GM, TSLA, or NIO: Which EV Stock Could Drive the Best Returns?

Despite macro challenges and intense competition, electric vehicle (EV) adoption continues to rise globally. As per Counterpoint Research, one in every seven cars sold in the first quarter of 2023 was an EV. Global passenger EV sales grew 32% year-over-year in Q1 2023. Given the concerns over climate change and carbon dioxide emissions, EV sales are projected to witness robust growth in the years ahead. Bearing that in mind, we used TipRanks’ Stock Comparison Tool to place General Motors (NYSE:GM), Tesla (NASDAQ:TSLA), and Nio (NYSE:NIO) against each other to pick the EV stock with the best upside.     

General Motors (NYSE:GM)

Legacy automaker General Motors is rapidly moving ahead with its goal of becoming an all-EV company by 2035. The company aims to build 400,000 EVs in North America from 2022 through the first half of 2024, including 150,000 units this year.

Moreover, GM has secured all battery materials required to grow its capacity to 1 million EVs annually in North America by 2025. While the company is investing aggressively in its EV ambitions, it is also reducing costs in other areas of its operations to improve its profitability. GM is targeting cost reduction of $2 billion by the end of 2024.

Earlier this month, GM entered into an agreement with Tesla, giving its EV buyers access to the Tesla Supercharger network. The company expects to save up to $400 million through this EV-charging deal with Tesla.     

Is GM a Buy, Sell, or Hold?

Following a CFO dinner and factory tour, Citigroup analyst Itay Michaeli reiterated a Buy rating on General Motors stock and a price target of $85. Michaeli’s meeting, which included the Factory Zero tour, SuperCruise rides, and EV updates, reinforced his bullish stance on GM.

The analyst sees several potential catalysts over the next six months that could positively influence investor sentiment, including Q2 earnings upside, moderating U.S. pricing and demand concerns in the second half of the year, Ultium EV ramp, and product launches.

Wall Street’s Moderate Buy consensus rating on General Motors is based on six Buys and five Holds. The average price target of $46.90 implies 22.8% upside. Shares have risen more than 13% so far in 2023.

Tesla (NASDAQ:TSLA)

Tesla stock has skyrocketed 108% so far in 2023, thanks to improved investor sentiment, the company’s competitive position in the EV space, AI-oriented rally in stocks, and key partnerships with players like General Motors, Ford (NYSE:F), Rivian (NASDAQ:RIVN) involving the adoption of the company’s North American Charging Standard (NACS).

In fact, Bernstein analyst Toni Sacconaghi expects supercharging to be a $12 billion opportunity for Tesla in 2030, although he expects the business to carry low margins. Interestingly, Sacconaghi has a Sell rating on Tesla and a price target of $150.

Meanwhile, TSLA has been downgraded by four analysts within the last 10 days due to valuation concerns following a significant rally in the stock and the impact of price cuts and competition on margins.

Is TSLA a Good Stock to Buy?

Ahead of Tesla’s June Delivery report this weekend, Piper Sandler analyst Alexander Potter reiterated a Buy rating on the stock with a price target of $280. Potter said that he wouldn’t be surprised to see “profit-taking” in the coming months, given TSLA stock’s rally so far this year. The analyst also sees the possibility of operational bottlenecks in the second half of the year.

Potter expects Tesla’s June deliveries to come in at 469,000, although he thinks that his estimate could be a “tad high.” Wall Street’s consensus expectation for June deliveries stands at 445,000. The analyst expects Tesla’s production to be at record levels in the second quarter due to the ramp-up at the Shanghai facility and contributions from Austin and Berlin plants.

Nonetheless, Potter contends that the gross margin outlook will perhaps be even more crucial than production and cautioned that any price cuts in Q3 might reignite worries about the company’s margins.  

Wall Street’s Moderate Buy consensus rating on Tesla is based on 13 Buys, 13 Holds, and five Sells. Given the impressive year-to-date rally in the stock, the average price target of $218.58 implies about 15% possible downside.

Nio (NYSE:NIO)

Nio has been struggling with supply chain issues, macro pressures, and intense competition in China, the largest EV market in the world. The company’s underwhelming first-quarter performance and weak second-quarter guidance added to investors’ woes. Succumbing to the price wars in China and in a bid to boost sales, Nio recently lowered the prices for its EVs by RMB 30,000. Nio has also decided to stop offering free battery-swapping services to buyers.   

The company’s Q2 deliveries outlook indicates a decline in the range of 0.2% to 8.2%, partly due to lower production in April and May, as the company transitioned its production lines to its NT2.0 platform.

Is Nio Stock a Buy, Sell, or Hold?

Following Nio’s weak Q2 revenue guidance, Mizuho analyst Vijay Rakesh reiterated a Buy rating on the stock and lowered the price target to $20 from $25 on June 9. Rakesh also lowered his delivery estimates to about 152,000 units from 207,000 for 2023 and to 259,000 from 283,000 for 2024.

Despite short-term headwinds, Rakesh remains bullish on Nio due to several upcoming production ramp-ups, including the low-cost ES6 SUV, a multi-year EV adoption tailwind, and the company’s leadership in the premium EV segment in China. He is also optimistic about Nio’s expansion in Europe and other regions and a growing product portfolio.  

With seven Buys and four Holds, Nio earns a Moderate Buy consensus rating. The average Nio price target of $10.33 implies 8.51% upside. Shares are down over 2% year-to-date.

Conclusion

Wall Street is cautiously optimistic about GM, TSLA, and NIO due to macro uncertainty and growing competition. Currently, analysts see higher upside in General Motors, with the company taking the right steps to accelerate its EV goals and improve profitability.

Disclosure