In this article, we discuss 10 best car stocks to buy now.

In 2022, the global automotive industry faced significant obstacles, including high interest rates, supply chain disruptions, and concerns about a potential recession. The global automotive industry is set to face several challenges in 2023 as well, due to various global factors, including the energy crisis, sluggish global demand, and ongoing disruptions in supply chains. However, the electric vehicle market is projected to be the only positive aspect, with the sales of conventional fossil-fuel cars and commercial vehicles expected to decline. Bernstein analyst Daniel Roeska wrote in an investor note in December 2022: 

“There is active demand destruction in the industry, given inflation, interest rates, and energy costs − but so far, this has mostly impacted the backlog.”

According to Charlie Chesbrough, Cox Automotive’s senior economist and senior director of industry insights, the company is predicting that U.S. new vehicle sales will reach 14.1 million in 2023, which he characterized as “cautiously optimistic.” However, Wall Street analysts estimate that U.S. auto sales for this year will be around 13.7 million. S&P Global Mobility predicts that new vehicle sales worldwide will rise by 5.6% from the previous year to nearly 83.6 million units in 2023. S&P also expects sales in the United States to increase by 7%, reaching about 14.8 million units in 2023.

Similarly, Fitch Ratings predicts a 5% increase in global vehicle production and sales in 2023 due to the easing of supply chain disruptions. However, the global sales and production will still be constrained by weak economic conditions, particularly in the U.S. and Europe. Lower commodity prices and reduced logistics costs are expected to support the profitability of auto makers and suppliers. Nevertheless, the normalization of vehicle mix and higher incentives will bring down net pricing and reduce auto manufacturer margins from the high levels of 2022. Fitch maintained a Neutral outlook for the global auto sector. 

The automotive industry faced a major challenge when a significant number of employees left their jobs and did not return, leaving factories and original equipment manufacturers short-staffed just when the industry needed to resume production. This was compounded by the need for a shift in skill sets to support the transition from internal combustion engine models to electric vehicles. Larry Keyler, Partner and Global Automotive Leader at RSM US, said on January 18, 2023: 

“As a result of the labor shortage, I think we will continue to see a significant increase in the development of robotics and automation on the supply base as well as other technologies at the OEM level.”

Don’t Miss: Most Promising Car Stocks According to Analysts

Despite numerous challenges faced by the automotive industry, one of the most prominent trends is the focus on the development of electric vehicles, including improving battery performance and expanding charging infrastructure. As a result, vehicle manufacturers are increasing their research and development efforts on EV technology despite the current challenges in the industry. To benefit from the growth and transformation in the auto sector, some of the best car stocks to buy include Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM) and Rivian Automotive, Inc. (NASDAQ:RIVN). 

Our Methodology 

We scanned Insider Monkey’s database of 943 hedge funds and picked the top 10 companies that provide services in the auto sector with the highest number of hedge fund investors. These are the best car stocks to buy according to hedge funds.

Best Car Stocks To Buy Now

10. Fisker Inc. (NYSE:FSR)

Number of Hedge Fund Holders: 13

Fisker Inc. (NYSE:FSR) manufactures, advertises, rents out, and sells electric cars. The company is divided into three segments – The White Space, The Value Segment, and The Conservative Premium segments. According to the company’s statement in Q4 2022, Fisker Inc. (NYSE:FSR) has manufactured a total of 56 vehicles, out of which 15 were created for Magna’s group, since production commenced. Fisker Inc. (NYSE:FSR) has already requested and secured the necessary parts for the initial 300 automobiles, as well as some long-lead components for the second quarter.

On March 27, Citi initiated a “90-day upside Catalyst Watch” for Fisker Inc. (NYSE:FSR)’s stock. Despite providing “very promising” guidance for 2023 compared to other electric vehicle companies, Fisker Inc. (NYSE:FSR)’s stock has not performed well, possibly due to broader economic concerns. Citi believes that if Fisker Inc. (NYSE:FSR) meets most or all of its near-term objectives, the company’s stock narrative could quickly shift from one of skepticism to one that embraces the Ocean’s appealing electric vehicle specifications, pricing, asset-light model, and growth plans. Citi thinks that given Fisker’s low market capitalization compared to its peers, there is a significant potential for upside if the company succeeds in the coming months. Therefore, the firm maintained a Buy rating on the shares with a price target of $21.

