions. But BYD's technological advancements, its portfolio of vehicle options, and its market dominance in the fast-growing Chinese market position this stock as the better long-term bet in my view.

And with Berkshire Hathaway (NYSE:BRK-B) CEO Warren Buffett giving BYD a serious vote of confidence (BYDDF stock makes up 0.5% of his portfolio of publicly-traded stocks), that's an indication that there's some serious mental firepower who agrees with my view.

Rising global competition and price cutting measures have done little to slow BYD's market share rise, dominating more than 35% of the Chinese EV market, with global ambitions. For those betting on which company may be the global powerhouse in the EV sector, BYD should be a top contender right now.

Li Auto (LI)

A Li Auto vehicle at the Los Angeles auto show

One of the most undervalued EV stocks in the market could be Li Auto ( NASDAQ:LI ). Trading at just 13-times trailing earnings and less than 9-times forward earnings , this is a highly-profitable EV maker many investors have simply moved on from.

The company has seen slow model launches in the past, and the company's weak Q1 deliveries numbers did miss expectations. That said, Li Auto's record-breaking July deliveries numbers and strong demand for its new L6 model suggest a turnaround for this stock could be imminent.

Other geopolitical concerns have also plagued the company, like the other EV stocks on this list. But with healthy margins, efficient operations, and plan to launch  its level-3 self-driving model in 2025 , there's a lot to like about how this stock is positioned on relative to the competition.

Additionally, unlike so many EV makers out there, Li Auto has a rock-solid balance sheet supported by $13.7 billion in cash reserves, and the apparent ability to continue ramping up production. With a record 51,000 vehicles produced in July , Li Auto is posting near-50% growth rates (remember those days, Tesla investors?). In many ways, I view LI stock as the Tesla of China a few years ago, without the exorbitant valuation multiple. This is a stock I'm shaking my head at, when it comes to how cheap it's trading on a relative basis.

XPeng (XPEV)

An XPeng vehicle stock photo

Xpeng ( NYSE: XPEV ) rounds out this list of Chinese EV stocks I think has been unfairly punished by the market. Among the smaller Chinese EV producers, Peng's brand and model lineup is competitive with its peers. The company has stood the test of time, celebrating its 10th anniversary, meaning XPeng really is among the "old guard" in this relatively nascent sector.

The EV maker announced strong pre-orders in July, while also announcing its official launch of its Mona lineup models . This Mona EV will round out a rather impressive and diverse set of models, including its infamous P7 series sedans, X9 MPV, G9 SUV, and more. The P7+ sedan is expected by Q4 2024, and the company's Mona lineup originated from Xpeng's acquisition of Didi Global's EV business in August 2023.

XPeng's ability to beat future vehicle deliveries targets and communicate a path toward profitability will be important for the investment thesis in this name. Certainly the most speculative name on this list, if XPeng figures out the profitability piece of the puzzle, I think this stock could turn out to be similarly undervalued over time.

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