The U.S. transition to electric vehicles (EVs) hasn't been a smooth ride thus far. Following the end of the federal $7,500 EV tax credit and a weakening of fuel economy regulations, young EV makers have had a tough time generating as much demand as anticipated only a few years ago.

That said, the transition will go on, and will eventually accelerate, and that leaves investors who want to buy into this EV future a few options.

On the riskier end of the scale, investors might be comparing Rivian Automotive (NASDAQ: RIVN) and Lucid Group (NASDAQ: LCID). Here's one major factor to remember: shareholder dilution.

Why dilution matters

It's worth repeating, though most investors are aware: Shareholder dilution is simply the aftermath of when a company creates new shares of a stock for capital; as the pool of shares grows larger, an individual's stake gets less valuable. This is hugely important for investors buying into young companies that are capital-intensive, as they could need multiple capital raises that could be dilutive. That's one of the biggest differences between Lucid and Rivian right now, and it's more important than ever.

LCID Shares Outstanding (Quarterly) data by YCharts

Let's start from the beginning, because it matters. Rivian chose a standard initial public offering (IPO), and the timing was nearly perfect. The market was giving massive valuations, and Rivian sold 153 million shares at $78 per share, raising nearly $14 billion (after underwriters fully exercised their options) in one of the largest debuts in 2021.

That gave Rivian a large cash cushion to fund investments and expenditures without needing to raise additional capital nearly as soon as Lucid, which chose to go public through a special purpose acquisition company (SPAC) merger. While Lucid received a solid valuation initially, it received a much smaller cash infusion of only about $4.4 billion.

Lucid ended the second quarter of 2026 with $3 billion in total liquidity, but its cash and cash equivalents were a lesser $732 million. Management expects that liquidity to last well into 2027, but already, analysts are predicting capital raises will be necessary and could be very shareholder dilutive. Lucid is working to curb its cash burn and is aiming to generate $1.4 billion in cash-flow improvements, but even that is likely just buying time until the next selling of shares or infusion from Saudi Arabia's Public Investment Fund, which already owns a massive chunk of the young EV maker.

Rivian, on the flip side, actually has better liquidity than it appears. Rivian ended the second quarter with $5.3 billion in cash and cash equivalents, but including its credit facility, its total liquidity reached about $5.8 billion. Following the second quarter, Rivian announced one of its rare capital raises and added about $1.3 billion in net proceeds, lifting its liquidity to almost $7.2 billion.

But wait, there's more. Thanks to Rivian's partnership with Volkswagen, the former expects a non-recourse loan capital and milestone investments to add another $1.4 billion, and Uber Technologies is expected to invest another $250 million in 2026 and over $700 million in subsequent years.

Lastly, Rivian's $4.5 billion Department of Energy loan is earmarked to help fund the company's second manufacturing plant in Georgia. All in all, investors have transparency of about $14 billion in Rivian's expected liquidity. That is a vastly superior position compared to Lucid, and gives investors confidence that there will be less shareholder dilution in the near term.

Rivian R2. Image source: Rivian.

What it all means

Lucid makes some of the world's most advanced EVs, and will continue to do so. However, Lucid has also been troubled with recalls, production hiccups, delays, and supplier issues, and has struggled to scale fast enough to lower overhead and reduce costs. Those issues have hindered Lucid's ability to improve its gross margin consistently, as rival Rivian has already done.

Investors comparing these two young EV makers must remember shareholder dilution, because $1 invested in Rivian right now is far more likely to hold its value going forward. Lucid investors likely can't say the same.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

Investors would certainly love to find the next high-flying Tesla stock, which made many long-term shareholders wealthy. Right now, the electric vehicle (EV) industry is slowly gaining traction after fuel economy regulations were relaxed and the $7,500 federal EV tax credit ended, and that gives investors a chance to gauge EV investments and potentially start a position before the industry accelerates forward, and eventually, it will. When comparing two young EV makers, Rivian (NASDAQ: RIVN) and Lucid (NASDAQ: LCID), one of the most important factors is gross profitability.

Here's how the two compare, and why it matters.

All about the money

Gross profitability is hugely important for young companies such as Rivian and Lucid. Gross profitability is simply how much profit a company makes after paying the direct costs to create its product or services, in this case, EVs (mostly); more on this later. It proves to investors that the core business model is sound before adding other expenses and complications. It's also important to attract more investors, which increases demand for the stock and raises its price, as they'll see the investment as more long-term viable.

While Lucid and Rivian share many similarities, gross profitability is the first major factor that separates the two.

RIVN Gross Profit (TTM) data by YCharts.

As you can see, Rivian has consistently and methodically improved gross profitability since 2023, while Lucid has wavered at best and moved in the wrong direction for about a year and a half.

Driving forces

There are three primary reasons for this separation. First, Rivian simply has more scale, although both remain at low volumes compared to traditional automakers. Rivian delivered more than double the number of vehicles in 2025 with over 42,000 vehicles compared to Lucid's almost 16,000 vehicles.

The second reason for Rivian's better gross profitability is its extensive per-unit cost cuts. The automaker has done a fantastic job removing redundant parts and even large amounts of wiring, among other things, saving thousands of dollars per vehicle. Furthermore, the company has even renegotiated with suppliers to improve unit economics.

Rivian's R2. Image source: Rivian.

Lastly, and perhaps the most important reason, is that Rivian's advanced electronics and software stack were enough to convince Volkswagen to team up in a joint venture that pays Rivian handsomely and helps split development costs. Rivian's joint venture has significantly boosted its gross profits: Consider that Rivian's second-quarter automotive gross profit was a loss of $36 million, while its software and services segment checked in at $215 million. Furthermore, the software segment's gross margin was a strong 42%.

What it all means

The biggest step a young company can take is to prove to investors that its business model can work in the long term, which means showing consistent gross profitability. Rivian has consistently improved, and its upside is solely due to its software advantage. Investors also have to consider that Rivian has been far less dilutive to shareholders than Lucid has been, making it a much better investment as things currently stand.

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

Three legacy global automakers that have far more in common than not could hardly have traded any differently over the past three years. General Motors is firing on all cylinders after gaining 164%, while crosstown rival Ford Motor Company gained a modest 19%. The struggling Stellantis (NYSE: STLA) shed over 70% of its value during that time -- ouch.

That said, because of that drastic sell-off, investors have an opportunity to start a position in Stellantis cheaply, in hopes its massive $70 billion turnaround will gain traction and drive the stock far higher. A big part of Stellantis' turnaround focuses on Jeep, and there's some interesting news with the automaker's star brand.

Image source: Stellantis.

Will Jeep work in China?

Jeep's importance to Stellantis' global turnaround can't be understated. Not only is it one of the automaker's four newly designated core global brands (along with Ram, Peugeot, and Fiat), but one could argue that it's the most important. Stellantis is committing 70% of its core $70 billion turnaround plan into those core four, and now we have additional insight into Jeep investment.

Jeep is making a splash and returning to Chinese production after being absent for the past four years. Previously, Jeep's China sales imploded from a peak of about 203,000 vehicles in 2018 down to almost irrelevancy at 20,000 in 2022. Jeep's return to production in China is not the only intriguing aspect of this small but brilliant move by Stellantis. Jeep will also export vehicles globally from China for the first time.

As many investors know, China's automotive market share is roughly half new-energy vehicles (NEVs), a term that includes both full-electric vehicles (EVs) and hybrids. While that may not sound like a market traditional Jeep vehicles would thrive in, Jeep's strategy includes developing two electrified Jeep vehicles with Dongfeng Motor Group, leveraging the Chinese partner's manufacturing capabilities and advanced EV technology -- a pretty big win for Stellantis and Jeep.

The new $1.2 billion Dongfeng Stellantis Automotive Technology Co. is now poised to aid in the development of two Jeep-branded and two Peugeot-branded models. All four will be EVs and plug-in hybrids. According to Stellantis CEO Antonio Filosa, the new vehicles are going to be manufactured by Dongfeng Peugeot Citroen Automobile (DPCA) at its plant in Wuhan starting in 2027. They will then be distributed globally through Stellantis' international sales and distribution network, leveraging both companies' comparable strengths.

Why it's important

This is an excellent way for Stellantis to leverage excess capacity as a global export base in China. It also enables Jeep to tap directly into the advanced EV technology and development process that has been dubbed "China Speed." Chinese automakers can develop an entire new vehicle in roughly half the time the global industry has considered normal.

This small but brilliant move not only produces new Jeep vehicles and allows domestic sales to regrow, but also enables a new pathway for Jeep to export to multiple regions as opportunities or demand arise. Jeep is going to be a centerpiece of Stellantis' global turnaround, and this was just a prudent, profitable, and wise strategic move amid the automaker's broader $70 billion turnaround. Savvy investors would be wise to follow Stellantis' many moves, even small ones such as this.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.

Tesla (NASDAQ: TSLA) is undergoing one of the biggest evolutions in automotive industry history, and you could almost consider it outside of the auto industry looking in at this point. Its vehicles are still selling well, but they're aging and requiring more margin-eroding incentives, while its capital expenditures are set to explode as it transitions its business to include humanoid robots, artificial intelligence (AI), and its eventual robotaxi business. That said, Tesla still has a massive advantage with technology, AI, and software, highlighted in Gartner's Digital Automaker Index 2026. Here's what investors should know.

Top ranks remain

There are certainly noticeable trends within the index ranking, and Tesla's dominance still shines. The top six in the rankings remain unchanged from the prior year, and Tesla again took the No. 1 spot, improving its score from 79.3% last year to 82.7%. The next two competitors, Nio (NYSE: NIO) and Xiaomi, checked in with strong scores of 73.1% and 69.2%, respectively. Then scores drop significantly to round out the top six, represented by XPeng, Li Auto, and Rivian landing in a range of 55.5% to 57.7%.

Image source: Tesla.

The trend here is that U.S. young electric vehicle (EV) makers and Chinese automakers are dominating, improving nearly across the board, and legacy automakers such as General Motors (NYSE: GM), Ford Motor Company (NYSE: F), Stellantis (NYSE: STLA), and Volkswagen all fell further behind in the rankings despite large investments in software and AI. "It shows how many automakers aren't yet prepared enough to deal with AI," Gartner Vice President of Research Pedro Pacheco told Automotive News Europe.

It isn't just a Detroit auto problem, with European and Japanese automakers also struggling to close the gap with the top-ranking EV makers that have clearly been more prepared to adopt and innovate in software-defined vehicles and AI. Mercedes-Benz was the highest-scoring European automaker, ranking 11th, while Nissan and Mazda checked in at the lowest two ranks.

What does this mean?

Gartner suggests that much of the issue is the pace of internal transformation that isn't prepared to adapt to rapid tech adoption, which puts them further behind in the race to also attract talent to improve or innovate their vehicle architecture, connected vehicles, driverless technology, and AI (four of the 10 categories producing automaker scores).

For Tesla investors, this does lend some credibility to its transition into more technology-based businesses. According to Automotive News Europe, Gartner Vice President of Research Pedro Pacheco said:

When you buy technology from a vendor then any of your competitors can do the same. But if you develop the technology in-house, you have a chance to be better than the competition and differentiate yourself.

