This year hasn't been a great one for shareholders of most electric vehicle (EV) stocks. While the S&P 500 is up since the end of 2023, the S&P Kensho Electric Vehicles Index is down for the same timeframe. Tesla is one of the few exceptions to this trend, but even then much of this strength can be chalked up to a bounce-back from weakness in 2022 and 2023.
Blame the transitional dynamic, mostly. The industry has been forced to adjust to the fact that many people still doubt the practicality of EVs. Simultaneously, new competition has required all manufacturers to become more price-competitive than they've ever needed to be. They've also been forced to become more operationally efficient.
Yet, the electric vehicle movement is hardly dead. Technology market research and consultancy outfit Gartner believes there will be over 85 million EVs traveling the world's roads by the end of next year, up 35% from the 64 million being driven now. Most of this growth will (once again) stem from demand for ordinary BEVs, or battery-operated vehicles, as opposed to hybrids.
This continued expansion, of course, translates into opportunity for investors. Here's a closer look at three EV stocks that could outright soar in the coming year just by catching this tailwind.
BYD Company
You might think Tesla is the world's biggest electric vehicle name, as measured by unit production. At one point, that was true.
However, there's a reason that China's BYD Company(OTC: BYDDY) has surpassed America's home-grown EV powerhouse. That is, there's more demand for high-quality electric vehicles outside the U.S. than there is inside it. The Chinese market that BYD serves is by far the biggest single market for these cars, in fact, and BYD easily leads this market.
It's not like this year has been a bad one for BYD shareholders. Indeed, the stock's up 35% year to date (although that still only leaves it at where it was priced in early 2021). This bullishness could easily persist and carry shares to record highs in the coming year for one key reason: The recovery of China's floundering economy.
Not everyone sees it. Admittedly, this year's been a tough one for China's economy, with the echoes of heavy-handed pandemic lockdown measures still ringing. The nation's real estate market remains a particularly sore spot, too.
There are some green shoots starting to sprout, though. For instance, China's retail sales have grown to some degree every month since late last year, and accelerated to a pace of 4.8% in October. Clearly, people are coming up with at least a little bit of extra cash in this environment.
The country's industrial output also surged 5.3% year over year last month, driven higher by its all-important exports. Goldman Sachs expects China's economy to grow a healthy 4.5% next year. That's not as firm as this year's 4.9% growth, but it's still forward progress that most other nations can only envy.
This bodes well for BYD's foreseeable future, since it facilitates continued demand for electric vehicles in China. To this end, the analyst community believes this company's top line is set to grow more than 20% next year, with earnings more or less likely to match that improvement.
QuantumScape
There's a good chance you've never heard of QuantumScape(NYSE: QS). Not only did it not earn a spot on our rundown of the world's biggest electric vehicle companies, it's not even an EV maker. Nevertheless, it's worth inclusion on this list of EV stocks that could perform incredibly well in 2025. Here's why.
The company is developing batteries that could get electric vehicles over their proverbial adoption hump. Although the battery packs found in most modern EVs are effective enough, QuantumScape makes them better. How much better? Based on the initial testing of its tech, a conventional lithium battery pack capable of propelling an EV 350 miles could achieve up to 500 miles' worth of range were it a solid-state pack.
QuantumScape's solid-state batteries are also expected to be useful for up to 300,000 miles' worth of driving, versus the expected 100,000 miles most lithium batteries currently found in EVs are warrantied to achieve. While this tech might cost more up-front, these two competitive advantages address two of the biggest concerns preventing would-be EV owners from taking the plunge.
But what specifically makes 2025 a prospective banner year for QuantumScape? This could be the year the company finally produces its first commercial EV revenue.
While QuantumScape has been refining its tech for years, electric vehicle manufacturers have only been testing its wares in actual EVs in the past few months. For example, in July, Volkswagen (one of the world's biggest electric vehicle players, by the way) inked a deal that potentially calls for as many as one million of QuantumScape's batteries per year -- its biggest and best prospect yet.
It's just one agreement in a lithium battery market with a bunch of players. However, this solid-state battery solution is superior to other lithium-ion battery technology -- so much so that Straits Research predicts the global solid state battery market is poised to grow at an annualized pace of 36.4% through 2024. Most of this growth should be driven by usage in EVs although the technology is marketable as a solution for a wide range of energy-storage needs.
Toyota Motor
Finally, add Toyota Motor(NYSE: TM) to your list of electric vehicle stocks that could soar in the coming year. At first blush, it's not much of an EV name. Only about one-third of its production is electric vehicles, with most of those being hybrids rather than battery-only electrified automobiles like Tesla's.
The carmaker is also seemingly just as interested in less-proven powertrains like hydrogen fuel cells and even hydrogen combustion engines, even though these solutions are still many years away from even having a shot at entering the mainstream (if they ever do).
Don't misinterpret Toyota's navigation of this still-young industry, however. The company isn't taking a passive approach to electric vehicles. It's taking a thoughtful, measured approach rather than rushing in to simply try and take a commanding lead of a new market.
For example, the Japanese carmaker recognized well before most other EV makers did that hybrid electric vehicles are a palatable solution for people who might otherwise balk at vehicles that require regular charging -- especially when charging infrastructure may not be readily available everywhere a car owner drives.
This calculated wisdom hasn't helped the stock much of late. Shares are down 30% from their March peak, sliding all the way back to their late-2021 price. Investors are understandably concerned about global economic lethargy.
The sellers have overshot their target, dragging Toyota shares to a trailing 12-month price-to-earnings ratio of only 8.4 and a price that's 17% below analysts' consensus target of $212.81. Newcomers will also be stepping in while the forward-looking dividend yield stands at a respectable 3%. Even the slightest of bullish nudges for the global economy could put this stock in a whole new light come 2025, prompting a sweeping reversal of investors' current pessimism.
The kicker: There's arguably no car company on the planet with a better, more marketable reputation for quality than Toyota. When it's ready to turn up the heat on this business, it could become an EV monster.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Tesla. The Motley Fool recommends BYD Company, Gartner, and Volkswagen Ag. The Motley Fool has a disclosure policy.
