Tesla Market Sentiment Sours: Here Are the EV Winners

Key Points

• Tesla stands to underperform its guidance and analysts' consensus forecasts due to souring consumer sentiment linked to CEO Elon Musk.
• EV OEMs like BMW, Toyota, and Lucid stand to gain the most. 
• Institutional activity is a factor that provides a tailwind for BMW, TM, and LCID stock. 

Tesla’s NASDAQ: TSLA stock is under pressure because its CEO is busy down-sizing the U.S. government while its business faces numerous headwinds. Not only are the policies he supports and enforces detrimental to the EV market, but he’s alienating his customers. They are protesting at Tesla sites, trading in their vehicles at a record pace, and adversely affecting the outlook, generally. 

Tesla wasn’t expected to have a robust year, but now, even the tepid outlook is in danger as it loses first-mover advantages and favorable consumer sentiment. We have to assume that Tesla’s loyal customers aren’t buying new cars like they were, and there are other problems, such as the recall of the Cyber Truck and the increasing competition. Here’s a look at the top three positioned to take share from Tesla in the U.S.

BMW Emerges as Leading Competitor to Tesla

BMW ETR: BMW has been steadily improving its EV fleet and now stands as the leading competitor positioned to take share from Tesla. While its i4 and Polestar lineups come at a slightly higher price point, they are a more luxurious choice with comparable performance. As it is, BMW’s EV sales accounted for less than 20% of the 2024 revenue but are on track to grow in 2025 and reach 50% by 2030. Regarding growth, BMW is expected to grow its business in alignment with the greater automobile industry. At the same time, EVs will become a larger share of its revenue and the EV market at large. 

Analysts are still on the fence with BMW, rating it as a hold, but value is present. The consensus target is increasing in 2025 and forecasts a high-single-digit upside for the stock. A move to the consensus target would align this market with recent highs and set it up to complete a full reversal. 

Toyota Leans Into Hybrid Vehicles With RAV4 

Toyota’s NYSE: TM lower-price RAV4 is at the other end of the spectrum. While not a full BEV electric vehicle, its hybrid design combines the best of both worlds: reduced emissions and increased range. The takeaway is that this vehicle offers numerous incentives to disgruntled Tesla owners and gets high ratings. Kelly Blue Book reports that 60% of owners recommend it to others, 42% give it a 5-star rating, and Edmunds has a 7.7 out of 10 rating, citing a smooth ride and roominess. Toyota is also expected to grow at a low-to-mid single-digit CAGR for the next few years. It is rated as a Hold. 

Investors worried about losing exposure to Tesla’s research and advances in other technologies needn’t. BMW and Toyota have leaned into AI, robotics, and next-gen transportation technologies, making them equally attractive. Toyota, specifically, has invested millions into Joby Aviation NYSE: JOBY, the leading candidate for broad FAA approval of its EVTOL technology. Once approved, Toyota will be instrumental in helping the company ramp up its production and commence air-taxi operations. 

Lucid Could Get a Much-Needed Boost

Lucid NASDAQ: LCID is well-positioned to benefit from Tesla’s decline. The company’s Air lineup has a higher price point but offers advantages, including space, luxury features, and overall quality. The market expects the company to gain traction in 2025, with production of the Gravity now underway and deliveries expected to begin soon. 

Analysts sentiment remains tepid for Lucid, but there are signs of improvement. The number of analysts covering the stock increased at the end of 2024 and again in early 2025, along with an uptick in sentiment. Pegged at Hold, there is now a bullish bias that suggests a floor is in place for the market. Institutional buying trends align with that forecast, ramping to a multiyear high in Q1 2025 and netting nearly $1.5 billion in shares. 

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