In this article, we discuss 10 best car stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Car Stocks To Buy Now.
In 2022, the global automotive industry faced significant obstacles, including high interest rates, supply chain disruptions, and concerns about a potential recession. The global automotive industry is set to face several challenges in 2023 as well, due to various global factors, including the energy crisis, sluggish global demand, and ongoing disruptions in supply chains. However, the electric vehicle market is projected to be the only positive aspect, with the sales of conventional fossil-fuel cars and commercial vehicles expected to decline. Bernstein analyst Daniel Roeska wrote in an investor note in December 2022:
“There is active demand destruction in the industry, given inflation, interest rates, and energy costs − but so far, this has mostly impacted the backlog.”
According to Charlie Chesbrough, Cox Automotive's senior economist and senior director of industry insights, the company is predicting that U.S. new vehicle sales will reach 14.1 million in 2023, which he characterized as "cautiously optimistic." However, Wall Street analysts estimate that U.S. auto sales for this year will be around 13.7 million. S&P Global Mobility predicts that new vehicle sales worldwide will rise by 5.6% from the previous year to nearly 83.6 million units in 2023. S&P also expects sales in the United States to increase by 7%, reaching about 14.8 million units in 2023.
Similarly, Fitch Ratings predicts a 5% increase in global vehicle production and sales in 2023 due to the easing of supply chain disruptions. However, the global sales and production will still be constrained by weak economic conditions, particularly in the U.S. and Europe. Lower commodity prices and reduced logistics costs are expected to support the profitability of auto makers and suppliers. Nevertheless, the normalization of vehicle mix and higher incentives will bring down net pricing and reduce auto manufacturer margins from the high levels of 2022. Fitch maintained a Neutral outlook for the global auto sector.
The automotive industry faced a major challenge when a significant number of employees left their jobs and did not return, leaving factories and original equipment manufacturers short-staffed just when the industry needed to resume production. This was compounded by the need for a shift in skill sets to support the transition from internal combustion engine models to electric vehicles. Larry Keyler, Partner and Global Automotive Leader at RSM US, said on January 18, 2023:
“As a result of the labor shortage, I think we will continue to see a significant increase in the development of robotics and automation on the supply base as well as other technologies at the OEM level.”
Despite numerous challenges faced by the automotive industry, one of the most prominent trends is the focus on the development of electric vehicles, including improving battery performance and expanding charging infrastructure. As a result, vehicle manufacturers are increasing their research and development efforts on EV technology despite the current challenges in the industry. To benefit from the growth and transformation in the auto sector, some of the best car stocks to buy include Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM) and Rivian Automotive, Inc. (NASDAQ:RIVN).
Our Methodology
We scanned Insider Monkey’s database of 943 hedge funds and picked the top 10 companies that provide services in the auto sector with the highest number of hedge fund investors. These are the best car stocks to buy according to hedge funds.
Fisker Inc. (NYSE:FSR) manufactures, advertises, rents out, and sells electric cars. The company is divided into three segments – The White Space, The Value Segment, and The Conservative Premium segments. According to the company's statement in Q4 2022, Fisker Inc. (NYSE:FSR) has manufactured a total of 56 vehicles, out of which 15 were created for Magna's group, since production commenced. Fisker Inc. (NYSE:FSR) has already requested and secured the necessary parts for the initial 300 automobiles, as well as some long-lead components for the second quarter.
On March 27, Citi initiated a "90-day upside Catalyst Watch" for Fisker Inc. (NYSE:FSR)’s stock. Despite providing "very promising" guidance for 2023 compared to other electric vehicle companies, Fisker Inc. (NYSE:FSR)’s stock has not performed well, possibly due to broader economic concerns. Citi believes that if Fisker Inc. (NYSE:FSR) meets most or all of its near-term objectives, the company's stock narrative could quickly shift from one of skepticism to one that embraces the Ocean's appealing electric vehicle specifications, pricing, asset-light model, and growth plans. Citi thinks that given Fisker's low market capitalization compared to its peers, there is a significant potential for upside if the company succeeds in the coming months. Therefore, the firm maintained a Buy rating on the shares with a price target of $21.
According to Insider Monkey’s fourth quarter database, 13 hedge funds were bullish on Fisker Inc. (NYSE:FSR), compared to 15 funds in the prior quarter.
In addition to Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM), and Rivian Automotive, Inc. (NASDAQ:RIVN), Fisker Inc. (NYSE:FSR) is one of the best car stocks to invest in.
XPeng Inc. (NYSE:XPEV) is a Chinese company that manufactures and promotes intelligent electric cars. In addition, the company offers sales agreements, upkeep, quick charging, technological assistance, automobile financing, insurance technology assistance, ride-hailing, and automotive loan recommendations, among other services. XPeng Inc. (NYSE:XPEV) delivered 7,002 Smart EVs, up 17% on a month-over-month basis, bringing Q1 total deliveries to 18,230 vehicles.
