Many investors are growing bullish on electric vehicle (EV) stocks, but it may not be for the reason you think. In years past, they have focused on the growth opportunity in EV sales, which still represent less than 15% of total vehicle sales in the U.S. The current hype, however, has to do with robotaxis. Some experts believe these could ultimately become a $5 trillion to $10 trillion global opportunity.

EV makers like Tesla (NASDAQ: TSLA) and Lucid Group (NASDAQ: LCID) are investing heavily in robotaxis. Competitors like Rivian Automotive (NASDAQ: RIVN), meanwhile, simply seem focused on getting new models to market — at least for now.

Which stock is the best buy right now? You might be surprised by the answer.

After years of anticipation fueled by Elon Musk’s repeated promises, Tesla finally launched its robotaxi service in Austin, Texas, earlier this year. Shortly after, Lucid announced that it would be partnering with Uber Technologies on a robotaxi venture.

Uber would own and operate the robotaxis, and Lucid would supply more than 20,000 vehicles over the next six years to power the service. The market responded positively to both announcements, sending shares of Tesla and Lucid higher in the days that followed.

The age of robotaxis is finally upon us. But there are two other things you should know before getting overly excited.

First, scaling up these robotaxi services will take many years. Musk has predicted more than 1 million autonomously driven Teslas will be roaming U.S. streets by the end of next year. But he has not been not a reliable source of predictions regarding self-driving vehicles. In 2015, he forecast Tesla would achieve “complete autonomy in approximately two years.” Ten years later, the company’s robotaxis in Austin still don’t have full autonomy.

The robotaxi market could be huge over the long term, but don’t expect huge swings in adoption over the next few years. The technology simply isn’t there yet. Regulations are also far behind what’s needed for a global rollout to occur.

Second, it appears as if robotaxi stocks like Tesla and Lucid already have a premium built into their prices. Despite falling revenue this year, Tesla shares trade at a lofty 15.4 times sales. Lucid, meanwhile, trades at 7.6 times sales.

Compare those valuations to Rivian — a stock that doesn’t yet have a clear robotaxi narrative and trades at just 3.6 times sales — and it becomes clear that the market may already be assigning meaningful value to Tesla’s and Lucid’s robotaxi potential.

Source link