Whether or not Tesla is a stock to consider starting a position in really comes down to what you're investing for. Tesla helped change the game with EVs, but some analysts estimate that its future robotaxi business already accounts for almost half of the company's valuation. Tesla won't be the same car company investors bought into a decade ago, and its new business plans carry greater uncertainty and risk than its legacy automotive business. Tesla has problems to solve and challenging, expensive operational transformations to work through, but despite its flaws, this index suggests the company has the capability as the lines between software and traditional vehicles blur.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Tesla and Xiaomi. The Motley Fool recommends Gartner, General Motors, and Stellantis. The Motley Fool has a disclosure policy.

Ford Motor Company (NYSE: F) is thinking outside the box and making some big changes. It's planning to create sub-brands with popular models such as the Bronco SUV, adding not only a pickup version but even a luxury Lincoln variant.

Investors should be optimistic about Ford's commitment to refreshing 80% of its North American lineup and promising five models at $40,000 or lower to help address the growing affordability problem. What it's doing in Europe is just as intriguing.

Here's the latest example of the changing dynamics in joint ventures and what it means for Ford investors.

If you can't beat 'em...

In the grand scheme of the automotive industry, it wasn't all that long ago that foreign automakers entered China's massive automotive market but were forced to partner with Chinese automakers to do so. It started a trend of rapid learning among Chinese automakers, which is now culminating in Chinese automakers developing cars at roughly half the speed the industry is used to; it even has a term, "China speed." Now, at least in this recent development, the apprentice has become the master, and Ford plans to build a new SUV using Geely Auto Group's (OTC: GELHY) electrified GEA platform.

Image source: Geely.

More specifically, Ford and Chinese juggernaut Geely will collaborate on a compact crossover with multiple drivetrains with a launch date of 2029. The product will be built in Valencia, Spain, and Ford plans to use Geely's GEA platform but will differentiate its product with a "rally" styling and design specs intended to draw on Ford's racing heritage.

Ford and Geely's joint venture will operate the Valencia factory, and, as part of the joint venture, Centurion Industries, which is Geely-owned, will pay the Detroit automaker $259 million for a 34% stake in the facility.

For Ford, this is unique and intriguing because it's essentially a reversal of past joint ventures with Chinese automakers, and it will enable the Detroit automaker to tap into the low cost structure and advanced electric vehicle technology that Chinese automakers are becoming world-renowned for developing at half the speed historically seen.

For Geely, this enables the company to reduce risk and capital investments and helps it expand in Europe, which has been a focus for Chinese automakers, as the domestic market has been engaged in a brutal price war. The Chinese auto market could use consolidation and an end to the brutal price wars, but it's caused Chinese automakers to focus on exports, which have absolutely soared over the past couple of years.

In fact, Geely's target is to sell 400,000 vehicles in Europe annually between Geely, Lynk & Co, and Zeekr brands. While those three bands combined for only about 25,000 vehicle sales during the first six months of this year, that's over three times the same amount last year.

Learning time

The Chinese automakers show how quickly these joint ventures can improve operations by simply learning from new processes and strategies, and if done correctly, Ford's gained knowledge could be transported back to its North American profit engine and give it an edge over the competition here, which, for now, lacks a Chinese presence due to tariffs.

Ford was early to try this new strategy, but it's certainly not the only example. Stellantis also created a joint venture with China's Leapmotor. The partnership calls for Leapmotor to utilize spare production capacity at Stellantis' Spanish factories, enabling the Detroit automaker to use a Chinese platform for its new Opel/Vauxhall SUV.

These are prudent, smart, and likely profitable moves by Ford and Stellantis, and the upside is large if the two automakers can learn to develop China speed and drastically lower costs. It's also exactly what the doctor ordered for Ford and Stellantis, as legacy automakers seem to be falling behind technological advancements, not only from Tesla and Rivian (which already helps Volkswagen with its software stack) but also from many Chinese "rivals."

Investors would be wise to keep an eye on these moves just as much as the moves to refresh Ford's portfolio in North America, because we've seen exactly what these joint ventures can do for automakers over the years -- it's just the Chinese teaching this time around.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Ford Motor Company (NYSE: F) has always had an American favorite in its Bronco SUV, and now the Detroit automaker is expanding the product in a couple of unique ways.

This is a part of a bigger plan as the company continues to adjust from its $19.5 billion charge and reversal of electric vehicle plans. There have already been casualties to the strategic adjustment, including the canceling of the F-150 Lightning, though it will return as an extended-range option, and another next-generation full-size electric pickup.

Here's exactly what Ford is planning with its upcoming portfolio refresh, product blitz, and why it matters for investors.

Bronco pickup

Perhaps taken straight from a Bronco fan page, Ford is expected to add a pickup version of its popular SUV. The plan first calls for a Bronco hybrid due in 2027, followed by the Bronco-based pickup toward the end of this decade. In another unique move adding to the Bronco-as-a-sub-brand, Ford's luxury brand Lincoln plans to build a Bronco-based off-roader in a move that dealers should welcome after its product lineup dwindled down to only three vehicles.

Lincoln has always offered the company upside as luxury vehicle sales are significantly more profitable than mainstream vehicles. Despite its potential and upside, Lincoln has never gained the traction investors hoped and has remained an afterthought in recent years.

Ford Bronco. Image source: Ford Motor Company.

The Bronco is not the only fan-favorite Ford vehicle receiving upcoming love as the automaker plans to keep adding new Mustangs, including a glimpse of a four-door variant it showed dealers in a bit of an unusual move for the company that doesn't overly share details of upcoming products.

Portfolio refresh

The Bronco and Mustang expansion is a part of a bigger plan. Ford is planning to refresh 80% of its North American portfolio by 2029 – fresher product sells better and requires less margin-eroding incentives to do so.

Perhaps the most intriguing part of its plan is to attack the vehicle affordability crisis as average new vehicle prices continue to hover around all-time highs, causing consumers to extend loan lengths and an uptick in repossessions nationally. Ford is planning a $25,000 hybrid crossover and will offer five vehicles under $40,000 by the end of the decade while also targeting half of its global volume to be hybrid, EV, or extended range by 2030.

The trick for Ford will be to lower costs enough, without hurting quality or removing value, to keep these more affordable vehicle sales profitable – it'll take some creativity. While the following statement is a little vague, it shows Ford understands the challenge: "I would say there's probably 10 actions that we'll do to help affordability," Andrew Frick, president of Ford Blue and Model e divisions, told Automotive News.

What it all means

Despite the renewed focus on gasoline and hybrid powertrains, including the developing Bronco sub-brand, Ford is still banking on its low-cost Universal Electric Vehicle platform to drive its future EV market share and profitability. The upcoming platform is expected to be the base of numerous vehicle models, including the recently named Fathom midsize electric truck due out next year.

Ford's upcoming product blitz is about more profitable fresh products, expansion of highly successful models, and even showing some love to its often overlooked luxury Lincoln lineup. Further, the focus on Bronco-based vehicles should come with strong margins, and the aspect of a Bronco pickup is tantalizing for investors.

The expansion of the Bronco is just part of a larger portfolio refresh that helps market share, assuming it can get its more affordable models out quickly before the demand flocks to the market's upcoming rival's more affordable options. Stellantis is one example of also planning a long list of affordable options in an effort to regain lost market share from years of struggling – the race is on.

Daniel Miller has positions in Ford Motor Company. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Lucid Group (NASDAQ: LCID) has had a rough year or two and could use some positive news. The electric vehicle (EV) company announced it would delay its Cosmos crossover until at least next year (it was previously scheduled for launch in late 2026). It's still bleeding cash and posted a net loss of $1 billion during the second quarter.

Management is now working on a plan to save cash, including two rounds of layoffs this year alone. The young EV maker went as far as to hire consulting firm AlixPartners to help with a turnaround plan. In a rare moment of good news from the company, it announced the 2027 Gravity GT-S. But is this a development that can move the needle?

Interior of Lucid Gravity GT-S. Image source: Lucid

Creating? Or remixing?

Lucid is reviving the 1,070-horsepower drivetrain from its discontinued Dream Edition for the GT-S, which it claims to be America's most powerful three-row crossover, barely surpassing the nearest competitor, Rivian's R1S three-row crossover, which has 1,025 horsepower. It's a lot of power, but Lucid's flaw has never been its ability to create excellent EVs.

The problems with Lucid have been production hiccups, supplier bottlenecks, product delays, and the inability to lower costs to consistently improve its gross margins -- a feat rival Rivian continues to excel at.

The Gravity GT-S could certainly make a marketing splash, but it almost certainly won't move the needle on sales volume at a starting price approaching $128,000. The high end of the EV industry has been saturated by automakers' attempts to make EVs as profitable as possible, with many companies continuing to lose large sums on the vehicles.

The Gravity GT-S will at least be cheaper than the limited-run Dream Edition, which sold for over $141,000 as a 2026 model. There's little doubt it will be flashy, but that's perhaps where the positive news ends.

Demand for Lucid's other Gravity trim versions has so far been uneven at best due to high pricing that often exceeded $100,000 in luxury configurations, a number of delivery disruptions, and a stop-sale order on the stock. It has also taken some heat for software bugs and other minor issues, and there is some buyer hesitation regarding the company's long-term financial situation and dependence on Saudi Arabia's Public Investment Fund (PIF) for billions of dollars in support.

The GT-S won't solve problems

Unfortunately, the Gravity GT-S won't address many of the valid Lucid concerns facing consumers and investors. There were rumors earlier this year that Lucid was considering bankruptcy or going private, since Saudi Arabia's PIF already owns about 60% of the company.

Management strongly denied both rumors and will now rely on AlixPartners to help improve operations, lower costs, and save cash. AlixPartners has not recommended bankruptcy.

The delayed Cosmos SUV, which is targeting a price around $50,000 and was expected to open doors to an even wider market than the Gravity, is arguably a bigger announcement than the GT-S. That's because Lucid is between a rock and a hard place.

Amid a management shake-up and a new CEO, it needs to build scale and fill its production capacity to help lower costs, which the Cosmos would help with, but a 2026 launch would have been a lot to take on while still working out the issues with Gravity production and delivery. Lucid needs the Cosmos as soon as possible, but only when it's well prepared to handle another big launch with fewer operational and supply issues.

The Gravity GT-S could help draw eyes to the company's more affordable options, similar to a "halo" car. But it's a high-priced vehicle in a saturated segment, when the company really needs to double down on cutting costs without sacrificing quality and improving operations to conserve cash.

Lucid needs answers, and maybe AlixPartners will come through, because its flashy GT-S isn't going to solve any of the numerous problems facing long-term investors.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The autonomous vehicle (AV) industry spent a long time in the realm of science fiction before jumping quickly from concept testing to now commercial deployment, and the robotaxi market alone is projected to explode to roughly $415 billion globally by 2035. Most investors wanting to get a piece of this growth likely think of companies such as Amazon's Zoox, Tesla with its Cybercab, or Alphabet's Waymo. That leaves many overlooked AV stocks with significant upside.

Here are three investors you should stop overlooking.

Uber, Lucid, and Nuro, are partnering to develop a global robotaxi service.

Trucking evolution

While many think of robotaxis when AVs are mentioned, long-haul trucking might be the first industry to see significant change. Aurora Innovation (NASDAQ: AUR) is a leader in driving the U.S. autonomous semitruck market with its proprietary Aurora Driver that combines its in-house long-range LiDAR with software and data services, enabling heavy trucks to carry full loads at highway speeds.

Aurora is certainly in the early innings of a young start-up company, but it began generating revenue in 2025 and operates largely on interstate highways in the southern U.S., where the weather tends to be more favorable to driving (Arizona, Oklahoma, New Mexico, and Texas). Beginning in 2027, the company will transition its business model to installing its hardware and software into heavy trucks owned by fleet operators, for which it will be paid on a per-mile basis.