According to Insider Monkey’s fourth quarter database, 13 hedge funds were bullish on Fisker Inc. (NYSE:FSR), compared to 15 funds in the prior quarter. 

In addition to Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM), and Rivian Automotive, Inc. (NASDAQ:RIVN), Fisker Inc. (NYSE:FSR) is one of the best car stocks to invest in. 

9. XPeng Inc. (NYSE:XPEV)

Number of Hedge Fund Holders: 17

XPeng Inc. (NYSE:XPEV) is a Chinese company that manufactures and promotes intelligent electric cars. In addition, the company offers sales agreements, upkeep, quick charging, technological assistance, automobile financing, insurance technology assistance, ride-hailing, and automotive loan recommendations, among other services. XPeng Inc. (NYSE:XPEV) delivered 7,002 Smart EVs, up 17% on a month-over-month basis, bringing Q1 total deliveries to 18,230 vehicles. 

According to a research note by Barclays analyst Jiong Shao, XPeng Inc. (NYSE:XPEV)’s Q4 results were “weak,” and the company’s Q1 delivery guidance was “soft.” XPeng Inc. (NYSE:XPEV) is currently undergoing significant product changes and some leadership adjustments, which may have contributed to these results. The firm hopes that XPeng’s new products will gain traction later in the year, leading to increased sales. However, Barclays remains cautious since they have limited visibility into XPeng Inc. (NYSE:XPEV)’s sales ramp or the potential success of its new models. As a result, the firm maintained an Equal Weight rating on the shares with a $8 price target on March 30.

Among the hedge funds tracked by Insider Monkey, 17 funds were bullish on XPeng Inc. (NYSE:XPEV) at the end of December 2022, compared to 20 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a significant position holder in the company, with 3 million shares worth $30.8 million. 

8. Li Auto Inc. (NASDAQ:LI)

Number of Hedge Fund Holders: 25

Li Auto Inc. (NASDAQ:LI) is a Chinese company that designs, produces, and sells new energy vehicles. Their primary product is the Li ONE, a six-seat smart electric sport utility vehicle equipped with advanced features such as smart vehicle solutions, navigation on ADAS, and automatic emergency braking functionalities. In addition to vehicle manufacturing, Li Auto Inc. (NASDAQ:LI) also provides sales and after-sales management services, technology development, corporate management services, and purchases manufacturing equipment. It is one of the best car stocks to invest in. 

Li Auto Inc. (NASDAQ:LI) sold 20,823 automobiles in March 2023, which is an 88.7% increase year-over-year and a 25% increase from the previous month. As a result, Li Auto Inc. (NASDAQ:LI) delivered a total of 52,584 cars in the first quarter, representing a 65.8% year-over-year growth. The cumulative number of Li Auto vehicles sold reached 309,918 by the end of March.

On March 20, Morgan Stanley raised the firm’s price target on Li Auto Inc. (NASDAQ:LI) to $30 from $23 and maintained an Overweight rating on the shares, citing valuation, balance sheet strength, speed of innovation, and model iteration.

According to Insider Monkey’s fourth quarter database, 25 hedge funds were bullish on Li Auto Inc. (NASDAQ:LI), compared to 20 funds in the preceding quarter. Andreas Halvorsen’s Viking Global is the largest stakeholder of the company, with 9 million shares worth $185.4 million. 

7. NIO Inc. (NYSE:NIO)

Number of Hedge Fund Holders: 25

NIO Inc. (NYSE:NIO) is a Chinese company that specializes in the design, development, manufacturing, and sale of smart electric vehicles, including SUVs and sedans. The company also offers energy and service packages to its customers, as well as battery packs, e-powertrains, and components. In addition, NIO Inc. (NYSE:NIO) provides various power solutions, such as home charging, battery swapping, fast charging, mobile charging, and access to a network of public chargers. NIO Inc. (NYSE:NIO) also offers a valet service called One Click for Power, which provides vehicle pick-up, charging, and swapping services. It is one of the best car stocks to watch. 

