Many investors are growing bullish on electric vehicle (EV) stocks, but it may not be for the reason you think. In years past, they have focused on the growth opportunity in EV sales, which still represent less than 15% of total vehicle sales in the U.S. The current hype, however, has to do with robotaxis. Some experts believe these could ultimately become a $5 trillion to $10 trillion global opportunity.
EV makers like Tesla(NASDAQ: TSLA) and Lucid Group(NASDAQ: LCID) are investing heavily in robotaxis. Competitors like Rivian Automotive(NASDAQ: RIVN), meanwhile, simply seem focused on getting new models to market — at least for now.
Which stock is the best buy right now? You might be surprised by the answer.
After years of anticipation fueled by Elon Musk’s repeated promises, Tesla finally launched its robotaxi service in Austin, Texas, earlier this year. Shortly after, Lucid announced that it would be partnering with Uber Technologies on a robotaxi venture.
Uber would own and operate the robotaxis, and Lucid would supply more than 20,000 vehicles over the next six years to power the service. The market responded positively to both announcements, sending shares of Tesla and Lucid higher in the days that followed.
The age of robotaxis is finally upon us. But there are two other things you should know before getting overly excited.
First, scaling up these robotaxi services will take many years. Musk has predicted more than 1 million autonomously driven Teslas will be roaming U.S. streets by the end of next year. But he has not been not a reliable source of predictions regarding self-driving vehicles. In 2015, he forecast Tesla would achieve “complete autonomy in approximately two years.” Ten years later, the company’s robotaxis in Austin still don’t have full autonomy.
The robotaxi market could be huge over the long term, but don’t expect huge swings in adoption over the next few years. The technology simply isn’t there yet. Regulations are also far behind what’s needed for a global rollout to occur.
Second, it appears as if robotaxi stocks like Tesla and Lucid already have a premium built into their prices. Despite falling revenue this year, Tesla shares trade at a lofty 15.4 times sales. Lucid, meanwhile, trades at 7.6 times sales.
Compare those valuations to Rivian — a stock that doesn’t yet have a clear robotaxi narrative and trades at just 3.6 times sales — and it becomes clear that the market may already be assigning meaningful value to Tesla’s and Lucid’s robotaxi potential.
Source: Getty Images
Make no mistake: The robotaxi market is very exciting. But this early in the game — with so many questions surrounding how quick the rollout will be and which companies will ultimately benefit — I’m not sure stocks like Tesla or Lucid are worth the up-front premium. Instead, I might stick with an EV maker like Rivian that continues to execute on its core strategy, which should begin to pay off by the start of next year.
Rivian is essentially copying Tesla’s path to growth. It started by building luxury cars that, while expensive, showcased the company’s capabilities and created a reputation of quality among buyers. The company then quickly focused on scaling up to more affordable vehicles.
Today, more than 90% of Tesla’s vehicle revenue comes from its two affordable models: the Model 3 and Model Y. Nearly 70% of prospective car buyers plan to spend less than $50,000 on their next vehicle. So it should come as no surprise that offering models under this price point is a crucial step toward mass growth.
Early next year, Rivian plans to begin production of three new models, all priced under $50,000. Lucid is still years away from reaching this growth catalyst. Tesla, meanwhile, hasn’t introduced a new affordable model in more than five years.
Trading at a discounted valuation despite rosy growth prospects for 2026 and 2027, Rivian remains my top growth stock for the year ahead. Tesla and Lucid have promising futures, but their high valuations make shares far less appealing.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.
1 Electric Vehicle Stock to Buy Hand Over Fist and 2 to Avoid Like the Plague was originally published by The Motley Fool
