Dividend Stocks

The 3 Most Undervalued EV Stocks to Buy Before They Drive Higher

We are all aware that the automotive future is electric, and there is no better time than now to invest in our future. If you are optimistic about the EV industry and its potential to reach new highs, now is the best time to invest in EV stocks. As per a report from S&P Global Mobility, EV sales in the US could reach 40% of the total passenger car sales by the end of 2030, and several other optimistic projections see the sales surpassing 50% by 2030. This will give a boost to the undervalued EV stocks in the industry.

Looking at the current state of adoption, it shouldn’t come as a surprise if the sales surpass 50% by the end of this decade. EV makers are increasing their production to meet the rising demand, and after suffering from the China lockdown and supply chain issues in 2022, EV stocks are ready to soar this year. This means it is time to buy EV stocks before they rise. With that in mind, let’s take a look at the three most undervalued EV stocks to buy before they drive higher.

Undervalued EV Stocks: General Motors (GM)

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One thing about General Motors (NYSE:GM) is that the company already has an established market and is an experienced automaker. Today, the company manufactures cars that people trust and want to buy. It started in 2023 on the right foot and has succeeded in larger SUVs and full-size trucks. It sold over 600,000 vehicles in the U.S. in the first quarter, up 18% compared to the previous year. 

The company is thinking about the future and is moving into the EV space at a fast pace. This is a perfect example of being at the right place and time. It sold more than 20,000 EVs in the U.S. in the first quarter, and it is in line with the target of making over 50,000 EVs in North America by June.

GM stock is trading at $33 today, approaching the 52-week high of $43. Following price cuts, GM’s Chevy Bolt, now America’s cheapest EV, has seen a sales rise of 50% compared to last year. The company plans to make a record 70,000 units this year and will stop production at the end of the year. My InvestorPlace colleague Samuel O’Brien thinks GM could be the next Tesla (NASDAQ:TSLA).

In the first quarter earnings, the company saw revenue growth of 11%, and the EPS came in at $1.69, up 25% compared to the previous year. The automaker has recently announced the Cadillac Escalade IQ, the first all-electric Escalade that will be revealed later in the year. GM remains one of the top undervalued electric vehicle stocks to own right now. The future potential of GM stock looks undervalued to me and could soar to new highs by the end of the year.

Ford (F)

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Ford (NYSE:F) is in the news for its recent partnership with Tesla, which has pressured several EV makers. Based on this deal, Ford owners will now get access to over 12,000 Tesla Superchargers in Canada and the U.S. starting in 2024. Even the next-generation EVs manufactured by Ford will use Tesla’s charging plug.

This means there will be growing interest in Ford EVs, and the owners can charge at Tesla Superchargers without needing an adapter. Ford will have an edge over other EV makers who do not have fast chargers. Tesla Supercharger network has already established several charging corridors across Canada, and the U.S. F stock is trading at $12 today. It is one of the best cheap EV stocks to own now.

Automaker Ford posted impressive quarterly results from the EV business separately for the first time. It did report a loss of $729 million, but the overall business has made a quarterly net income of $1.8 billion. The company aims to reach an EV production of 600,000 by the end of 2023, which will help reduce the losses. Ford is another automaker that will benefit from the Inflation Reduction Act as it will be able to save close to $7 billion in tax credits. There is positive sentiment surrounding the company, and I believe it will be able to accelerate production in the coming months.

Ford also leverages Chinese operations as its manufacturing hub for affordable EVs in South America and Australia. It will help expand its market and strengthen its position in the industry. Ford is one of the most undervalued EV stocks today.

Li Auto (LI)

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A hot stock in the industry today, Li Auto (NASDAQ:LI) is an automaker making big moves with its numbers. LI is one stock that has increased by 25% despite the market rout. While most EV makers delivered negative returns, Li Auto continued to benefit investors. LI stock is trading at $28 today, up 34% year-to-date. The stock has generated over 75% returns in the past five years.

The company reported a delivery growth of 65.8% on a year-over-year basis for the first quarter. It reported a net income of $136 million and held $9.4 billion in cash. It delivered 25,681 cars in April, over a 500% year-over-year rise. I believe the company will report strong numbers this month as well. Li Auto delivered 52,584 vehicles in the first quarter and aims to launch multiple models this year, which will increase delivery growth.

The automaker reported an impressive margin of 19.8% in the quarter despite rising inflation. It aims to deliver 76,000 to 81,000 vehicles in this quarter, and even if it just hits the lower end of the target, it will still mean significant year-over-year growth. If it manages to reduce the cost of production, it will be able to report even better results in the coming quarters. Li is one of the EV stocks with high growth potential in the industry. The automaker aims to triple the model lineup by 2025, leading to bigger delivery and revenue numbers.

On the date of publication, Vandita Jadeja did not hold (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.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.