Here are some statistics to consider. First, analysts at Morningstar forecast that autonomous trucks will account for 40% of all semitruck miles in the U.S. by 2040. Second, autonomous trucking is forecast to be cheaper per mile than human-driven trucks as soon as 2028 in the U.S. market. Third, Goldman Sachs' analysts project the global AV trucking market could reach $560 billion by 2035.

Autonomous trucks are coming to highways sooner than you might think, and the market potential is lucrative. Combine that with 2027 being a massive year as Aurora begins installing its hardware/software and being paid per mile, now is a good time to dig deeper on a start-up AV company with plenty of upside.

Market dominance

No matter how you look at Mobileye (NASDAQ: MBLY), it's easy to see the company will have its hands in multiple aspects of a rapidly developing future. Mobileye is well known for its autonomous driving and advanced driver-assistance systems (ADAS), but also has expertise in artificial intelligence (AI), computer vision, and integrated software and hardware. In other words, Mobileye is developing multiple technologies to drive the ADAS and AV fields toward commercial scale. There's a long list of reasons to consider a deep dive into Mobileye as a long-term investment, but here are some key figures to entice you.

First, consider that Mobileye has its EyeQ technology (think chips and electronic control units) in more than 250 million vehicles worldwide. Mobileye is embedded into an automaker's vehicle architecture, and more importantly, its safety systems, giving Mobileye competitive advantages through significant switching costs.

Second, ADAS are increasingly important to automakers because they're the systems helping drive profits and margins higher, as consumers increasingly want these options, and Mobileye has roughly a 70% global ADAS market share according to Jefferies.

Third, per Mobileye's 2025 full-year earnings report, the company now has an eight-year future expected auto revenue pipeline of $24.5 billion. That number is important, but perhaps the better aspect is that it represents a 42% increase over the prior pipeline figure, thanks to securing more contract wins with many of its top existing auto clients.

If you're interested in the future of AVs, Mobileye is an excellent place to start researching.

High-risk, high-reward

Uber Technologies (NYSE: UBER) is an intriguing mix of upside and risk. Uber might be a bit overlooked when it comes to AVs simply because of the strategy it has taken. Uber has the potential to be a great AV play because, rather than taking the capital-intensive approach of developing its own vehicles, it's opting for a range of partnerships across the industry to become the primary aggregator of ride-hailing for the broader AV industry.

That said, here comes the big risk of buying Uber for its potential in AVs: Waymo recently made its intentions clear to eventually dissolve the partnership between the two, prioritizing the growth of its own ride-hailing system and cutting Uber out of at least Waymo's share of the pie. Will that become the norm as AV companies develop and expand, or will the majority prefer to use Uber's well-developed routing, payment processing, and other infrastructure advantages, albeit at a cost?

We can speculate, but for investors, the answer is uncertain -- one of Wall Street's most hated words. While the risk remains, it's also fair to say that uncertainty has weighed on the stock, giving investors the potential to jump on board for Uber's existing strong cash flow and profit growth at a seemingly undervalued price.

What it all means

Sure, there are plenty of reasons to consider Tesla, Amazon, and Alphabet when it comes to the future of AVs, as those are some of the largest and most impressive companies in the world; the risk there is much more tame. On the flip side, if you're accepting of higher risk, Aurora has an intriguing road ahead with disrupting the trucking industry, Mobileye has its hand in multiple angles of the AV future, and Uber could end up connecting AVs to a massive amount of consumers using its established network and infrastructure. All three are overlooked with intriguing upside.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Jefferies Financial Group, and Tesla. The Motley Fool recommends Mobileye Global and Uber Technologies and recommends the following options: short August 2026 $8 puts on Mobileye Global. The Motley Fool has a disclosure policy.

Rivian Automotive (NASDAQ: RIVN) kicked off what could become a string of strong quarterly results as the R2 launch continues to ramp up its production during the back half of 2026. Rivian's second quarter topped Wall Street estimates on the top and bottom lines, and the company posted a record gross profit of nearly $180 million at an 11% gross margin.

Management also raised full-year delivery guidance, narrowed its EBITDA (earnings before interest, taxes, depreciation, and amortization) loss guidance, and lowered capital expenditure expectations. All in all, it was a strong result for the young electric vehicle (EV) maker, but the stock is up only 1% following earnings.

Here are three important things that investors may have overlooked in Rivian's earnings report.

Image source: Rivian.

Transparent liquidity

One of the biggest focal points for investors of young EV makers is liquidity, simply because young automakers face heavy capital investment requirements and are still slowly building valuable scale. Rivian exited the second quarter with $5.3 billion in cash and cash equivalents, but really, the company has additional transparency with future liquidity.

More specifically, when including its asset-based revolving credit facility, Rivian ended the second quarter with $5.8 billion in liquidity and added another roughly $1.3 billion in net proceeds from its July follow-on equity offering, bringing the total to nearly $7.2 billion.

Rivian's liquidity figure looks even better when you consider it expects another $1 billion in non-recourse loan capital from Volkswagen and a milestone-based investment from Uber Technologies worth $250 million -- both expected in 2026, bringing Rivian's future liquidity to $8.4 billion.

Lastly, investors also have to consider Rivian's $4.5 billion Department of Energy loan, which is earmarked for developing its second factory in Georgia, another $700 million from Uber, and another $460 million from Volkswagen, all over the next few years. That brings Rivian's expected liquidity up to around $14 billion, a much more reassuring picture for long-term investors.

Demand generation

One aspect of Rivian's second quarter that certainly seemed overlooked was its growing ability to generate demand, driven by growth in both Rivian Spaces and Demo Drives. Rivian's Demo Drive program enables prospective buyers and reservation holders to experience driving Rivian's R1S SUV, R1T truck, and the new R2.

The EV maker ended the second quarter with 43 Rivian Spaces (where demo drives take place), a 39% increase from the prior year, and an even stronger 104% increase in demo drives, which numbered over 57,000 during the second quarter alone. Also improving the user experience were a 26% increase in Rivian Adventure Network Locations and a 37% increase in Rivian Network Chargers -- both can also support demand generation.

Driverless technology

Rivian's driverless vehicle technology often takes a back seat to the company's much-hyped R2 launch and production ramp, the development of its second factory and future R3 model, and its massively valuable joint venture with Volkswagen -- but that could be an oversight. In the medium term, Rivian believes that advanced assisted driving features will be a key differentiator for customers and a driver of market share.

Rivian's Autonomy+ is progressing well, has an encouraging take rate with consumers, and is expected to roll out point-to-point capabilities by the end of this year. Point-to-point is an assisted driving feature that allows the driver to enter an address so Rivian can drive there under the driver's supervision. It's comparable to Tesla's Full-Self Driving (FSD).

What's also often overlooked is Rivian's pathway to its Level 4 autonomous robotaxi. Rivian already boasts over 3.5 million miles of universal hands-free travel across the U.S. and Canada and, as previously mentioned, plans to unveil point-to-point features later this year. Rivian is targeting eyes-off features next year and its L4 robotaxi in 2028.

What it all means

Rivian posted an excellent second quarter with improving metrics nearly across the board. While often overlooked, the company's improving and transparent liquidity provides a cushion against adversity and ever-changing market dynamics, and its demand generation, combined with expanding driverless technology, bodes well for the company's medium-term future. Rivian also continues to separate itself from rival EV maker Lucid Group and is poised to finish 2026 on a strong note.

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

A while back, Morgan Stanley's well-respected automotive analyst Adam Jonas evaluated Tesla (NASDAQ: TSLA) using a sum-of-the-parts model between artificial intelligence (AI), software, energy, and robotics rather than considering it a traditional automaker. What's interesting is that Jonas believes autonomous driving technology and the robotaxi business drive 41% of Tesla's valuation compared to 34% from its core automotive and energy business and about 25% from Optimus robot potential. So, when robotaxi rival Waymo of Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) points out why Tesla's driverless technology strategy could have serious drawbacks, investors should take note.

What's going on?

Recently, Alphabet's Waymo co-chief executive officer, Dmitri Dolgov, seemingly took a shot at Tesla when speaking at Y Combinator's Startup School, though he didn't name the automnaker specifically. Dolgov essentially argued that camera-only self-driving technology could be considered "weak sensing" and that the strategy would develop quickly initially before hitting a lower ceiling of capability and performance long term.

Image source: Y Combinator / Waymo co-CEO Dmitri Dolgov at Startup School 2026.

For years, the common argument for a camera-only system was that it's cheaper and that humans rely solely on vision when driving. Therefore, a camera-only system could work adequately for driverless vehicles. Dolgov essentially agreed that a camera-only system could match human performance, but that to build a driverless technology that's safer than humans, which is the entire goal, there needs to be more sensors.

Although Tesla has opted for a camera-only driverless system strategy, which enables the automaker to lower costs, Waymo opts to use three sensor types: cameras, LiDAR, and radar. "These different sensing modalities, they're not backups to each other," Dolgov said during the presentation. The data fuses into a single view of the world that he noted is "vastly superior to what you get with any one sensor."

It's true that using three sensors is better than one unless you believe all three are redundant. In my opinion, they aren't. Consider this simple scenario: A snow storm could cause a whiteout for camera-only systems, which would see next to nothing, while LiDAR in the same scenario would have no problem detecting a human or obstacle on the roadside. Even a fluke event such as mud covering the camera lens could completely shut down the driverless vehicle, whereas a Waymo vehicle with LiDAR and radar could safely navigate back to its home base to clean the camera.

Falling behind?

For Tesla investors, the criticism about camera-only systems should be concerning because there is truth to it. It's a potential speed bump for Tesla especially when you consider there are other issues with Tesla's driverless technology and robotaxi strategy, such as Tesla being on the hook to replace the self-driving computer in roughly 4 million vehicles, or figure out a way to compensate owners fairly after admitting Hardware 3 isn't powerful enough to deliver the unsupervised self-driving as advertised.

Image source: Tesla.

Another issue for Tesla investors to chew on is that the automaker has yet to deliver much transparency or a timeline for its Cybercab approval process. The vehicle needs approvals to begin charging for rides. Amazon-owned Zoox recently received approval by the National Highway Traffic Safety Administration (NHTSA) to commercially deploy its purpose-built, steering-wheel-free robotaxis, enabling it to officially charge for rides, which it plans to do shortly in Las Vegas.

What it all means

Simply put, investors need to be aware of not only Tesla's camera-only capability for its driverless system but the steps it needs to take for the approval process so that its robotaxi business can truly start expanding. Waymo, among other rivals, has already established a lead in the business compared to Tesla. Considering the latter's valuation is largely believed to be from its robotaxi potential, Tesla needs to play catch up fast.

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

Lucid Group (NASDAQ: LCID) has always been an intriguing investment opportunity, but it has consistently disappointed investors in several ways.

The electric vehicle (EV) maker designs and produces some of the most advanced EVs globally but has a growing number of recalls and supplier issues and has struggled to lower costs and build scale to improve vehicle unit economics and gross profitability.

Now, another speed bump: The EV maker just announced that its upcoming Cosmos SUV is significantly delayed -- does this represent a red flag or a smart move?

What's going on?

