Tesla has been one of the hottest and most disruptive stocks of the past decade. The electric vehicle maker led by Elon Musk has seen tremendous growth and has been a top performing stock.
However, as Tesla’s valuation has soared to over $700 billion, making it one of the most valuable companies in the world, some investors are looking for alternatives that have more room for growth. Here are 5 of the best Tesla alternative stocks to consider:
1. NIO
NIO is a Chinese electric vehicle manufacturer that is viewed by many as “the Tesla of China.” The company designs and manufactures premium electric SUVs, sedans and other vehicles and has ambitious plans to expand globally. NIO delivered 122,486 vehicles in 2022 in total, increasing by 34.0% year-over-year.
Some key advantages NIO has over Tesla include a focus on swappable batteries, innovative features like in-car AI assistants, and pricing that appeals more to mainstream consumers in China.
The Chinese EV market is projected to become the largest in the world over the next decade. As a homegrown champion with support from the Chinese government, NIO could emerge as a massive winner.
The stock is also far cheaper than Tesla, trading at around a $50 billion market cap compared to over $700 billion for Tesla. With China’s booming EV market and NIO’s innovation, its growth runway could be very long. For investors who missed out on Tesla’s huge runup, NIO provides a second chance in the EV space.
2. Li Auto
Li Auto is another rapidly growing Chinese electric vehicle startup. The company is focused specifically on electric SUVs and is a pure play on this rapidly growing segment. Li Auto’s flagship offering is the Li ONE SUV, which has been a hit in China selling over 133,246 units in 2022.
The Li ONE stands out through its range extension system which contains a small gasoline engine to generate additional electric power. This helps alleviate range anxiety for consumers and eliminates the need for large, expensive battery packs. The model has been popular in China and Li is looking to capitalize with new models.
Li Auto has also been expanding rapidly, more than tripling deliveries in 2023. With a market cap around $35.41 billion, the stock offers massive growth potential if Li Auto can maintain momentum. As a China-based EV play trading at a far lower valuation than Tesla, Li Auto makes for an appealing alternative.
3. Rivian
While Tesla’s vehicles are targeted primarily at the mass market, Rivian is aiming for a niche – electric trucks and SUVs. The company’s R1T pickup and R1S SUV are targeted at outdoor enthusiasts and feature rugged, off-road capabilities mixed with high-tech, connected features.
Rivian fills a void in the truck market left open by Tesla and the major auto companies. Pre-orders for its vehicles have been strong and Rivian is backed by Amazon, which ordered 100,000 electric delivery vans. With the appetite for electric trucks growing, Rivian is poised to capitalize.
The company is currently valued at around $50 billion, just a fraction of Tesla’s valuation, but still has immense room for growth if it can execute. For investors who want EV exposure but are interested in a niche player rather than a broad mass market play like Tesla, Rivian presents a compelling option.
4. Lucid Group
Lucid Group could become a major Tesla rival in the luxury electric vehicle market. The company’s first vehicle, the Air, is a premium electric sedan loaded with range, performance and luxury features. It boasts over 500 miles of range on a single charge, rivaling or surpassing Tesla’s vehicles.
The Air has received rave reviews and Lucid is ramping up production to meet strong demand. By targeting the high-end market, Lucid avoids direct competition with Tesla’s more mass market positioned vehicles. The company is also rolling out innovative battery packs that provide unmatched efficiency.
Lucid started trading publicly in 2021 after a SPAC merger and has a market cap around $45 billion. As the company scales up and sells vehicles globally, its valuation could grow exponentially if it executes well. For investors enthusiastic about Tesla but wanting more affordable valuation and exposure to the luxury EV segment, Lucid is appealing.
5. Xpeng
Xpeng is yet another rapidly growing Chinese electric vehicle startup. The company sells smart EVs and is known for its advanced driver assistance technology and smart connectivity features. Models like the P7 sedan and G3i SUV have sold well, with over 120,757 vehicles delivered in 2022.
Like NIO and Li Auto, Xpeng benefits from China’s massive EV market opportunity as well as sympathetic government policies. The company is also expanding internationally and developing autonomous driving technology. With a market cap around $25 billion, Xpeng offers tremendous growth potential.
For investors excited about EVs but worried about Tesla’s steep valuation, Chinese companies like Xpeng provide a great alternative. The regulatory and competitive environment may differ from Tesla, but the core electric vehicle trend and growth trajectory could be similar if executed well. As Tesla’s valuation leaves little room for error, Xpeng offers a cheaper option on the same revolutionary changes in auto.
Summary
Tesla has been a phenomenal stock, but its huge size leaves little room for error. For investors interested in the electric vehicle revolution, several strong Tesla alternatives exist that have more room for valuation growth. Companies like NIO, Li Auto, Rivian, Lucid and Xpeng give exposure to similar industry tailwinds while being earlier in their growth cycle.
These alternatives all have unique advantages or niches that help them stand out from Tesla. As Tesla starts facing more competition, alternatives trading at much cheaper valuations could turbocharge portfolio returns. For investors who think they may have missed the boat on Tesla, it’s worth taking a close look at these 5 appealing alternatives.
The EV and self-driving revolution has just begun. These players give you options to ride the wave and potentially generate outsized returns over the next decade. Each offers unique capabilities, market exposure and valuation proposition compared to industry juggernaut Tesla.