In 2024, the landscape of electric vehicle (EV) sales faced unexpected challenges, with notable brands like Tesla recording a 1% decline in annual sales, marking its first downturn in over a decade. This decrease fell short of the company’s ambitious expectations and mirrored a broader trend within the industry, where overall growth also lagged behind analyst projections. This dip raises questions about market dynamics and consumer behavior in a rapidly evolving sector.
However, it’s essential to look beyond these initial statistics. Despite Tesla’s struggles, EV sales in the U.S. surged by 7.3% in 2024, resulting in a record-breaking 1.3 million electric vehicles sold. Globally, electric vehicles accounted for approximately 20% of total vehicle sales last year, indicating a robust and growing demand. Experts predict that this trend will continue for many years, if not decades, highlighting the long-term potential of the electric vehicle market.
For investors looking to capitalize on this ongoing growth trajectory, focusing on two promising stocks could be advantageous.
Explore Rivian: A Leading Contender in the EV Market
Among the various EV stocks available, Rivian Automotive (RIVN -2.50%) stands out as a compelling choice. This company represents an intriguing balance of risk and potential reward, though there are significant challenges that potential investors should consider. The journey of launching an electric vehicle company from the ground up is fraught with obstacles, particularly concerning the need for substantial funding.
Establishing an electric vehicle startup involves extensive effort and long hours, but the critical hurdle is often securing sufficient capital. The transition from concept to mass production can span a decade or longer, and many EV startups have succumbed to financial difficulties before even delivering their first vehicle. Rivian’s ability to navigate these challenges enhances its appeal in a crowded market.
What sets Rivian apart is its relatively small scale, with annual sales currently under $5 billion. Despite this, the company has demonstrated its capability to produce electric vehicles that resonate with consumers. According to a recent Consumer Reports survey, Rivian ranked highest among all car manufacturers for customer satisfaction and loyalty, outperforming both other electric vehicle brands and traditional automakers.
Nonetheless, Rivian faces ongoing financial challenges, as it continues to incur losses on each vehicle sold, with over $1 billion in cash burned last quarter alone. However, there is hope for a turnaround as the company prepares to launch three new mass-market models in 2026, all expected to be priced below $50,000 for the base model. If successful, these launches could significantly boost sales and reinforce Rivian’s reputation for quality.
Currently, Rivian shares are valued at just 2.8 times sales, compared to Tesla’s 13.6 times. While these companies are not exactly comparable, Rivian’s projected revenue growth and potential shift to profitability could considerably narrow this valuation gap. Investors looking to benefit from Rivian’s future success will need to exercise patience for another year or two.
RIVN Revenue (TTM) data by YCharts
Lucid Group: Unlocking Significant Growth Potential
If you’re seeking maximum growth potential, look no further than Lucid Group (LCID -2.08%). Currently, Lucid’s sales base is approximately 80% smaller than Rivian’s, and the company has yet to launch mass-market models that could significantly increase its growth trajectory beyond its existing luxury offerings.
Despite its smaller size, Lucid’s streamlined operations may allow it to sustain higher growth rates compared to Rivian in the near term. Recently, the company launched its Gravity SUV platform, which is expected to drive additional sales. In fact, January saw a remarkable 50% increase in sales compared to the previous year, although the total number of vehicles sold remains modest at just 665 units.
LCID Revenue (TTM) data by YCharts
While Lucid presents appealing near-term growth prospects, its valuation raises some concerns. The company’s shares are currently trading at 9.2 times sales, compared to Rivian’s more attractive 2.8 times. Nevertheless, analysts anticipate a staggering 117% growth in sales for Lucid this year, while Rivian is expected to see a modest 11% increase. While Rivian may offer superior long-term growth potential and valuation, those eager for immediate sales growth may find Lucid to be the more compelling option.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