Lucid originally planned to launch its midsize Cosmos SUV EV late this year, although it admitted that production volume would be low until production accelerates next year. To be fair, many investors and analysts were skeptical of this timeline, given that its Gravity SUV is still dealing with recalls, supply chain bottlenecks, and production shifts to align with consumer demand.

During Lucid's second-quarter earnings report last week, the company announced a wider-than-expected loss, high cash burn, and that, during an "operational reset," it would push the Cosmos SUV launch back until at least 2027.

According to CNBC, Lucid's new CEO Silvio Napoli said, "We're not going to make the mistake of the past, where products, great cars, were in fact tainted by launching before things were ready. I think it's going to be '27. ... Most likely the second half of '27."

Lucid Gravity. Image source: Lucid.

Red flag or prudent move?

This move could certainly cause investors and analysts to raise an eyebrow in cynicism, because launches are expensive, especially early on, when production volumes are low and inventory is stacked before being distributed, further pressuring Lucid's liquidity.

There's some truth to that, as Lucid admitted it is focusing on $1.4 billion in cash flow improvement opportunities by reducing capital expenditures and vehicle inventory for the rest of 2026 -- largely the difference from delaying the Cosmos Launch. More specifically, Lucid is targeting inventory savings between $600 million and $800 million, capital expenditure savings of about $500 million, and operating expense savings of $200 million, which includes the company's two sizable rounds of layoffs (totaling about 20% of its U.S. staff).

That cash flow improvement is desperately needed for an automaker that has consistently relied on Saudi Arabia's Public Investment Fund (PIF) and has drastically diluted shareholders, compared with rival Rivian Automotive (NASDAQ: RIVN), which has used less dilutive strategies. Lucid should be commended for its decision to delay until it's ready for a smooth launch of the Cosmos, especially considering past production hiccups.

Still, in the wake of rumors that the automaker was considering bankruptcy or taking the company private (which Lucid denies), the optics aren't great. Lucid exited the second quarter with $3 billion in total liquidity, though only about $730 million was in cash and cash equivalents, which it believes will be sufficient "well into 2027." But what has investors understandably nervous is that Lucid's free cash flow was a negative $1.48 billion during the second quarter.

What it all means

Putting it bluntly, there are plenty of red flags for Lucid, whether you count this delay as yet another or not. Ultimately, with the Gravity still smoothing out its optimal production, recalls, and supplier bottlenecks, and cash burn remaining as high as it is, the last thing Lucid needed to do was apply more financial pressure to itself with another expensive launch before it begins reaping the rewards (ideally) of the Gravity SUV opening doors to a mainstream consumer.

For investors, it's wise to put the idea of the Cosmos on the back burner as well and focus on Lucid's ability to expand its liquidity, hopefully without extreme shareholder dilution and with lower costs to improve gross profitability, all while building scale as Gravity deliveries are optimized. Savvy investors should watch this investment opportunity from the sidelines, since Lucid has much to prove before it's worth its sizable risk.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

It's easy to understand why investors and Wall Street were focused on Western electric vehicle (EV) pioneers, given Tesla (NASDAQ: TSLA) essentially reenergized the industry from California. When looking for the next soaring Tesla stock, many jumped to look at Rivian or Lucid, while overlooking a growing Chinese Juggernaut, BYD Co. (OTC: BYDDY) -- and that's a mistake. BYD offers an enticing combination of global scale, impressive vertical integration, proven profitability, and the ability to develop a vehicle from the ground up faster than the industry has seen. But the one reason BYD could be the top automotive stock investors are missing is an easy one, with a great recent example: growth.

Coming for that top spot

BYD Co. might not be a household name in America, yet. The Chinese automaker doesn't sell a product here thanks to significant tariffs on Chinese EVs, but it has burst onto the global scene over the past five years. Last year, BYD sold more full-electric vehicles than its well-known rival Tesla and, even though BYD ended production of any gasoline-powered vehicles in 2022, it sold more new-energy vehicles (NEVs), which is just a term that combines full-electric and hybrids, than Ford Motor Company sold total vehicles last year.

BYD barely celebrated its growth, and instead talked about its new target: overtaking Toyota (NYSE: TM) to become the No. 1 automaker by global sales in five years. BYD Chairman Wang Chuanfu stated at its annual shareholder meeting, "BYD will truly become the No. 1 automaker globally in terms of scale in five years."

That would require more than doubling its 4.8 million sales globally to close the gap with Toyota and its lofty 11.3 million global vehicle sales. While entering the U.S. market, which remains the second-largest EV market by volume, would be a boost to reaching this target, the company has no plans to do so and will instead rely on its explosive international growth via Europe, Latin America, Southeast Asia, and Australia. Backing up Chairman Chuanfu, BYD Executive Vice President Stella Li added, "With our own organic growth... We don't need the U.S. market to achieve that."

Image source: BYD Co.

If BYD were to achieve this without yet entering the lucrative U.S. market, that would be massive growth alone, with tantalizing upside were it to find a way into the U.S. market in time. BYD's potential growth over five years is enough to dig deeper into it as an investment, but there's so much more that makes the Chinese juggernaut intriguing. One example is that the company boasts impressive vertical integration that enables it to build almost everything in-house, including batteries, electric motors, and software, which lowers costs and speeds up the development process significantly. Another example is its recent entry into Japan's minicar market, which no foreign automaker has dared to attempt in many, many years. BYD designed a vehicle specifically to succeed in the extremely challenging and strictly regulated market, and if it's successful, it would prove the Chinese juggernaut can truly enter any market and win.

Who knows if BYD can actually surpass Toyota in five years; it's a significant challenge, no doubt. That said, BYD has proven it can enter just about any market and gain market share, and it can do so increasingly profitably because of its vertical integration and advanced technology. BYD still has massive upside for investors with potential growth internationally, and eventually the U.S. market.

What it all means

This is an interesting point in time for the automotive industry, with multiple shifts and evolving technology that is increasingly intertwined with lucrative software or even artificial intelligence (AI). BYD offers immense upside over the next five years, as does the broader industry, as the auto industry expands into higher, software-like margins with new business, services, and apps. Savvy investors looking to get into the evolution of the auto industry would be wise to look deeper into this Chinese EV maker that has taken the globe by storm.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

Maybe you've already heard, but the U.S. new-vehicle market is heading toward a crisis, as new-vehicle prices continue to rise and now sit around $50,000. Total automotive debt has reached an all-time high of $1.68 trillion, and almost 25% of buyers are taking loan terms of 84 months or longer. Nearly 30% of trade-in vehicles carry negative equity, which is often rolled into new high-interest vehicle loans, sending average monthly payments soaring.

That has left the more affordable price range drastically underserved amid pent-up demand, which is why Ford Motor Company's (NYSE: F) and Stellantis' (NYSE: STLA) strategic moves to address this affordability crisis are brilliant.

What's the strategy?

While it will remain hugely important for Ford and Stellantis to continue producing high-margin SUVs and trucks, more affordable models could quickly gain traction and become high-volume sellers. Both Ford and Stellantis could use a jolt to their market share, and additional volume will only improve factory utilization, which supports margins more broadly, even if these vehicle sales are less lucrative.

More affordable vehicle products should complement the high-margin SUV and truck business. Image source: Ford Motor Company.

Less than a year after Ford announced it was discontinuing its entry-level Escape, to the dismay of many dealerships wondering what its replacement would be, Ford is now preparing to tackle the growing affordability crisis. Recently, at a private meeting in Las Vegas, according to Automotive News, Ford showed early designs of a small crossover that is expected to start around $25,000. The more affordable model will have multiple powertrains, gasoline and hybrid, and is expected to go on sale in 2029.

That upcoming model would instantly become Ford's most affordable vehicle, checking in noticeably cheaper than its $29,000 Maverick pickup and its recently named $30,000 electric pickup due in 2027, the Fathom.

Further strategic details are few and far between; Ford doesn't give too much information about future products, but the automaker also showed a prototype of a four-door Mustang with a promise of a price tag under $40,000. Ford's Fathom will be the first vehicle to use the new Universal EV Platform. Eventually, five vehicles will be built on that platform, potentially opening the door to more profitable and more affordable options.

Ford is definitely taking steps to develop and deliver multiple affordable options that could boost its factory utilization and scoop up market share in an underserved price range, but Stellantis is also pursuing this strategy with significant investment.

The turnaround plan

Stellantis has struggled in recent years, and under former leadership, the company hiked prices while cutting costs by slashing features, leaving core consumers unimpressed and dealerships filled with excess and unsold inventory. Under new CEO Antonio Filosa, Stellantis is prioritizing volume, better pricing, and improved factory utilization over short-term profits.

A big part of that, and of its global $70 billion turnaround strategy, is pushing nine new vehicle models in its North America profit engine that will be priced under $40,000; those vehicles will launch by 2030. Two vehicles will be distinct crossovers priced under $30,000.

A slew of high-volume, more affordable vehicles will help Stellantis in a couple of ways. It will help it achieve its target of 80% factory utilization in North America, which will go hand in hand with its ability to achieve North America EBIT margins between 8%-10% by the end of this decade -- a huge move considering its recent unprofitability in 2025. Further, Stellantis' sell-off over the past three years allows investors to buy low before its turnaround gains traction.

Will the strategies work?

Stellantis is making a massive push to deliver a long list of products to more affordable price ranges, and it stands to gain much volume doing so, but it does hinge on one aspect: Is the quality there? Stellantis, and to a lesser degree Ford, still have to convince consumers these more affordable vehicles still offer solid features and high quality, or the otherwise brilliant moves might not gain enough traction.

It's also fair to wonder if by the time these more affordable vehicles are launched, they'll be the early birds to get the worm or not. Either way, for investors, Ford and Stellantis racing product to an underserved and potentially high-volume market is a great move and will improve factory utilization and almost certainly market share.

Daniel Miller has positions in Ford Motor Company. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Near the end of July, Tesla (NASDAQ: TSLA) achieved something no other automaker has done in history: It produced its 10 millionth full-electric vehicle (EV). It's a huge milestone and feels appropriate for the company that largely drove the global surge in EV investment. With that milestone comes the bittersweet truth that Tesla isn't quite the automaker most long-term investors signed up for.

Tesla's future is clearly driving toward a future of humanoid robots, robotaxis, and Artificial Intelligence (AI). While that could prove wildly lucrative for Tesla down the road, it also adds immense near-term uncertainty as it transitions. For investors considering jumping on board, here are two reasons buying Tesla should make you nervous.

Valuation breakdown

Morgan Stanley's Adam Jonas, a longtime Tesla bull and respected auto analyst, broke down Tesla's valuation and believes that roughly 34% of its total valuation is driven by its core automotive and energy business. In comparison, 41% is driven by the hype surrounding its robotaxi and autonomous driving technology. The last 25% is driven by the potential of its Optimus humanoid robot. Let's hit two of those segments and discuss why there are concerns.

Robotaxi woes

While a big chunk of Tesla's valuation is driven by its robotaxi business, which doesn't really exist yet, the company finds itself trailing competitors in full-driverless miles (no supervisor) and in regulatory approvals. Alphabet's Waymo has logged over 200 million fully autonomous, no-supervisor miles and generates roughly 500,000 weekly paid rides across major metropolitan areas, and Baidu has surpassed 137 million fully driverless miles.

On the flip side, per Tesla's second-quarter earnings report, the automaker has a cumulative 2.4 million paid robotaxi miles, and that growth between the first and second quarter was essentially flat. There's a little smoke and mirrors with Tesla, because it announced plans to launch in new markets such as Tampa and Orlando, as well as across the Austin metro area, but it's estimated that Tesla's active unsupervised driverless fleet remains a modest 20 to 40 vehicles.

