Vehicle Market Outlook for 2025 Reflects Mixed Opportunities
According to the S&P Global Mobility report, global vehicle sales in 2025 are expected to reach 89.6 million units, growing 1.7% from 2024. However, several challenges, including high interest rates, economic uncertainty, and evolving electrification policies, are likely to limit growth. In the US, the incoming administration's policies, including tariffs and deregulation, could further complicate the market. The European market is projected to grow modestly due to economic risks and stricter emission rules.
Meanwhile, China's vehicle market is expected to see continued growth, especially in new energy vehicles, supported by incentives and subsidies. Global production is forecast to decline by 0.4%, with regional variations. Electric vehicles are still a growth sector, with battery electric vehicle sales projected to reach 15.1 million units, a 30% increase from 2024, the report states. However, uncertainties regarding infrastructure, policies, and supply chains persist.
China’s Electric Vehicle Surge Set to Outpace the World
China is set to lead global EV sales, with domestic EV sales expected to exceed 12 million units by 2025, a 20% increase from the previous year, as reported by the Financial Times. This growth comes as traditional car sales are expected to decline by over 10%. China's EV success is attributed to advancements in technology and resource supply chains, lowering manufacturing costs. While EV growth has slowed in Europe and the U.S., China’s market continues to expand rapidly, overtaking Western competitors.
However, intense competition and oversupply in the domestic market could lead to consolidation among Chinese manufacturers. The market is anticipated to face challenges in 2025 due to policy changes, but strong growth is expected to resume later in the decade.
New Approach for Reshaping the U.S. Auto Sector
According to a Bloomberg report, advisers to President-elect Donald Trump are proposing a two-pronged strategy to reshape the U.S. auto industry. The plan includes cutting federal subsidies for EVs while fostering a domestic supply chain for their production. This approach aims to prioritize U.S. automakers without taxpayer support for consumers. Recommendations also include easing environmental reviews, speeding up permits for EV projects, and expanding tariffs on EV-related imports.
Moreover, federal incentives like the $7,500 tax credit for EV buyers would be repealed, and fuel economy and tailpipe pollution regulations would return to 2019 levels. The proposals also seek to support domestic manufacturing, including EV battery production, the report states. Additionally, the transition team is considering deregulating the autonomous vehicle industry and easing reporting requirements for carmakers using automated driving technologies.
Potential U.S. Tariffs Could Undermine Canada-U.S. Automotive Trade
There are growing concerns that President-elect Donald Trump's proposed 25% tariffs on Canadian imports could harm the recovering Canadian auto industry, especially in Ontario, where major automakers produce vehicles largely for U.S. consumers, as per CNBC.
Ontario Premier Doug Ford warned that such tariffs could increase vehicle prices, slow production, and cost jobs in both Canada and the U.S. Trump's tariffs, intended to address national security concerns, could add significant costs to vehicles and automotive parts from Canada, Mexico, and China. The report states that while Canada's auto exports to the U.S. are substantial, industry leaders fear the tariffs could disrupt this balance, negatively impacting both sides. Ontario Premier called for closer collaboration between Canada and the U.S. rather than imposing tariffs on their closest ally.
Our Methodology
For this article, we created a list of the largest auto manufacturers in the world that manufacture and sell EVs. We then narrowed our list to 12 stocks with the biggest market cap and were traded on either the NYSE, NASDAQ, or OTC markets. The 12 biggest EV stocks in the world are listed in ascending order of their market cap. We also added the hedge fund sentiment around each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Analyst Says Tesla (TSLA) In ‘Very Early Innings,” Sees “Compounding Throughout The Decade’
Tesla, Inc. (NASDAQ:TSLA) specializes in designing, manufacturing, and selling electric vehicles and energy products. Its main focus is on the Automotive segment, offering electric cars, regulatory credits, used vehicles, supercharging services, and vehicle insurance. The company sells sedans and SUVs through direct and used car sales, supports customers with service locations and mobile technicians, and provides financing and warranties. Tesla also operates a network of Superchargers and offers in-app upgrades for its vehicles.
Tesla (NASDAQ:TSLA) is the biggest EV stock in the world. While the company faces intense competition from other brands, especially in China, it still dominates the global BEV industry with a 17.5% market share. Moreover, Tesla's dominance in the EV market is less about maintaining market share and more about leading in production growth and profitability. As the EV market expands, Tesla's production scales rapidly, allowing substantial growth even with increased competition.
For example, in Q3, Tesla achieved record vehicle delivery volumes, with year-over-year and sequential growth. Regulatory credit revenue was the second-highest in company history, as competitors work to meet emissions standards. Additionally, the cost of goods sold per vehicle reached an all-time low of ~$35,100.
Tesla (NASDAQ:TSLA) continues to focus on making EVs affordable, with plans to launch more budget-friendly models starting in early 2025. The company also aims to provide autonomous transport at a cost lower than rideshare and public transit.
Overall TSLA ranks 1st on our list of the best EV stocks in the world heading into 2025. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