According to a research note by Barclays analyst Jiong Shao, XPeng Inc. (NYSE:XPEV)’s Q4 results were "weak," and the company's Q1 delivery guidance was "soft." XPeng Inc. (NYSE:XPEV) is currently undergoing significant product changes and some leadership adjustments, which may have contributed to these results. The firm hopes that XPeng's new products will gain traction later in the year, leading to increased sales. However, Barclays remains cautious since they have limited visibility into XPeng Inc. (NYSE:XPEV)’s sales ramp or the potential success of its new models. As a result, the firm maintained an Equal Weight rating on the shares with a $8 price target on March 30.
Among the hedge funds tracked by Insider Monkey, 17 funds were bullish on XPeng Inc. (NYSE:XPEV) at the end of December 2022, compared to 20 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a significant position holder in the company, with 3 million shares worth $30.8 million.
Li Auto Inc. (NASDAQ:LI) is a Chinese company that designs, produces, and sells new energy vehicles. Their primary product is the Li ONE, a six-seat smart electric sport utility vehicle equipped with advanced features such as smart vehicle solutions, navigation on ADAS, and automatic emergency braking functionalities. In addition to vehicle manufacturing, Li Auto Inc. (NASDAQ:LI) also provides sales and after-sales management services, technology development, corporate management services, and purchases manufacturing equipment. It is one of the best car stocks to invest in.
Li Auto Inc. (NASDAQ:LI) sold 20,823 automobiles in March 2023, which is an 88.7% increase year-over-year and a 25% increase from the previous month. As a result, Li Auto Inc. (NASDAQ:LI) delivered a total of 52,584 cars in the first quarter, representing a 65.8% year-over-year growth. The cumulative number of Li Auto vehicles sold reached 309,918 by the end of March.
On March 20, Morgan Stanley raised the firm's price target on Li Auto Inc. (NASDAQ:LI) to $30 from $23 and maintained an Overweight rating on the shares, citing valuation, balance sheet strength, speed of innovation, and model iteration.
According to Insider Monkey’s fourth quarter database, 25 hedge funds were bullish on Li Auto Inc. (NASDAQ:LI), compared to 20 funds in the preceding quarter. Andreas Halvorsen’s Viking Global is the largest stakeholder of the company, with 9 million shares worth $185.4 million.
NIO Inc. (NYSE:NIO) is a Chinese company that specializes in the design, development, manufacturing, and sale of smart electric vehicles, including SUVs and sedans. The company also offers energy and service packages to its customers, as well as battery packs, e-powertrains, and components. In addition, NIO Inc. (NYSE:NIO) provides various power solutions, such as home charging, battery swapping, fast charging, mobile charging, and access to a network of public chargers. NIO Inc. (NYSE:NIO) also offers a valet service called One Click for Power, which provides vehicle pick-up, charging, and swapping services. It is one of the best car stocks to watch.
In Q4 2022, NIO Inc. (NYSE:NIO) delivered a total of 40,052 vehicles, out of which 20,824 were premium smart electric SUVs and 19,228 were premium smart electric sedans. This marked a 60% increase from Q4 2021 and a 26.7% increase from Q3 2022. The total vehicle deliveries in 2022 were 122,486, which is a 34% increase from 2021.
On March 20, Morgan Stanley analyst Tim Hsiao maintained an Overweight rating on NIO Inc. (NYSE:NIO) but lowered the firm's price target on the shares to $12 from $16.10.
According to Insider Monkey’s fourth quarter database, 25 hedge funds were bullish on NIO Inc. (NYSE:NIO), compared to 26 funds in the last quarter. Jos Shaver’s Electron Capital Partners is a prominent stakeholder of the company, with 6.30 million shares worth $61.4 million.
Stellantis N.V. (NYSE:STLA) designs, engineers, manufactures, distributes, and sells automobiles, light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems. Its products include luxury and premium passenger vehicles, pickup trucks, sport utility vehicles, and commercial vehicles. The company also offers parts and services, as well as retail and dealer financing, leasing, and rental services. On April 21, Stellantis N.V. (NYSE:STLA) declared a $1.42 per share annual dividend. The dividend is payable on May 4, to shareholders of record on April 25.
On March 6, Berenberg analyst Adrian Yanoshik raised the firm's price target on Stellantis N.V. (NYSE:STLA) to EUR 21 from EUR 18 and kept a Buy rating on the shares.
According to Insider Monkey’s fourth quarter database, 28 hedge funds were long Stellantis N.V. (NYSE:STLA), compared to 25 funds in the earlier quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest stakeholder of the company, with 10.20 million shares worth $144.3 million.
Like Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM), and Rivian Automotive, Inc. (NASDAQ:RIVN), elite investors are piling into Stellantis N.V. (NYSE:STLA) for exposure to the auto sector.