Another factor that could make investors nervous is that while Tesla is ramping production of its Cybercab, which will need regulatory approvals before it can charge for rides, it hasn't outlined a clear plan or timeline for the approval process. Meanwhile, Amazon-owned Zoox was just granted permission by the National Highway Traffic Safety Administration (NHTSA) to commercially deploy steering-wheel-free robotaxis at a rate of 2,500 vehicles annually for two years, for a total of 5,000 vehicles. Zoox's robotaxi is the first vehicle designed from the ground up with no manual controls to receive approval and is poised to begin paid rides in Las Vegas.

It's also fair to bring up the potential complications of Tesla's strict camera-only approach to driverless vehicles, rather than including sensors such as LiDAR and radar for better depth perception and adverse-weather mapping. That isn't to say Tesla's strategy isn't possible, but that scaling the Cybercab could be much slower. Further, Tesla faces looming issues with its older Hardware 3 (HW3), which lacks the memory bandwidth and processing power required for true unsupervised Full Self-Driving, as promised to consumers -- the outcome of this is still unfolding.

Tesla's Cybercab. Image source: Tesla.

Softening core

Tesla's future might indeed be lucrative with investments in robotaxis, robots, and AI, but right now, its core business is still manufacturing vehicles, and that's slowly eroding. For years, Tesla's guidance was for roughly 50% annual growth in production and deliveries, but that trend stopped when the EV maker peaked in 2023 at 1.81 million deliveries. Then, that figure declined for two consecutive years, with 2026 still up in the air.

Tesla's mass-market Model 3 launched in 2017, and the Model Y in 2020, and neither has received a complete redesign; instead, the company relies on minor trim adjustments, stripped-down versions, and software updates to drive demand. Tesla's Cybertruck was a flop; the Model S and Model X were discontinued to free up factory space for robotics production; and the Tesla Semi is years behind schedule, even though it's making a strong impression with truckers. Because of growing global EV competition and an aging lineup, Tesla's profit margins have been under pressure due to price cuts to drive demand, low-cost financing incentives, and other promotional discounts.

TSLA Operating Margin (TTM) data by YCharts.

Time will tell whether Tesla follows through on the next-generation Roadster or ever launches an all-new low-cost Tesla vehicle, but keep in mind the company has historically overpromised and underdelivered, often later than anticipated.

What it all means

Tesla has achieved some amazing things, and producing its 10 millionth vehicle is a very real accomplishment. But there's much uncertainty hanging over Tesla, including a potential merger with SpaceX. Its product portfolio is aging and pressuring margins, its capital expenditures on future businesses are exploding with little to no return on the horizon, and its robotaxi business is in the rearview mirror of multiple competitors. Tesla could continue to be a phenomenal investment, but there is much risk and uncertainty, and plenty of reasons to be nervous -- research thoroughly before buying!

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Baidu, and Tesla. The Motley Fool has a disclosure policy.

The automotive industry is poised to potentially evolve more over the next decade than it has in the past 50 years -- arguably even longer.

A massive shift from internal combustion engine powertrains to electric vehicles (EVs) has also spurred the development of software-defined vehicles and driverless vehicles, and driven a rise in services and subscription offerings, which are rapidly changing how savvy investors view auto stocks as new high-margin businesses.

Investors looking to get in early on the evolving auto industry should start by considering these two stocks with massive upside potential.

No love? No problem.

Ferrari (NYSE: RACE) is a unicorn in the automotive industry with a long list of competitive advantages, lucrative margins that dwarf the industry, a powerful brand and racing heritage, and a loyal, ultra-wealthy consumer base that is less impacted by typical economic downturns, making the stock more recession-resilient. But over the past year, it has traded well below its average price-to-earnings ratio, allowing investors to buy an excellent business at a discount.

RACE PE Ratio data by YCharts

One reason for the recent pessimism surrounding Ferrari was the launch of its first full electric vehicle, the Luce, and the initial reaction to the unusual design, which was not at all flattering. Making investors more anxious was the fact that rival Lamborghini officially canceled plans for its first full-electric vehicle, the Lanzador, citing customer demand for a full-electric Lamborghini as "close to zero."

But Lamborghini's hesitation and internet backlash -- from people highly unlikely to be Ferrari customers anyway -- didn't slow Ferrari down. The company announced it has already sold every Luce it plans to build this year -- about 500 vehicles -- and it did so in less than two months, per the Financial Times. It sold out of the Luce allotment before a single one was even delivered; deliveries don't begin until October.

Ferrari's first full-electric vehicle, the Luce. Image source: Ferrari.

The Luce selling out isn't about the sales volume, but it does emphasize numerous competitive advantages that make it one of the top, if not the top, automotive stocks in the market. The Luce, with a base price of roughly $640,000, already sits near the top of Ferrari's price ladder and demonstrates the company's incredible pricing power, not to mention loyal consumers willing to buy nearly anything it produces. Branching into full EVs represents incremental volume and a bigger total addressable market, and Ferrari noted that many Luce buyers have never owned a Ferrari before.

At a time when most automakers are losing money on their EVs, Ferrari proves once again that it operates in a whole different world than traditional automakers. At its current valuation, it has plenty of upside for investors and far less risk than most auto stocks.

Big-time turnaround

Stellantis (NYSE: STLA), on one hand, appears to be an automaker nobody wants to invest in. It took massive charges on an EV strategy it pulled back on, has shed 70% of its value over the past three years, has posted seven consecutive years of annual sales volume declines through 2025, and has other issues. On the other hand, Stellantis has an excellent turnaround plan and is investing $70 billion to implement it over the next five years.

Stellantis' five-year strategic plan will have many moving parts globally. Two of the most important strategic initiatives are affordability and investing in North America, which remains its profit engine. The push for affordability comes with significant unmet demand for vehicles priced under $40,000, especially as the price of new vehicles continues to hit new record highs.

In a move that could quickly reverse its market share losses, Stellantis promised nine new North America vehicles priced under $40,000, and at least two priced under $30,000. Not only will these high-demand, more affordable vehicles help reverse market share losses, but they will also improve the automaker's poor factory utilization, which will support margin growth.

North America will be crucial to Stellantis' overall turnaround, and about 60% of the strategy's product and brand investments will be directed there to boost offerings and launch more lucrative vehicles from its Jeep and Ram brands. Stellantis is already gaining traction, with its recent launches returning the automaker's North American sales volume to year-over-year growth for the past four quarters.

Stellantis is focused on rebuilding profitability, reversing declining sales, and improving factory utilization to support margins. Because investors have drastically sold it off over the past three years, it might have the most upside amid its potential turnaround of any auto stock in the market.

Time to buy?

This is an interesting time for the automotive industry, with multiple shifts and evolving technology that is increasingly intertwined with lucrative software and even artificial intelligence (AI). Both Ferrari and Stellantis offer immense upside over the next five years, partly due to their recent sell-offs, and savvy investors looking to get into the evolution of the auto industry toward a higher-margin business would be wise to look more closely at those two overlooked stocks.

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

One of the most important ways Rivian (NASDAQ: RIVN) has separated itself from rival Lucid (NASDAQ: LCID) has been its ability to improve vehicle unit economics. It's well known that Rivian expects the R2 to check in at about half the production cost of even the more recent R1 vehicles. Rivian's improving unit economics have consistently improved its gross margins, even achieving its first full-year gross profit in 2025.

Rivian is about to be put to the test during the R2 ramp-up, and my prediction is that we're about to see Rivian's automotive gross profit finally turn positive as early as the third quarter -- software and services have largely been driving overall gross profitability. Let's take a look at where the EV maker's automotive gross profit is trending and why it matters.

Gross profit progress

Here's a quick look at the consistent progress that Rivian has made in its gross profitability compared to rival Lucid, which has been unable to make the same improvements to vehicle costs and scale.

RIVN Gross Profit (Quarterly) data by YCharts

As you can see, while Lucid has remained largely flat in gross profitability, Rivian's improving unit economics have consistently driven its results higher, despite starting from a worse initial position than Lucid. Rivian's second quarter brought more improvement: Consolidated gross profit was $179 million, a significant $385 million improvement over the prior year.

It's important to break down consolidated gross profits into two segments: automotive, software, and services. As R2 deliveries accelerate, it should drive automotive gross profitability higher and provide a nice boost to the company's efforts to one day reach operating profits and become a self-funding business -- exactly what will generate demand for the stock and send its price higher.

Rivian's R2. Image source: Rivian.

Breaking it down

During the second quarter, automotive gross profit was a loss of $36 million, still a vast improvement over the prior year's $335 million loss. Software and services gross profit not only checked in at $215 million but also at an impressive 42% margin. Those are not margins historically associated with the automotive industry, but that narrative is slowly changing for the better as more vehicles are software-defined and loaded with apps, services, and subscriptions.

While software and services have been the gross profit engine, Rivian has significant upside in automotive gross profitability as the R2 continues to accelerate production and even adds a second production shift toward the end of the third quarter.

What's in store for Rivian stock?

Rivian's automotive gross profit was a little tricky to gauge in the second quarter because the improvement was aided by factors beyond increases in production and delivery volumes. Rivian benefited from increased revenue from regulatory credits, as well as from an IEEPA tariff refund receivable. On the flip side, as Rivian only began external deliveries of the R2 as of June 9, it recognized roughly $100 million in incremental cost of revenues due to the early production ramp-up relative to expected levels.

All that said, analysts at Baird cited improved gross margins as a primary reason for upgrading Rivian stock to "outperform." Meanwhile, analysts at TD Cowen also raised Rivian's price target to $21, maintained its "buy" rating, and also noted improved margins and a bright outlook for the R2 program.

It'll be a significant challenge for Rivian to flip automotive gross profit into positive territory in the third quarter due to early-launch economics as it works toward normalized production levels. Still, it's possible given the progress it has consistently made.

Starting with the second quarter of 2025, Rivian's automotive gross margin has moved from (36%) to (11%), (7%), (7%), and (3%) each quarter. But my prediction is that once a second shift of R2 production is added, improving scale and plant production optimization, it will turn positive during the fourth quarter and quickly grow to rival, and perhaps surpass, software gross profits in the medium term.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Rivian (NASDAQ: RIVN) posted a strong second quarter that showed significant improvements in many metrics, and the back half of 2026 should only get more interesting as production of the R2 ramps up. The electric vehicle (EV) maker only began delivering R2 units to customers on June 9, leaving little time before the end of the quarter and causing Rivian to absorb roughly $100 million in additional cost of revenue as it brought the production line up to speed.

Let's take a look not just at the R2 hype and expectations, but also at why this young EV maker is poised to move higher in the near term.

The R2 hype is real

To say Rivian has other driving forces beyond the R2 would be fair, but it is important to note what investors can expect over the back half of 2026. Investors might overlook just how significantly Rivian expects to accelerate production of the R2 over the next few months.

More specifically, Rivian delivered 10,365 vehicles in the first quarter and 12,194 in the second quarter, for a total of just over 22,500 vehicles. Rivian recently raised its delivery guidance range by 3,000 units to between 65,000 and 70,000 vehicles for the full year.

Let's say Rivian production ramps up flawlessly and quickly enough to deliver 18,000 vehicles during the third quarter and then another significant jump to 27,000 vehicles during the fourth quarter. It would land right in the middle of its guidance -- but that feels like a challenging target.

