Stocks to buy

EV Stocks of Tomorrow: 3 Companies That Will Overtake Tesla in 2024

The electric vehicle (EV) market is in the midst of a slump in 2024. Interest rates remain elevated, and the Federal Reserve does not want to be hasty about cutting them either. Elevated rates for an elongated period not only risks slowing economic growth, but it can disincentivize consumers from purchasing products or assets normally bought using debt, such as cars.

Despite this, there are good reasons to invest in reasonably valued EV stocks, especially those poised to overtake Tesla (NASDAQ:TSLA) in terms of share price performance in 2024. These companies are trading at relatively cheap valuation multiples and, despite the broader slump, are continuing to invest in capturing market share.

For some perspective, Tesla’s shares are down more than 28% on a year-to-date perspective. This will make it easier for these three EV stocks below to beat TSLA this year.

BYD (BYDDY)

Source: T. Schneider / Shutterstock

BYD’s (OTCMKTS:BYDDY) growth in China and abroad appears unmatched at this point in time. Last year, BYD became the world’s top EV maker in 2023, trouncing its American rival Tesla in electric vehicle sales. In Q4 2023, BYD sold 526,409 electric vehicles, while Tesla sold 484,507. Despite an EV slowdown, BYD is still increasing its sales year-over-year. In particular, in January 2024, the company sold 205,588 electric vehicles, up 33.1% Y0Y but down more than 34% monthly. The Chinese EV maker was not the only large electric vehicle company to report a month-over-month decline in sales growth.

To cushion the slowdown in sales, BYD and its competitors have pursued price cuts in their expensive models. For example, the Yuan Plus SUV has a price tag of 119,800 yuan (US$16,642), which is nearly 12% less than where it was before.

Still, I would argue the Chinese EV giant’s growth cycle hasn’t peaked yet. The company continues to make strides in expanding its brand power abroad, with a new dealership partnership in Qatar and other partnerships in the making across Europe.

BYDDY, now larger than Tesla in EV sales, only trades at 15.7x forward earnings, which could present a great opportunity for interested investors.

Li Auto (LI)

Source: Andy Feng / Shutterstock.com

Li Auto (NASDAQ:LI) is another leading electric vehicle (EV) manufacturer from China. This EV maker particularly focuses on producing smart SUVs with extended-range technology. The company’s flagship model, for instance, is the Li L7, a five-seater premium SUV that can run on both electricity and gasoline and competes directly with Tesla’s Model Y.

Li Auto’s shares are off to bad start in 2024, despite the EV maker’s Nasdaq-listed shares having risen 83.5% in 2023. In the current year, LI shares are up 14.8% YTD, despite the broader market slump that has also slowed sales for the Chinese automaker. In particular, EV deliveries declined by 35% in February.

Since the start of trading in 2024, Li Auto’s share price is trading at an attractive multiple: 16.6x forward earnings. The company is a close competitor to Tesla in mainland China and could overtake the US automaker in sales in the near future, boosting shares in the process.

General Motors (GM)

Source: Jonathan Weiss / Shutterstock.com

In contrast, General Motors (NYSE:GM), one of the largest and oldest automakers in the world and has been one of the most aggressive players in the electric vehicle space, aiming to sell more than 1 million EVs annually by 2025 and achieve an all-electric portfolio by 2035. The legacy automaker has increased its exposure to battery development boasting its own battery platform called Ultium, which can power a variety of EV models with different sizes, shapes, and performance levels.

The U.S. automaker’s wide variety of EVs allows it to be a formidable contender in the burgeoning market. Stock market investors looking to benefit from the adoption of EVs should keep an eye on GM, especially as the company’s shares trade at only 4.5x forward earnings, well below Tesla’s shares which trade at 56.8x forward earnings.

On the date of publication, Tyrik Torres 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.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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