1 EV Stock to Load Up on and 2 to Dump on the Street

Lately, t's been an absolute roller coaster ride in the electric vehicle (EV) industry. While pessimism surrounding high prices, interest rates, charging infrastructure, and slowing growth have plagued many EV players, the past three months has brought much relief for stock prices, with many surging higher. Investors should take these gains with a grain of salt, and deciding which companies are worth your investment is as difficult as ever. That said, here's one stock investors can load up on and two that should be avoided for now.

Rivian continues to shine

Whether you look at deliveries, vehicle reception, or impressive deals made, Rivian (NASDAQ:RIVN) continues to shine. Let's start with vehicle reception, as a recent survey by McKinsey & Co. noted that roughly 40% of current EV owners plan to revert and buy a gasoline-powered vehicle next -- bad news for EV makers.

However, Edmunds.com is currently doing long-term testing with nine EVs and Rivian's R1T is one of its favorites. Not only did Edmunds recommend buying the R1T again, but it also noted that the R1T launch edition was its favorite among all start-up EV manufacturers.

Early in July, Rivian also posted strong delivery numbers of 13,790 vehicles. That figure was a 9% gain over the prior year and ahead of Wall Street estimates calling for 12,000 vehicles. Better yet, Rivian's production was roughly 9,600 vehicles, meaning that Rivian was able to clear out some valuable inventory.

Rivian received a major vote in confidence from global automaker Volkswagen. The deal is to create a joint venture that will share EV architecture and software. Volkswagen will invest up to $5 billion in Rivian, and not only will it provide Rivian more funding to finish developing and producing its next generation R2 crossover, it will help the EV maker cut operating costs by leveraging volumes of supplies and components.

Rivian has also recently refreshed its current R1 vehicles, which could help spur demand and bridge the gap until its R2 vehicles roll off the assembly line in early 2026. Rivian is one of the smartest investments of all start-up EV makers.

Buyer beware

Nikola Corporation (NASDAQ:NKLA) has had its share of controversies and speed bumps in its short history, and it's still struggling to find its foothold as a viable business. Sure, the company posted some success during the first quarter with 40 FCEV truck deliveries, but it remains a far cry from profitable sales volume.

Further, the company's cash burn is still a large concern for investors. Nikola exited the first quarter of 2024 with roughly $378 million in cash and cash equivalents, but it also has a negative operating cash flow of $431.8 million over the past 12 months. It's almost certain that Nikola will have to raise additional capital to keep its vision alive, and that brings shareholder dilution right along with it.

Nikola has consistently overpromised and underdelivered, and it will compete against other companies rolling out their own battery-powered tractor-trailer trucks over the next few years. Right now, Nikola is a tough sell to investors hoping for a long-term winner in the EV industry.

Hitting speedbumps

Nio (NYSE:NIO) is another company that's had a rough road throughout its history. Recently, like many EV makers, it's faced supply chain disruptions, crippling price wars and increasing competition, and overseas tariffs that threaten its ability to expand sales internationally.

You can see the impact of these speed bumps in the company's delivery figures. Nio's delivery growth dropped to 31% in 2023, which was a huge slowdown compared to triple-digit increases recorded in 2020 and 2021. Further, the price wars have shredded its margins -- its vehicle margin dropped from a record high 20.2% in 2021 to a modest 9.5% in 2023.

Nio does have some hope left, however. The company is kicking off its much-hyped Onvo lineup, which is designed to bring a premium-quality vehicle to mainstream consumer budgets. Deliveries will start during the third quarter of 2024, but if the lineup fails to carve out market share or improve deliveries, the disappointing results could really damage investors' confidence.

What it all means

EV adoption has slowed in the U.S., and tariffs are putting pressure on expansion by Chinese automakers such as Nio. Right now, Rivian continues to shine by most metrics and has a substantial cash pile, and support from Volkswagen, to help push through this downturn. Nikola and Nio aren't dead in the water yet, but their near-term outlooks leave investors in a very speculative and risky position -- buyer beware.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.