In Q4 2022, NIO Inc. (NYSE:NIO) delivered a total of 40,052 vehicles, out of which 20,824 were premium smart electric SUVs and 19,228 were premium smart electric sedans. This marked a 60% increase from Q4 2021 and a 26.7% increase from Q3 2022. The total vehicle deliveries in 2022 were 122,486, which is a 34% increase from 2021.

On March 20, Morgan Stanley analyst Tim Hsiao maintained an Overweight rating on NIO Inc. (NYSE:NIO) but lowered the firm’s price target on the shares to $12 from $16.10. 

According to Insider Monkey’s fourth quarter database, 25 hedge funds were bullish on NIO Inc. (NYSE:NIO), compared to 26 funds in the last quarter. Jos Shaver’s Electron Capital Partners is a prominent stakeholder of the company, with 6.30 million shares worth $61.4 million. 

6. Stellantis N.V. (NYSE:STLA)

Number of Hedge Fund Holders: 28

Stellantis N.V. (NYSE:STLA) designs, engineers, manufactures, distributes, and sells automobiles, light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems. Its products include luxury and premium passenger vehicles, pickup trucks, sport utility vehicles, and commercial vehicles. The company also offers parts and services, as well as retail and dealer financing, leasing, and rental services. On April 21, Stellantis N.V. (NYSE:STLA) declared a $1.42 per share annual dividend. The dividend is payable on May 4, to shareholders of record on April 25. 

On March 6, Berenberg analyst Adrian Yanoshik raised the firm’s price target on Stellantis N.V. (NYSE:STLA) to EUR 21 from EUR 18 and kept a Buy rating on the shares.

According to Insider Monkey’s fourth quarter database, 28 hedge funds were long Stellantis N.V. (NYSE:STLA), compared to 25 funds in the earlier quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest stakeholder of the company, with 10.20 million shares worth $144.3 million. 

Like Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM), and Rivian Automotive, Inc. (NASDAQ:RIVN), elite investors are piling into Stellantis N.V. (NYSE:STLA) for exposure to the auto sector. 

5. Rivian Automotive, Inc. (NASDAQ:RIVN)

Number of Hedge Fund Holders: 29

Rivian Automotive, Inc. (NASDAQ:RIVN) produces and sells electric automobiles and accompanying parts. The company presents a selection of pickups that can seat five passengers and sports utility vehicles that can seat seven passengers. On April 20, it was announced that the roster of vehicles that meet the requirements for the electric vehicle tax credit in the United States has been expanded yet again, with Rivian Automotive, Inc. (NASDAQ:RIVN) R1T and R1S now included in the list. If new buyers order a configuration that is under the $80,000 limit, they can receive a $3,750 credit.

On April 18, Morgan Stanley maintained an Overweight rating on Rivian Automotive, Inc. (NASDAQ:RIVN) but lowered the firm’s price target on the shares to $24 from $26. In 2022, investor confidence in Rivian Automotive, Inc. (NASDAQ:RIVN) had decreased due to production delays, industry-wide challenges, and intense competition in the electric vehicle market. However, the firm believes that there may be reasons to be optimistic about Rivian Automotive, Inc. (NASDAQ:RIVN) before the upcoming earnings report, given that the stock has already factored in much of the negative news. After updating its projections, the firm’s “bull case” target is now $45 (down from $55) and its base case target is $24.

According to Insider Monkey’s fourth quarter database, 29 hedge funds were long Rivian Automotive, Inc. (NASDAQ:RIVN), compared to 30 funds in the prior quarter. George Soros’ Soros Fund Management is the biggest stakeholder of the company, with 14.3 million shares worth $264.3 million. 

Baron Asset Fund made the following comment about Rivian Automotive, Inc. (NASDAQ:RIVN) in its Q4 2022 investor letter:

“Consumer Discretionary investments along with the lack of exposure to the strong performing Energy sector offset a portion of the above-mentioned gains. Within Consumer Discretionary, the underperformance of electric vehicle (EV) manufacturer Rivian Automotive, Inc. (NASDAQ:RIVN) coupled with lower exposure to this better performing sector hampered relative results. Rivian’s shares fell as investors fretted over the company’s unit economics and how macroeconomic uncertainty is impacting the EV industry.

