Electric Vehicle Stocks Face Challenges Amid Competition and Demand Shift

Detroit, MI – Electric vehicle (EV) manufacturers are grappling with declining demand amidst a complex business landscape that includes fierce competition and new tariffs imposed by the administration. Despite these short-term pressures, the global outlook for EVs remains promising as nations prioritize emission reductions and climate initiatives.

General Motors (GM), a legacy automotive giant, has seen its stock tumble more than 9% year-to-date due to these challenges. Recently, the company provided an optimistic outlook for 2024, projecting growth in both its electric and traditional internal combustion engine (ICE) segments. GM CFO Paul Jacobson stated that the company’s performance in 2024 is “outstanding” despite a difficult market environment.

One noteworthy aspect of GM’s strategy is the growing adoption of EVs among luxury consumers. The automaker anticipates that its upcoming luxury models including the Escalade IQ, OPTIQ, and VISTIQ will significantly enhance its position in the premium EV market. GM’s production and sales figures reveal that it produced and sold 189,000 EVs to distributors in North America last year, with expectations to increase wholesale volumes to 300,000 units by 2025.

Recently, TD Cowen analyst Itay Michaeli initiated coverage of GM with a Buy rating, supporting a street-high price target of $105. Michaeli highlighted GM’s strong truck franchise as a differentiator, stating that the value of its EV and autonomous vehicle prospects place a 9-11x price-to-earnings ratio on 2025 earnings per share as favorable.

As of now, Wall Street maintains a Moderate Buy consensus on GM stock, backed by 10 Buy recommendations, four Holds, and one Sell. The average target price of $63.80 suggests a potential upside of approximately 32.2% from current levels.

In contrast, XPeng, the Chinese electric vehicle manufacturer, has witnessed a remarkable surge in its stock by 123% year-to-date. This growth is attributed to the company’s favorable delivery metrics, driven by demand for its competitively priced new models with advanced autonomous features.

In February alone, XPeng delivered over 30,000 vehicles, with significant contributions from its lower-priced MONA MO3 model. This delivery figure marked a 570% increase compared to the previous year, showcasing the sustained consumer interest. Additionally, XPeng’s analyst estimates have seen upward revisions, notably from Citi’s Jeff Chung, who upgraded the stock from Hold to Buy, raising the price target from $13.70 to $29. The analyst cited stronger volume expectations for 2025 and 2026, while also noting projected reductions in losses for the company.

Despite the optimistic projections, analysts continue to exercise caution over XPeng’s stock due to serious competition within China’s EV market. The Wall Street consensus for XPeng is classified as a Hold, based on three Buy, four Hold, and one Sell recommendations with an average price target of $17.28, indicating a potential downside of 34.4%.

Similarly, Nio, another prominent Chinese EV maker, has experienced a 20% rise in stock value this year, bolstered by announcements regarding its financial results set to be released on March 21. Investors are particularly interested in updates on demand for its sub-brands Onvo and Firefly, alongside its flagship ET9 model.

Nio’s deliveries reached 221,970 vehicles in 2024, reflecting a 39% increase. The company reported 13,193 deliveries in February, showing a promising year-over-year growth of 62.2%. As Nio capitalizes on its mass-market strategy with the Onvo line-up, the company is already taking pre-orders for its compact Firefly model to cater to urban consumers.

However, ongoing profitability concerns remain a focal point for analysts as Nio continues to face losses. Bank of America‘s Ming-Hsun Lee reiterated a Hold rating on Nio, trimming the price target from $6 to $5, with expectations that volume growth will be offset by slower margin improvements and high operational costs. Nio’s Wall Street rating also remains a Hold, with one Buy, four Holds, and one Sell essays leading to an average target of $5.25.

Summarily, although General Motors displays greater potential upside amidst a challenging environment, XPeng and Nio are faced with uncertainties that have left analysts hesitant. While long-term prospects for the EV sector appear positive, the journey ahead is marked by intense competition and market volatility.