What will be key for Rivian to execute its production ramp and lofty delivery targets is its ability to implement a second production shift. Management noted strong progress in new team member training and process improvements during the R2's first shift and expects to operate with two shifts by the end of the third quarter. While the R2 hype is real and it remains the overall growth engine for Rivian, it's not all the company has going for it.

Image source: Rivian.

Software and services

Achieving gross profit was one of Rivian's largest and most impressive accomplishments of late, further separating it from rivals such as Lucid (NASDAQ: LCID), which has had more trouble scaling and improving vehicle unit economics. Consolidated gross profit checked in at $179 million during the second quarter, a significant $385 million improvement over the prior year, but the breakdown gives us a clue about how lucrative its software business is.

Automotive gross profit checked in at a $36 million loss, which was a sizable near-$300 million improvement over the prior year but was held back by the previously mentioned $100 million in incremental cost of revenues due to the R2 production ramp. Losses in the automotive segment were offset by software and services, which posted a $215 million gross profit at a staggering 42% margin.

Investors often quickly dismiss this as purely a function of Rivian's joint venture with Volkswagen, but there's more to it. Yes, the joint venture has been instrumental and hugely beneficial for Rivian, and it drove 60% of software and services revenue during the second quarter. There was also growth in its vehicle repair and maintenance services and in Autonomy+, which are Rivian's advanced driverless technology features. Rivian noted it's happy with its take rate and believes Autonomy+ will be a key differentiator in the future, and that developing this advantage will help it gain market share over EV rivals.

What it all means

Rivian posted a strong second quarter, improved its guidance on several metrics, delivered strong gross profitability driven by a blossoming software and services segment, and is confident it can lock in a second production shift and drive deliveries toward 70,000 vehicles this year.

One aspect that some investors also overlook is Rivian's better-than-it-appears liquidity position. Rivian ended the second quarter with $5.31 billion in cash, equivalents, and short-term investments. In July, Rivian sold over 86 million Class A shares to raise another $1.3 billion.

The young EV maker also expects $1 billion in non-recourse debt from Volkswagen and a $250 million equity investment from Uber, adding in capital from its Department of Energy loan. Rivian expects future capital to be around $14 billion, nearly three times what it exited the second quarter with.

Rivian is about to shift into a higher gear, its financials are improving, and it's stacked up a lot of capital without diluting shareholders nearly as badly as its rival Lucid. Rivian is positioned for its stock price to rise, and it's not just all R2 hype, either.

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

Stellantis (NYSE: STLA) has had a bumpy few years that saw the company lose market share in key regions, take massive one-time charges for its pullback on electric vehicles (EVs), and lack a true overall identity with its list of overlapping brands. However, Stellantis has a global turnaround plan that includes investing heavily in key brands such as Jeep and Ram.

Stellantis stock has shed 70% of its value over the past three years. It trades with a market capitalization about one-third that of rival General Motors and less than half that of Ford Motor Company. The good news for investors is that the second quarter suggests Stellantis' turnaround is already gaining traction.

STLA gains momentum

Stellantis gave investors a tiny glimpse of what CEO Antonio Filosa's $70 billion turnaround plan could bring to financial results. Last week, the company turned in a Q2 profit driven by rising demand for its vehicles in North America, arguably the most important region for the automaker globally. Still, Wall Street doesn't seem impressed. The stock sold off almost 10% after announcing Q2 results, before recovering some of those losses.

Stellantis posted Q2 net profit of 293 million euros, or about $335.3 million, compared to a prior-year loss of 1.87 billion euros. Adjusted operating income more than tripled during Q2 to 773 million euros, but still checked in below Wall Street estimates calling for 914 million euros.

Despite Wall Street remaining unimpressed, and investors hesitant to jump on board the early turnaround story, there were a number of positives in Stellantis' Q2. North America, which will be key to Stellantis' rebound, was a bright spot with market share rising to 7.4%, up from a flat 7% a year ago. Adjusted operating margins for the company were positive at a modest 1.8%. Over the next five years, driven by the launch of many new vehicles, Stellantis aims to drive North American margins to between 8% and 10%.

"The Ram 1500 was a key driver of both volume growth and profitability in the quarter, with strong demand for the reintroduction of the legendary Hemi V-8 engine," Filosa said in a press release. "Building on that momentum, we are now shipping the highly profitable Ram 1500 TRX SRT to customers, just six months after its unveiling. This is the first off-road product from our SRT performance division, which we relaunched only one year ago."

What it all means

As mentioned, Ram was a key driver of Stellantis' surge in North America. The company achieved its fourth consecutive quarter of year-over-year growth with sales increasing 6%, after seven calendar years of annual declines. Stellantis remains on track after having launched two all-new and three refreshed vehicles during Q2, and has nine additional new and refreshed vehicles coming soon.

Image source: Stellantis Q2 slide deck.

Stellantis expects to drive higher profitability during the second half of 2026. This is thanks to more Ram 1500 SRT TRXs, priced at a staggering $102,590 with shipping, heading to dealerships now, later to be followed by a Ram 1500 Rumble Bee starting in the lower $60,000s. What investors might have forgotten is that performance-driven SRT trims bring margins that are two to three times higher than comparable non-SRT variants, and the automaker plans to offer 11 SRT models across Ram, Jeep, and Dodge brands over the next five years.

For investors willing to take on some risk, Stellantis might have the most upside over the next five years, if only because it's been so heavily sold off after a rough few years. Q2 showed solid improvement in many key metrics, including profitability, market share, and number of vehicle launches. It also showed that Stellantis remains on pace to drive financial improvements, not only through its fresher vehicle lineup, but through improved plant production efficiency and growing scale.

If this is truly the beginning of Stellantis' massive turnaround plan gaining traction in a key market, it comes at a time when Wall Street is still asking to see more. That gives investors an opportunity to get in early on a turnaround that could send its stock much higher than broader markets over the next three to five years.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.

The race to operating fleets of driverless vehicle robotaxis is heating up among a number of significant competitors. Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) Waymo has already tallied up more than 220 million fully autonomous miles, rider-only with no supervision. Tesla's (NASDAQ: TSLA) Cybercab ambitions are well publicized, even if its driverless programs are only slowly expanding. But it was actually Amazon (NASDAQ: AMZN) that recently landed a big win against its competitors.

Details on Amazon approval

Amazon-owned Zoox was just given temporary permission by the National Highway Traffic Safety Administration (NHTSA) to commercially deploy steering-wheel-free robotaxis, adding pressure to the robotaxi competition. This is significant because the vast majority of competitors, such as Waymo, are modifying traditional passenger cars. The difference is that the Zoox vehicle was developed from the ground up and is produced without manual controls, making it the first purpose-built driverless vehicle to receive approval.

Zoox vehicle in Las Vegas. Image source: Amazon.

"We can say pretty clearly that the systems in place on the Zoox exceed the equivalent performance requirements of a compliant vehicle," said the NHTSA's Jonathan Morrison regarding the agency granting temporary approval.

Zoox said the NHTSA's approval gives the company the federal go-ahead to begin charging for rides. Zoox acknowledged it would begin charging for its service in Las Vegas first, with additional markets to follow after various state requirements are met. Zoox's approval enables the company to commercially deploy up to 2,500 vehicles annually for two years, or a total of 5,000 vehicles.

It's a big win for Zoox against Waymo and Tesla, which are also racing to expand their autonomous ride-hailing services. While Waymo remains the clear market leader in operating paid fleets in multiple areas, this serves notice that a significant competitor with Amazon's backing will be a long-term competitor with the ability to scale.

What it all means

For Tesla, it's a reminder that it still has to get its own approval federally, and without it, its physical fleet will be legally restricted compared to Zoox's. Currently, Tesla's robotaxi service is operating unsupervised rides with Model Y vehicles in Austin, Dallas, Houston, Miami, Orlando, and Tampa.

While it's fair to say that Tesla CEO Elon Musk has been incorrectly predicting the mass rollout of autonomous vehicles for almost a decade, he isn't pulling back. In fact, he recently predicted via a video call at the Samson International Smart Mobility Summit in Tel Aviv that "10 years from now probably 90% of all distance driven will be driven by the AI in a self-driving car."

There's a lot riding on the driverless vehicle business for long-term Tesla investors. The company's massive market capitalization is supported by the belief that the company's transition from a traditional automaker to one that revolves around humanoid robots, robotaxi fleets, and artificial intelligence will grant it a more lucrative future. Currently, Tesla's robotaxi ambitions seem more hype than reality, and for investors, that's something that needs to change in the near term. Zoox receiving federal approval and beginning to charge for rides only applies more pressure for Tesla and Waymo.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Tesla. The Motley Fool has a disclosure policy.

For all Tesla (NASDAQ: TSLA) has achieved, and it has achieved much over the past decade plus, it faces numerous near-term challenges. Global competition is only intensifying in the electric vehicle (EV) industry, its product lineup is aging despite still selling well, and price cuts have hindered profit margins. For investors still considering investing in Tesla long-term, there is another potential speed bump in the road ahead: the company's mounting litigation exposure.

Overlooked topic

There was a recent development that many investors overlooked: Tesla has confidentially settled with three of five named plaintiffs in a racism lawsuit that has been on the company's radar for nearly a decade, since 2017. In the grand scheme of that lawsuit, it doesn't change a whole lot, and there are still nearly 600 workers involved with serious allegations. Investors can't forget that California's civil rights agency has its own case, too.

Image source: Tesla.

Tesla is currently battling more than 20 active litigation fronts, ranging from wrongful death suits to false advertising about full self-driving (FSD) to the previously mentioned racial discrimination case. Part of the reason Tesla's mounting legal exposure is often overlooked, in my opinion, is that there's significant uncertainty in how these lawsuits will play out and how much they could cost the company.

That said, the folks over at Electrek did an excellent job breaking it all down, and the numbers are a little alarming. When accounting for all potential costs, Tesla's litigation exposure ranges from about $2.7 billion to $14.5 billion. Another potential reason this gets overlooked is that it's not easy to see in the company's financials. Tesla doesn't break out a separate "legal reserve" line item, and it only has to set aside specific financial reserves for lawsuits if a loss is both probable and reasonably estimable.

What it all means

Throughout history, there have been numerous examples of massive lawsuits bankrupting companies, but investors don't have to worry about that. Let's hypothetically say Tesla loses a handful of large lawsuits and is forced to pay out: It turns into an action that directly lowers operating income. Consider that Tesla reported operating income of $1.34 billion for the first half of 2026, and then consider even materializing over a number of years at the low end of Tesla's litigation exposure, the exposure could be a drag on earnings.

Ultimately, Tesla's liquidity is over $40 billion, and even in a highly unlikely worst-case scenario, it could absorb these payouts without any real concern for its ongoing operations. That said, Tesla's litigation woes and concerns are likely to grow, and investors need to keep its legal issues in mind when assessing uncertainty, risk, and potential long-term earnings drags.

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

Uber Technologies (NYSE: UBER) is an intriguing stock for a number of reasons, including strong core business and user growth, strong adjusted earnings and cash flow, and significant value returned to shareholders through share buybacks.

Perhaps most intriguing is that it plans to avoid heavy capital investment to develop and manufacture self-driving vehicles by partnering with companies such as Waymo, which is owned by Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), as well as with Baidu and Nvidia. But if Waymo's recent announcement is any indication, Uber's future might be competing against former self-driving car partners.

