Valued at over US$589 billion market cap, Tesla (NASDAQ: TSLA) is the undisputed king in the global electric vehicle (EV) industry. The company has made its early investors quite rich, rising by almost 2,000% over the last decade.
Despite its industry-leading position, the company has faced several issues over the past two years. Between aggressive key interest rate hikes and the impact of red-hot inflation negatively impacting consumer spending, sales for the world’s largest EV company have dropped off a cliff.
To increase demand for its vehicles, the company has reduced prices several times. While it might have boosted revenue, the move has deteriorated its bottom line.
Wall Street anticipates that the company’s adjusted earnings will decrease from US$4.07 per share in 2022 to US$2.87 per share, despite an expected 9% year-over-year increase in its sales. Besides the industry headwinds, Tesla is also facing stiff competition from other auto manufacturers phasing out combustion engine vehicles for EV alternatives.
The EV industry is growing rapidly, and investors here can consider adding these two Canadian EV stocks if they are looking for alternatives to Tesla stock that offer a greater potential for meaningful returns.
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Lion Electric
Lion Electric (TSX: LEV) does not produce sedans or SUVs. This lesser-known EV stock is in the business of producing battery-powered buses. Headquartered in St. Jerome, it boasts a $459.87 million market capitalization. Its comparatively smaller size is exactly what might make it an excellent investment to consider for leveraging the growth of the industry.
The company almost doubled its sales in the third quarter of fiscal 2023 compared to the same period last year, generating US$80.3 million.
The quarter saw LEV stock report a US$5.4 million gross profit, which is a significant improvement from a gross loss of US$3.8 million last year. Analysts anticipate the company to grow its sales to $663 million in 2024, up from $190 million in 2022. As of this writing, it trades for $2.44 per share.
NFI Group
NFI Group (TSX: NFI) is also a manufacturer of battery-powered buses. Headquartered in Winnipeg, it boasts a $1.42 billion market capitalization.
It operates 50 facilities across nine countries, manufacturing and selling buses in North America, the U.K., Europe, and Asia Pacific markets. The company has also seen significant growth in new orders in its third quarter of fiscal 2023.
The September-ending quarter saw it report a third consecutive quarter of record-breaking adjusted earnings before interest, tax, depreciation, and amortization (EBITDA). With a backlog of around $6.6 billion, the demand remains strong.
The company is using the positive momentum to ramp up production. The next few years will likely see it generate higher profit margins and grow shareholder value significantly. As of this writing, NFI stock trades for $11.97 per share.
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Foolish takeaway
Industry headwinds might negatively impact these two Canadian EV stocks in the short term. However, a return to better market conditions might mean better returns on your investment through capital gains than with well-established EV stocks that have already delivered significant growth to early investors.
