If you’ve been closely following the electric vehicle (EV) industry, you’ve probably encountered the quest for the “next Tesla” on numerous occasions. From labeling various EV models as “Tesla killers” to coining catchy nicknames like “Tesla of China” and “Tesla of trucking” for companies like NIO (NYSE:NIO) and Nikola (NASDAQ:NKLA), there’s been a constant anticipation for the next big player in the EV sector. However, the reality paints a different picture as some of these contenders have faced significant challenges.
For instance, Nikola’s stock now trades just above $1, and Lucid Motors (NASDAQ:LCID), once hailed as a Tesla competitor, has struggled to sell as many cars as it can produce and is nearing penny stock territory. While Lucid Motors may still have potential for significant growth, it’s not currently a strong contender.
One noteworthy shift in the EV landscape is China-based BYD (BYDDY), which has already surpassed Tesla in total new energy vehicle (NEV) deliveries and is on track to become the largest seller of battery electric cars. Even Tesla CEO Elon Musk has acknowledged the changing landscape, stating that BYD’s cars are “highly competitive these days.”
So, who are the top contenders to be the next Tesla?
Given BYD’s strong position, we can consider Xpeng Motors (NYSE:XPEV) and Rivian (NASDAQ:RIVN) as the leading contenders.
Why Xpeng Motors is a Strong Contender
In July, Volkswagen invested in Xpeng Motors (NYSE:XPEV), and the two companies agreed to jointly develop two EV models for the Chinese market. This investment highlights not only Xpeng’s manufacturing capabilities but also its research and development and self-driving expertise.
Xpeng is actively developing autonomous driving technology, with testing underway in multiple Chinese cities, including Beijing. The company aims to roll out its autonomous driving service to all Chinese cities by the end of 2024. Furthermore, Xpeng took over Didi’s autonomous driving business in August, a move that should boost its autonomous driving segment. As part of this agreement, Xpeng will launch a new EV brand under the “MONA” project, focusing on EVs priced around $20,000.
Didi’s selection of Xpeng Motors from among numerous Chinese EV companies further solidifies its position. Xpeng’s G6 SUV has received a positive response in China, and its partnerships with Volkswagen and Didi are expected to significantly boost its revenue and margins in 2024. Altogether, Xpeng Motors appears to be one of the Chinese EV companies with a strong chance of becoming the next Tesla.
Why Rivian Could Join the Ranks of TSLA and BYD
Recently, Evercore ISI analyst Chris McNally upgraded Rivian’s (NASDAQ:RIVN) stock to “outperform” and suggested that it could be the next Tesla. McNally emphasized three key criteria for evaluating EV companies: “brand,” “scale economics,” and “vertical integration.” He noted that, apart from Tesla and BYD, only Rivian meets all three criteria.
McNally’s viewpoint is shared by other analysts, with Barclays identifying Rivian as the closest competitor to Tesla in the startup EV universe. Overall, Wall Street analysts rate Rivian’s stock as a “Moderate Buy.”
Rivian’s strong product proposition is reminiscent of Tesla. Its R1T pickup won MotorTrend’s prestigious Truck of the Year 2022 award, receiving high praise for redefining the modern pickup.
Rivian, like Tesla, has invested in its manufacturing facilities. It has a functional facility in Normal, Illinois, and is constructing its next mega plant in Georgia. The company is also gearing up to launch its low-cost platform R2 in 2026. With a robust balance sheet and backing from Amazon, which has placed an order for up to 100,000 electric delivery vans with Rivian, the company has the resources and potential to become a strong contender for the “next Tesla” title.
In conclusion, a robust balance sheet, compelling product offerings, premium brand positioning, a focus on manufacturing, and a vertically integrated supply chain make Rivian a formidable contender in the race to be the next Tesla.
Featured Image: Megapixl