What's going on?

In the latest development between Uber and Waymo, the latter is exploring options to exit its robotaxi partnership with the former. Currently, Uber offers rides in autonomous Waymo vehicles exclusively in Austin and Atlanta. Waymo gave Uber notice that it plans to launch its own service app in those two cities at the beginning of 2028.

Uber and Motional launched a competing robotaxi service in Las Vegas. Image source: Uber.

Waymo will run its service alongside its existing business with Uber and will keep its fleet of vehicles on Uber's platform through May 2028, when the current contract ends. "We believe in a vibrant and collaborative AV ecosystem that champions innovation and provides riders with a choice in how they experience this technology," said a Waymo spokesperson, according to Automotive News. "This is essential to the industry's future and to our vision of making the Waymo app and the safety of our technology available to riders everywhere."

Is this bad news for Uber?

This is certainly a negative development for Uber, which has focused on developing partnerships with fleet operators and investing in robotaxi companies, hoping it would eventually become the default aggregator for driverless rides, in addition to its human-operated ride business.

Savvy investors who have followed the partnership likely anticipated Waymo looking for an exit, as the robotaxi operator hasn't announced any new cities where its vehicles will be available on the Uber app, but has launched the Waymo app in six cities outside San Francisco and Los Angeles, where it already competes with Uber.

Waymo's likely exit from its partnership with Uber affects Uber in a couple of ways. It signals that while Uber is dominant in ride-hailing and Waymo represents a fraction of a percent of its total rides per quarter, it is a viable long-term threat and competitor. Investors should also expect increased capital investment, as Uber will need to invest more in autonomous vehicle companies to offset the expected loss of Waymo.

Lastly, it's leading some analysts to reconsider the long-term impact: Morningstar analysts reduced Uber's fair value estimate from $85 per share down to $76. Ultimately, this just signals that the path to Uber becoming the default aggregator for robotaxis will be bumpy as more companies look to become independent of its network.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Uber Technologies. The Motley Fool has a disclosure policy.

Chinese juggernaut electric vehicle (EV) maker BYD (OTC: BYDDY) surpassed Tesla in full electric vehicle deliveries last year. When comparing total global deliveries, BYD even overtook Detroit icon Ford Motor Company.

Now, electric vehicle maker BYD plans to overtake Toyota in five years, which would require it to more than double its deliveries last year. To achieve its goal of becoming the world's No. 1 automaker by volume, it will need to expand rapidly internationally, including entering markets where few automakers have dared to go: Japan.

The BYD Racco. Image source: BYD Co.

Taking some of Toyota's pie

One direct way to begin its quest to surpass Toyota would be to take sales from Japan's long-sheltered minicar market with a vehicle designed and manufactured specifically for that market. Japan's minicar market accounts for about a third of total vehicle sales in Japan. Still, foreign automakers haven't had any luck cracking it thanks to the segment's strict size and power requirements, as well as finicky consumers.

BYD launched its Racco minicar in Tokyo on July 28, signaling its rising confidence and competitiveness on the global stage. For investors, if BYD can successfully penetrate Japan's challenging minicar market, it's just another sign that the Chinese automaker can effectively enter and steal market share anywhere. That should give investors confidence that BYD might substantially cut into Toyota's large delivery lead and underscore the potential for top- and bottom-line growth along the way.

Is BYD stock a buy?

BYD's entry into Japan's domestically dominated minicar market doesn't make the stock a buy in itself. However, it absolutely highlights BYD's competitive advantages, and that's what makes the stock a buy.

For example, BYD's Racco minicar emphasizes what some in the automotive industry call "China Speed." The team of engineers needed just over two years to develop the vehicle from top to bottom for a specific market with strict regulations -- and they did so with no prior experience with Japanese minicars. The rule of thumb for automakers is a 48-to-72-month development cycle for a new vehicle model, which BYD essentially cuts in half.

BYD even developed a new battery architecture called X-Pack to work within the small minicar dimensions. Management noted that the company could use this newly developed technology in other small cars globally. Further, roughly 70% of the Racco minicar's components are sourced in-house from BYD group companies, allowing the automaker to sometimes drastically undercut the competition on price without sacrificing quality or advanced technology options, and keeping value and profits in-house.

All in all, BYD's entry into Japan's challenging minicar market emphasizes its aggressive international growth strategy, the impressive extent of its vertical integration, and the speed at which it can develop products. BYD is a solid stock to buy as it embarks on its goal of overtaking Toyota in five years.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

Interestingly, investors looking for potential future catalysts for both General Motors (NYSE: GM) and Ford Motor Company (NYSE: F) might just find their answers in the past.

While Stellantis is busy refocusing on its core vehicle production strategy and broader turnaround, both Ford and GM are busy diversifying and seeking new and incremental revenue streams. One catalyst with the potential to add billions in revenue and profit is the defense business.

Here's a brief history lesson on GM's and Ford's defense businesses and what reviving them could mean for long-term investors.

Image source: General Motors.

General Motors and Ford have a history of serving the military

Many forget that GM's defense business delivered over $12.3 billion in war goods during World War II, at the time making it the largest commercial provider of military vehicles. For an automotive industry already frowned upon for its cyclicality, GM's defense business was even more boom or bust and was divested in 2003 to General Dynamics for $1.1 billion. Until 2017, when GM Defense was reestablished, you could say GM's defense business was gone but not forgotten. But GM CEO Mary Barra dropped a hint in the automaker's recent second-quarter letter to shareholders: "Growth businesses like GM Defense and GM Insurance are creating additional avenues for value creation," she wrote.

GM is gearing up for a strategic pivot that could capture billions in defense revenue, and GM Defense has already secured a big multiyear contract to build the U.S. Army's Infantry Squad Vehicle (ISV), which is based on the Chevrolet Colorado ZR2 midsize truck architecture.

Crosstown rival Ford Motor Company got in the mix for the government's ISV-Heavy (ISV-H) program, in which the U.S. Army awarded GM Defense, Ford, and BC Customs firm-fixed-price prototype agreements. Prototypes are due by March 30, 2027.

GM has a head start in reviving its historic defense business, especially considering it has a more mature and dedicated subsidiary, while Ford's defense business is integrated into its Ford Pro operations. GM Defense even recently signed a memorandum of understanding (MOU) with Lockheed Martin to explore opportunities to improve the supply chain and drive manufacturing innovation between the two juggernauts.

While GM has a head start over Ford, the latter is already in negotiations with defense departments in Europe, as well as North America, to supply trucks and software to their armed forces. That said, the talks, which are said to be "productive," have yet to produce a contract with Ford.

What it all means for investors

More broadly, this is a trend investors should remember, as the U.S. Defense Department is aiming to diversify its contractors to improve service and slash costs, and major Detroit automakers were high on that list of companies to work with. While this would certainly be a solid business win for either GM or Ford, let's put some context around the current projections.

For 2026, GM Defense is aiming for about $700 million in revenue and double-digit percentage EBIT (earnings before interest and taxes) margins -- which is good compared to the single-digit margins major automakers typically achieve. Management also expects GM Defense to post a compound annual growth rate (CAGR) of more than 30% over the next several years. While GM Defense could certainly add billions to the company's top line, and, over the long term, to its bottom line, reasonable growth rates would probably put the business as only a small 2% to 3% of the company's EBIT profits by the end of this decade.

Despite being a small percentage of Ford's and GM's overall businesses, there's certainly upside beyond the numbers, such as with GM Defense's MOU with Lockheed Martin that could open up doors to drive efficiencies and lower research and development (R&D) costs, or potentially fill excess production capacity at its truck factories that would only boost margins. Ford and GM's renewed focus on defense business is a smart move, a profitable move, and a development worth watching for multiple reasons, but it won't cause the stocks to soar in the near term. However, as Ford and GM continue to diversify their business and expand margins above historical narratives, these moves all add up for investors.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors, Lockheed Martin, and Stellantis. The Motley Fool has a disclosure policy.

Stellantis (NYSE: STLA) and rivals Ford Motor Company and General Motors have traded differently over the past year. Stellantis, which recently unveiled a $70 billion turnaround strategy, saw its stock shed more than 40% of its value over the past year, while Ford posted a 25% gain and GM more than doubled that with a 54% annual gain.

Because of Stellantis' harsh sell-off over the past few years, it may actually have the most upside potential of the three stocks for investors willing to take on some risk over the next five years. Let's take a look at a core component of Stellantis' turnaround, why there are early signs of optimism, and what one catch might be.

Image source: Stellantis.

What's Stellantis' plan?

While Stellantis' global $70 billion turnaround will check many boxes across regions, CEO Antonio Filosa made it clear that North America will be a primary driver of success. In fact, of the $42 billion Stellantis has committed for just products and branding over the next half decade, roughly 60% will be invested into North America.

Of the tens of billions pouring into North America, it'll deliver 11 new vehicles by the end of this decade for the Jeep, Ram, Chrysler, and Dodge brands. Stellantis is gearing up to push aggressively with its dealerships and new product while aiming to grow North America volume by 35%, with a heftier 60% gain for its highly profitable Ram brand.

"Our plan for North America is very simple: Get the product right," said Tim Kuniskis, who leads Stellantis' American brands, according to Automotive News. "Right for the market, right for the brand positioning, right for segment expansion, right for growth, and right to recover our customer loyalty."

The flood of new vehicles from Stellantis in North America will help the company move more product faster, with less margin erosion from incentives and deals. The good news for investors is that we might already be seeing signs that the automaker is gaining traction before the massive investment provides additional support.

Q2 shipments tell a story

Data source: Stellantis consolidated Q2 shipments. Shipment figures are in thousands.

The table shows one reason North America is expected to drive this turnaround: There's more growth to be had than in its Enlarged Europe region. North America generated 122,000 units in shipment growth, accounting for 81% of the company's 150,000-unit growth during the second quarter, compared to the prior year. North America's 38% year-over-year growth in shipments carried the automaker through the second quarter.

Stellantis' North America shipments jumped largely due to new or refreshed products and offerings, including the Ram 1500 light-duty HEMI V8, the new Ram 1500 TRX SRT, the refreshed Jeep Grand Wagoneer and Grand Cherokee, and the acceleration of the all-new Jeep Cherokee. It could give investors a glimpse of what's to come as the company funnels more investment into its lucrative Jeep and Ram brands in the coming years.

Now, there is a bit of a catch to North America's 122,000-unit growth last quarter. That's due to Stellantis' planned summer shutdown, which is common for Stellantis, Ford, and General Motors as they adjust factories and production lines. Stellantis admitted that the spike in shipments was due to a surge in inventory ahead of the shutdown. The difference is significant: While North America shipments rose 38%, U.S. retail sales grew a much more modest 6%.

What it all means for Stellantis investors

Yes, the 38% growth in North American shipments is certainly inflated by a surge in inventory, but there is also real momentum building. Stellantis' 6% gain in U.S. sales during the second quarter was its fourth consecutive quarterly increase. Stellantis could offer investors willing to take some risk much upside after its drastic sell-off over the past three years, and keeping an eye on the company's shipments and U.S. sales could be a leading indicator of how quickly its turnaround plan could gain traction.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.

The automotive industry has long been known for razor-thin margins, but that narrative is slowly changing as more subscription services and advanced software technology flood into vehicles. In fact, General Motors' (NYSE: GM) OnStar subscription services ended the second quarter with deferred revenue of $6.3 billion -- an almost 50% year-over-year increase. Those subscription sales come with far higher margins than its traditional automotive business, giving investors a new angle on an age-old industry and its potential.