Rivian Automotive, Inc. is an EV manufacturer producing vehicles for the consumer and corporate delivery van markets. Its shares were under pressure during the quarter. Investors remained focused on the company’s execution challenges, the implied unit economics for its vehicles, and near-term headwinds for the automotive industry stemming from a weaker global economy. Despite these headwinds, we are comfortable with Rivian’s liquidity position and its competitive position within the EV industry, which we believe will continue to grow at impressive rates. Rivian should also benefit from its positive product reviews, its integrated technology approach, and its industry partnerships.”

4. Ferrari N.V. (NYSE:RACE)

Number of Hedge Fund Holders: 32

Ferrari N.V. (NYSE:RACE) is involved in the global design, engineering, manufacturing, and distribution of high-end performance sports cars. The company provides various types of vehicles, including range, special series, Icona, and supercars, as well as limited edition supercars and customized one-off cars. Additionally, the company offers track cars designed for racing. It is one of the best car stocks to watch. 

On April 14, Ferrari N.V. (NYSE:RACE) stock rose significantly after revealing a historic order list that reaches until 2024. Additionally, the company disclosed the outcomes of the resolutions proposed at its Amsterdam meeting, all of which were accepted. One of the accepted proposals involves paying a dividend in cash of €1.81 per common share outstanding, equating to €329 million, to shareholders on May 5.

Goldman Sachs analyst George Galliers upgraded Ferrari N.V. (NYSE:RACE) to Neutral from Sell with a price target of $283, up from $182 on April 6. The analyst’s outlook on the luxury segment of the automobile industry has become more optimistic, as he believes it is less susceptible to competitive threats and will likely remain steady during periods of economic downturn. Furthermore, the analyst stated that the recent shift in regulations to permit the use of e-fuel could decrease capital expenditure and lower the risk of companies and their brands in the long run.

According to Insider Monkey’s fourth quarter database, 32 hedge funds were bullish on Ferrari N.V. (NYSE:RACE), compared to 31 funds in the prior quarter. Anand Desai’s Darsana Capital Partners is the largest stakeholder of the company, with 750,000 shares worth $160.6 million. 

Ensemble Capital made the following comment about Ferrari N.V. (NYSE:RACE) in its Q1 2023 investor letter:

“Ferrari N.V. (NYSE:RACE) (+26.48%): The luxury automaker’s long awaited Purosangue, their first four door, four seater vehicle, has proven so popular that the company announced that they have ceased accepting new orders as they are sold out through all of this year and into 2024. The Purosangue is designed not as a copycat sports utility vehicle that many other luxury automakers sell, but as a true Ferrari car that their devoted fan base can use for more practical transportation needs. Since the average Ferrari is only driven a few thousand miles a year or less, they are best understood as mechanical works of art rather than a means of transportation. But with the introduction of the Purosangue, Ferrari enthusiasts will have a vehicle that meets transportation needs, while still delivering the extremely high end experience that you would expect from a car that costs about $500,000.”

3. Ford Motor Company (NYSE:F)

Number of Hedge Fund Holders: 40

Ford Motor Company (NYSE:F) develops, designs, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. On April 6, Ford Motor Company (NYSE:F) declared a quarterly dividend of $0.15 per share, in line with previous. The dividend is payable on June 1, to shareholders of record on April 26. Ford’s overall vehicle sales were up 10.1% in Q1 2023 to 475,906 vehicles.

On March 27, Citi analyst Itay Michaeli reiterated a Neutral rating on Ford Motor Company (NYSE:F) and reduced the price target of Ford from $14 to $12.50. The company’s reaffirmed guidance indicated a low likelihood of negative changes, but Michaeli believes that the first quarter of the year will provide insight into the company’s ability to execute its plans after a challenging second half of 2022. While Ford Motor Company (NYSE:F) has the potential to remain profitable during most economic downturns and maintain sufficient liquidity, the firm has adjusted its earnings forecasts due to macroeconomic risks.

According to Insider Monkey’s fourth quarter database, 40 hedge funds were long Ford Motor Company (NYSE:F), compared to 47 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 17.5 million shares worth $203.7 million. 

