Stocks to buy

Electric vehicle (EV) stocks have regained momentum as rising gas prices and growing consumer interest in electric vehicles create a favorable investment landscape. Investors seeking high returns are flocking to this segment, recognizing its potential for long-term gains in the battle against climate change.

While there are plenty of EV stocks to choose from, three stand out in particular. Let’s dive into why these companies may be worth considering as EV investments to hold until 2033 and beyond.

Li Auto (LI)

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Li Auto (NASDAQ:LI) has excelled in the Chinese EV market, witnessing a remarkable 62% year-to-date (YTD) stock value increase. Its robust financials and consistent vehicle delivery growth have propelled its success. Despite challenges like pricing wars, Li Auto delivered 52,584 vehicles in Q1, marking a substantial 66% year-over-year growth.

In May, Li Auto achieved a remarkable 146% year-on-year increase in deliveries, with a total of 28,277 vehicles. This outstanding growth can be attributed to two factors: aggressive retail expansion within China and the launch of new models like Li L7, Li L8, and Li L9. I anticipate that delivery growth will continue to be strong, even in 2024.

Additionally, the company’s robust cash flow, highlighted by a Q1 2023 free cash flow of $976 million, provides financial flexibility for product development and future international expansion. If the company can continue to post these kinds of numbers, this long-term stock investment can reward investors.

Byd Co. (BYDDF)

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BYD Co. (OTCMKTS:BYDDF) emerges as a formidable contender alongside Tesla (NASDAQ:TSLA) and VW in the race for future EV dominance. With China’s rapidly growing EV market and a strong appetite for continued growth, BYD has the potential to lead in the next five years. Although Tesla currently holds the lead, BYD’s promising trajectory is evident, making it one of the top EV stocks to hold. Despite selling fewer EVs than Tesla, BYD’s car deliveries surged by 85% year-on-year, outpacing Tesla’s 36% growth.

BYD has expanded its offerings with the launch of Fang Cheng Bao, a brand featuring sports cars and off-road models. While rooted in China, BYD has a strong presence in international markets and is actively expanding globally. The company recently introduced the BYD Dolphin in Australia.

As an EV battery manufacturer, BYD is poised to benefit from the increasing demand for EVs. It aims to ramp up the production of lithium iron phosphate Blade Batteries and has made a significant investment of $1.2 million in its Chinese plant.

Tesla (TSLA)

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There are certainly reasons to be skeptical of Tesla’s (NASDAQ:TSLA) recent performance and current valuation. I’ve been among the skeptics that have pointed out various factors which could lead to some underperformance for Tesla relative to its peers (namely, competition) in the past.

However, the fact remains that Tesla is currently by far the largest EV company in the U.S. Tesla’s influence extends beyond electric vehicles, as it has become a leading manufacturer of lithium-ion batteries. This technological expertise strengthens its position in the EV industry and opens doors to other energy-related markets. Tesla’s commitment to innovation in areas like EV autonomy and self-driving technology, along with its focus on cost efficiency, drives its success.

In Q1 2023, the company showcased impressive profitability, achieving an 11.4% operating margin and reporting a GAAP operating income of $2.7 billion and a net income of $2.5 billion. Additionally, Tesla’s operational performance has been outstanding, with the Model Y becoming the top-selling vehicle in Europe and the U.S. (excluding pickup trucks) during the first quarter.

Tesla continues to dominate the EV market with impressive financial performance. Aggressive price reductions have led to strong delivery growth and increased profitability. CEO Elon Musk’s dedication to innovation and cost reduction, combined with Tesla’s position as a leading lithium-ion battery manufacturer, provides a significant advantage over rivals. 

Thus, for those looking to bet on this sector with a long-term perspective, historically speaking, no stock has performed better than Tesla thus far. Accordingly, this is one investors will want to watch, whether they like the company and its CEO or not.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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