Two Straightforward Electric Vehicle Shares to Purchase with a $200 Budget at Present
Despite the fluctuating news headlines, the electric vehicle (EV) sector has shown a persistent growth trend over the past few years. Currently, 7.8% of vehicles sold in the United States are electric, which is a significant rise from the 3.3% at the beginning of 2022. Despite occasional downturns, such as the noticeable decline in the first quarter of 2021, the overall trend is undeniably positive. Most long-term predictions foresee a continuous surge in EV demand over the next decade and beyond.
The overall well-being of the EV industry based on sales is commendable. However, the performance of individual EV stocks is another story altogether. Some EV stocks now boast a valuation exceeding $1 trillion, offering substantial long-term benefits to patient investors. Conversely, other EV manufacturers are teetering on the edge of bankruptcy.
Investing in profitable EV stocks involves making wise choices. Here are two promising investment opportunities:
Wager on this financially robust EV champion
When it comes to electric vehicle stocks, Tesla (TSLA -3.25%) is unparalleled in scale. Furthermore, its financial strength puts it in a superior position in the long-term growth market. This competitive edge could make Tesla stock the go-to EV stock for years to come.
Countless electric car startups have shut down over the years due to various reasons. Some may have launched their first vehicle prematurely, while others may have banked on an inappropriate battery technology. However, the primary reason for the demise of numerous EV manufacturers in recent decades has been financial exhaustion.
Despite its current market dominance, Tesla has also experienced financial difficulties. According to Musk, the company had been moments away from bankruptcy on several occasions. It's not surprising that money plays a critical role in the success of an automaker. Designing, manufacturing, marketing, and delivering a vehicle requires substantial capital. Errors can result in substantial losses. Moreover, the time it takes to transition from the concept stage to production can stretch over years or even a decade. Rarely does a startup have the financial means and runway for such an extended period.
Tesla now has a market capitalization of $1.5 trillion, with share prices trading at 17 times sales. While Tesla stock appears expensive, it represents a prudent choice for those betting on EVs ruling the world. Even if $200 cannot purchase an entire share of Tesla, the opportunity to purchase fractional shares makes it an attractive investment option.
Overlook not emerging electric car startups like this
With a market capitalization of $1.5 trillion, the potential long-term growth for Tesla may be limited. Rivian Automotive (RIVN -2.06%), a rival EV manufacturer, finds itself in a contrasting position. This company has a market capitalization of just $16 billion, presenting significant upside potential for future investors.
Financially, Rivian's resources pale in comparison to Tesla's. For instance, Rivian has around $6.7 billion in cash on its balance sheet and has yet to turn a profit in its history. Tesla, however, is profitable with more than $30 billion in cash reserves, in addition to its ability to secure billions in additional capital through additional share sales whenever needed.
While Rivian lacks Tesla's financial resources, it offers what growth investors yearn for: substantial upside potential. Its market capitalization is currently only $16 billion – approximately 99% smaller than Tesla's. If the company can successfully follow in Tesla's footsteps, it's not difficult to imagine enormous long-term gains for Rivian shares.
In 2026, Rivian is expected to start delivering three mass-market vehicles – the R2, R3, and R3X. When Tesla first released its mass-market vehicles – the Model 3 and Model Y – its sales and stock valuation soared dramatically.
Investing in a smaller EV manufacturer like Rivian comes with inherent risks. However, by dividing your EV portfolio equally between Tesla and Rivian, you effectively diversify your portfolio to include both the current market leader and potentially the next market leader several years down the line.
The high valuation of Tesla's stock offers substantial benefits to patient investors, making it a promising investment opportunity in the electric vehicle sector. On the other hand, Rivian Automotive, with its market capitalization of just $16 billion, presents significant upside potential for future investors in the finance world, offering a chance for substantial long-term gains.
Investing in Tesla, despite its expensive share prices, represents a prudent choice for those who believe in electric vehicles ruling the world, thanks to its considerable market capitalization and financial strength. Moreover, investing in Rivian, with its smaller market capitalization compared to Tesla, could provide a diversified portfolio by including a potential future market leader in the electric vehicle sector.