Here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

2. General Motors Company (NYSE:GM)

Number of Hedge Fund Holders: 80

General Motors Company (NYSE:GM) is a multinational corporation headquartered in Detroit, Michigan. The company designs, manufactures, markets, and distributes vehicles and vehicle parts globally. It produces a range of vehicles, including cars, trucks, SUVs, and electric vehicles, under various brands such as Chevrolet, Buick, GMC, and Cadillac. General Motors Company (NYSE:GM) is one of the top car stocks to watch. 

On April 3, General Motors Company (NYSE:GM) reported an increase in sales in Q1 2023 compared to the same period in 2022, with a growth rate of 18% and an accompanying rise in its market share by 1.5%. In the first quarter of 2023, the company sold a total of 603,208 vehicles, driven by a 15% growth in retail sales and a 27% rise in fleet sales. The automaker particularly highlighted its leading position in fleet registrations, with the sale of 73,274 units in the quarter.

Barclays analyst Dan Levy maintained an Equal Weight rating on General Motors Company (NYSE:GM) and lowered the firm’s price target on the shares to $45 from $46 on April 17. According to the analyst, the expectations for Q1 earnings in the US auto and mobility sector are modest, which could lead to a positive reaction from shareholders. While end markets have been relatively stable, Levy believes that further improvement is necessary. He also expects that General Motors Company (NYSE:GM) outlook will remain consistent.

According to Insider Monkey’s fourth quarter database, 80 hedge funds were long General Motors Company (NYSE:GM), compared to 74 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 50 million shares worth nearly $1.7 billion. 

Here is what Diamond Hill Capital had to say about General Motors Company (NYSE:GM) in its Q3 2022 investor letter:

“Most recently, we initiated a position in General Motors Company (NYSE:GM), one of the largest automakers in the United States. Over the past several years, GM has taken steps necessary to focus the company on the most profitable segments and move into position to compete in an electrified and autonomous world. With the recent rise in interest rates there was a meaningful selloff in the auto industry, which presented us with an attractive entry point to a name we know well.”

1. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 91

Tesla, Inc. (NASDAQ:TSLA) is one of the best car stocks to invest in. Founded in 2003, the company designs, manufactures and sells electric cars, solar panels, energy storage systems, and related products. Tesla’s vehicles include the Model S, Model X, Model 3, Model Y, and the Cybertruck. 

On April 21, after reviewing Tesla’s Q1 report, Barclays maintained an Overweight rating on Tesla, Inc. (NASDAQ:TSLA) but lowered its price target on the company’s stock from $230 to $220. The analyst still believes that Tesla is a long-term winner, but noted that the stock may face challenges in the near future due to a “weak margin outlook.”

According to Insider Monkey’s fourth quarter database, 91 hedge funds were bullish on Tesla, Inc. (NASDAQ:TSLA), compared to 88 funds in the prior quarter. D E Shaw is a prominent stakeholder of the company, with 6.3 million shares worth $785.8 million. 

VGI Partners made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its 2022 annual investor letter:

“Pleasingly, the portfolio also benefited this year from a number of single-stock shorts, including a position in Tesla, Inc. (NASDAQ:TSLA), the well-known electric vehicle manufacturer that was experiencing a slowing in business momentum throughout the year as a result of pressures on consumer discretionary purchases, supply chain disruptions and increasing competition. We have expected for some time that the electric vehicle category would become more competitive, and more recently have begun to witness aggressive price cuts by manufacturers in an attempt to clear inventory, which is a negative trend for an industry that is only likely to see more competition over the coming years. The portfolio also benefited from a short position in a US-listed discount grocery store business, where investors were being pitched a large-scale store rollout story by senior management, albeit using forecasts that were extrapolating the temporarily favourable conditions into the long term and at a time when insider selling was rapidly accelerating. Both these short positions have now been profitably closed.

In meetings with investors over the last six months, we have said that the signposts that we are closer to an equity market bottom would include the reveal of a large fraud as well as a sell-off in Tesla, the retail investor poster-boy. We have seen the collapse of FTX, a large crypto company, and evidence that it is an outright fraud, along with a severe unwind in the Tesla share price (where we fortunately had a short position during CY22; since closed).”

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out 12 Best Entertainment Stocks To Buy In 2023 and 15 Stocks that will 10x in 5 Years. 

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Disclosure: None. 10 Best Car Stocks To Buy Now is originally published on Insider Monkey.