One topic that family members may want to avoid this holiday season is debating whether to drive an electric car or an internal combustion engine (ICE) car. While this is in jest, there is some truth to it: Each side tends to dig deeper when a discussion gets heated.
The problem with the electric vs gas car debate, however, is that it is being taken to the extreme. Most consumers are open to the idea of an electric car. The US Energy Information Administration (EIA) reported that battery electric vehicle (BEV) sales market share increased to record 8.9% in the third quarter 2024. And this market share among luxury car owners is even higher.
However, if you live outside of a major urban area, the practical limitations of current EV infrastructure become self-evident. This is a solvable problem, but it will require many years of investment.
That’s why EVs aren’t selling as expected and why EV stocks aren’t being named. Tesla Inc. NASDAQ:TSLA are lagging behind the market.
Fortunately, consumers and investors have an alternative. The same EIA report shows that hybrid vehicles have a market share of up to 10.6% of the light-duty vehicle (LDV) market. This is also a record.
And if consumers turn to hybrids, investors could do worse than buy shares of companies that are leaders in the field. Here are three names to watch for strong growth in 2025.
Short-term earnings concerns shouldn’t ruin your view of Toyota Motors
Toyota Motor today
Toyota Motor
(As of 12/17/2024 ET)
- 52 week range
- $159.04
▼
$255.23
- Dividend yield
- 2.67%
- P/E ratio
- 8.24
Many investors will not be surprised by the fact that the list of companies leading the hybrid car market belongs to Japan. First this Toyota Motor Corp. (New York Stock Exchange: TM). The company is an unabashed advocate of hybrid technology, even as the BEV push gains momentum.
The company’s global hybrid electric vehicle (HEV) sales grew 28% in October 2024, and year-to-date HEV sales are up more than 20%. This represents about 40% of the company’s total sales, up from about 33% in the previous year.
However, TM shares are down more than 4% in 2024. This loss is largely due to the company’s revenue halving in the most recent quarter compared to the same period last year. Analysts believe the certification and quality control issues will subside over time and forecast the company’s share price to rise 20% to $211.17. This would mean that the company’s earnings over the next two quarters will be significantly higher than the current average.
Honda’s sales decline in China is not expected to be a long-term concern.
The company reported a surprise decline in earnings in the second quarter of fiscal 2025. This was due to falling sales in China, which offset sales growth in the US and Japan.
HMC shares are down 18% in 2024. However, analysts believe the earnings decline will be temporary and give the stock a consensus price target of $34.90, giving investors an impressive 37% upside potential.
Hyundai Motor has a halo of artificial intelligence that adds to its hybrid appeal
Hyundai Motor today
(As of 12/17/2024 ET)
- 52 week range
- $40.24
▼
$69.27
- P/E ratio
- 0.00
Hyundai Motor Company. OTsMCTs: HIMTF is the strongest of the three auto stocks on this list. HYMFT shares are up more than 22% in 2024. However, some of this may be a halo effect as investors react to the company’s investment in the artificial intelligence darling. SoundHound AI Inc. NASDAQ:SOUN. The company is also partnering with South Korean chipmaker BOS Semiconductors, which makes artificial intelligence chips for automotive infotainment systems and autonomous driving.
But that shouldn’t distract you from the company’s strong position in the HEV market. In the company’s latest earnings report, Hyundai reported a 12.9% increase in global EV sales, with each of its three reporting regions (US, Europe and others) posting growth in the category.
Analysts are aggressively bullish on Hyundai shares. The 28 analyst consensus price target is $77.51. This is a whopping 44% increase from the closing price on December 13th.
Before you consider Toyota Motor, you should hear this.
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