Let's dig in and see how GM's digital strategy, as well as rival Ford Motor Company's (NYSE: F), could change the game for their investors.

What's going on?

Rather than pushing sales of its OnStar and Super Cruise services to consumers at the point of purchase, General Motors is going about it in a different way. The automaker is bundling long-term prepaid OnStar and Super Cruise trials into new vehicle purchase prices. All 2025 and newer models include eight years of OnStar Basics, and select equipped models include three years of hands-free Super Cruise and associated connected services.

The idea behind this strategy is simple: General Motors is essentially casting the widest possible net it can over consumers, hoping that in three or eight years' time, those consumers will have become so accustomed to having those services that they will opt to purchase them outright in their next vehicle or transition to paid monthly or yearly digital plans to keep those features in the existing vehicle.

So far, the results are encouraging, with General Motors reporting that retention rates were roughly 30% to 40% of drivers continuing to pay for Super Cruise after the three-year prepaid term.

If you're wondering what deferred revenue (that $6.3 billion) is, it's this: By bundling these multiyear trials into the upfront purchase of the vehicles, in accounting terms, this is revenue that General Motors has already collected during the vehicle purchase. But because a portion of the revenue is derived from OnStar services delivered each month throughout the trial, the automaker can't claim it as earned revenue until that time comes.

Make no mistake, deferred revenue isn't some imaginary pile of cash General Motors won't get a chance to utilize. Rather, think of it as a massive financial backlog that gives transparency to highly profitable upcoming revenue.

Where GM goes from here

At the end of Q2, General Motors had $6.3 billion in deferred revenue and said it remains on pace to reach $7.5 billion in deferred revenue by the end of this year. Recognized revenue was $800 million during Q2, a 20% bump from the prior year, and it is on pace to recognize $3 billion through 2026. The rule of thumb is that these digital services like OnStar and Super Cruise check in with software-like gross profit margins, or roughly 70%. As an entire company, General Motors' gross profit margin fluctuated between 15% and 20% between 2020 and 2025.

General Motors is far from driving alone on this new path forward. Crosstown rival Ford Motor Company is doing something very similar with its BlueCruise -- also noted to deliver gross margins around 70%. Ford's BlueCruise subscription has an annual $495 price tag, or $49.99 monthly, and while it hasn't copied its rivals' upfront purchase strategy, it experienced an 88% rise in total hands-free miles driven globally last year and topped the half-billion, hands-free miles-driven threshold.

The major difference between the Detroit rivals is their strategies. As General Motors continues to cast its wide net, OnStar is expecting to add another 1 million subscribers in 2026 to reach nearly 13 million by year's end. Ford is experiencing rapid growth as demand increases, but without such a wide net as its rival, Ford brought its global total to 1.22 million vehicles with BlueCruise last year. At the end of 2025, it boasted an 80% increase in vehicles equipped from the prior year.

A BlueCruise-equipped vehicle. Image source: Ford Motor Company.

What it all means

General Motors and Ford Motor Company have already proven that demand exists for these services and have done enough business to show they can be lucrative, with high margins and solid retention rates. Investors would be wise to see this trend developing because these types of software and autonomous driving services are only going to get more common and desirable, especially as more software-advanced electric vehicles (EVs) hit the road, which long term can absolutely change the game and the razor-thin margin narrative the two Detroit icons have played for so long.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.

BYD made a huge splash after exploding onto the global electric vehicle (EV) scene and impressively surpassing Tesla in battery-electric vehicle (BEV) sales for the first time in history last year. Perhaps more surprising was that BYD also surpassed Ford Motor Company for No. 6 in total global units sold, including sales of BYD's plug-in hybrid EVs (PHEVs) that year.

Rather than enjoying its meteoric rise to EV prominence and overall success, the Chinese juggernaut set its sights even higher: becoming the world's top automaker. Here's how it can get there.

Target in sight

BYD's new target is ambitious: to overtake Toyota Motor (NYSE: TM) to become the undisputed largest car company in the world in five years. That would certainly be a feat considering Toyota sold more vehicles last year globally at 11.3 million than BYD (~4.6 million) and Ford (~4.4 million) combined, by a fairly wide margin.

Some investors may have scoffed at BYD's new goal. Still, one person who certainly didn't was Toyota's vice chairman, Koji Sato, who didn't name Chinese automakers directly but suggested standardizing certain components across Japanese automakers as a new "Japan standard" to cut costs, improve efficiency, and drive innovation in more valuable areas.

This is one of the concepts the Chinese have used to dramatically undercut global competitor pricing without sacrificing advanced EV technology. "Unless things change, we will not survive," Sato said during Toyota's annual supplier meeting in March, according to Automotive News.

A simple example of how this works effectively is that a component, such as an air conditioning unit, which doesn't affect consumers' choice of one brand over another, is shared among competing Chinese automakers. This reduces development costs and increases order volume, thereby lowering unit costs, among other factors.

As long as it works, this is brilliant. A counterargument would be that if a shared component such as this triggers a massive hardware recall, it could ding the entire Chinese automotive industry.

How does BYD get there?

If BYD can achieve its goal and overtake Toyota, it'll essentially do so with one hand tied behind its back. That's because, thanks to steep tariffs on Chinese EVs entering the U.S., which remains the second-largest EV market by volume globally despite slower-than-anticipated growth, BYD won't likely enter the U.S. in the near term.

So, how does BYD get to No. 1? Amid China's softening automotive market and economy and a brutal price war, BYD will continue to focus on exports to drive overseas growth in regions with surging EV and PHEV demand, specifically Europe, Southeast Asia, Australia, and Latin America. As it does so, and eventually the Chinese market improves and demand returns, it will likely return to domestic growth.

BYD will also have to eat a piece of Toyota's pie directly. The EV maker is already rapidly feeding into crucial segments in key regions of the previously mentioned emerging markets, which will directly eat into the traditional sales volumes Toyota has enjoyed.

Image source: BYD Co.

Alongside those direct growth paths, BYD will also need to double down on what it already does well: roll out advanced technologies such as its second-generation Blade Battery and five-minute fast-charging technology and continue to drive greater efficiencies through its vertically integrated supply chain to make its vehicle price points more aggressive.

Lastly, BYD needs to continue pushing high-end vehicle development. While known for its prowess with affordable high-volume brands, it's currently gearing up to unleash a luxury segment offensive through three brands: Denza, Fangchengbao, and Yangwang. This push won't have the same high-volume impact as its mainstream brands, but there is incremental growth to be had -- the bonus is that those sales will come with higher margins, too.

What it all means

The way I see it, BYD is shooting for the stars, and if it falls short, it'll likely still be a highly valuable investment in the long term. BYD has competitive advantages in cost and vertical integration, a strong footprint in both powertrains of the future (BEV and PHEV), and has shown an ability to rapidly develop not only technology but new vehicles at a much faster pace than the global industry is accustomed to.

BYD doesn't need to overtake Toyota to be a great investment, and it's likely to remain one.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

Business has been a little bumpy for Tesla (NASDAQ: TSLA) over the past couple of years. In fact, after delivering a record 1.8 million vehicles in 2023, its deliveries promptly dropped for two consecutive years. Last year was filled with speed bumps that extended beyond vehicle deliveries.

Then something intriguing happened: Tesla's second-quarter deliveries soared far above Wall Street's average estimates. Investors might be overlooking the most impressive part of the data -- that Tesla held its own in a brutal Chinese market while a number of domestic automakers did not.

Numbers jump unexpectedly

On paper, the Q2 numbers were exactly the blowout delivery numbers Tesla needed after many months of bad news. Tesla delivered just over 480,000 vehicles globally during the second quarter. This was a solid 25% year-over-year gain and easily topped Wall Street analysts' estimates of about 406,000 vehicles. That result was the best Q2 of deliveries in Tesla's history.

Most investors keyed in on Tesla's results in Europe, and it's true that the region played a big role in the blowout Q2. While Tesla doesn't break out its delivery numbers by region, we can get a solid sense of the growth trend from the European Automobile Manufacturers' Association, which tracks registration data. That data from January through May this year showed a 77% year-over-year growth in Tesla registrations.

Don't overlook the China result

Despite Europe likely driving much of the Q2 surprise result, Tesla's decline of only 2% in China amid a softening economy, reduced electric vehicle (EV) incentives, and a brutal price war might actually be the more impressive feat.

Even BYD, China's juggernaut EV maker that's expanding rapidly around the globe, posted a 40% decline in domestic Chinese deliveries through the first half of the year, though this figure includes battery-electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). BYD has turned its focus to exports to offset this weakness.

For Tesla, despite the slight Q2 decline, it was still a nearly 12% gain over the first quarter. If you consider Tesla's wholesale deliveries in China (which includes exports), that figure was up nearly 33% compared to the prior year.

Image source: Tesla.

Here's just one example of how competitive China's automotive market is right now. Competitors in China have been forced to churn out new vehicles and/or refreshes more rapidly to lure in consumers on factors other than price. Simply put, new vehicles sell faster and with fewer incentives, and in a price war, refreshing the lineup is important. Because of that push, Chinese automakers have released around 650 new models since January. That's staggering.

To be fair, that 650 figure includes facelifts, refreshes, and all-new models. If we narrow it down to only all-new models, which are vehicles that don't have a previous version in China, automakers are still pushing out 30 all-new models each month since January. In contrast, the U.S. does roughly 30 all-new models annually.

What it all means

BYD's Executive Vice President, He Zhiqi, called the 650 figure "completely insane" on social media, before continuing to say that the Chinese auto market is "not just fierce, but brutal."

Tesla holding its own in China while some large domestic competitors such as BYD spiral, along with months of growing momentum in Europe, were exactly what Tesla needed during the second quarter. The question remains, however: Is this rebound sustainable?

There's a sound argument that the Iran conflict, which has affected oil prices in Europe, has given a boost to EV sales in the region, and it's uncertain how that trend will change in the near term. It's also fair to wonder if Tesla's thin and aging vehicle lineup can sustain this type of rebound through even the second half of 2026.

Either way, after two years of mostly bad delivery news, this might be the first Tesla delivery data that could inspire confidence -- and holding its own in China was more impressive than it's getting credit for.

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

When we think about the major global automakers these days, many investors forget all about Stellantis (NYSE: STLA), while General Motors (NYSE: GM) and Ford Motor Company (NYSE: F) remain hot topics. It's understandable, considering Stellantis' declining relevance in multiple markets, lack of a true branding identity, and numerous management missteps. No doubt, Stellantis has many, many issues to fix in the coming years to regain lost global notoriety. That said, the company could be in oversold territory, and Wall Street forward estimates suggest analysts are in "prove it" mode regarding the company's massive $70 billion turnaround plan. Here's a look at how Stellantis is poised to outperform its rivals over the next five years.

How bad is it?

Over the past three years, General Motors, Ford, and Stellantis have traded in completely different trajectories. GM has been thriving, and its stock has doubled over the past three years, while Ford has essentially remained flat, but Stellantis checked in with a staggering near 70% decline. To get a better idea of just how much value Stellantis has shed, take a look at this next graph.

STLA Market Cap data by YCharts

Not only does Stellantis' market cap equal a fraction of rivals GM or Ford, but it has also even sunk below that of young electric vehicle (EV) maker Rivian (NASDAQ: RIVN). That's right; Stellantis, a global automaker with millions of shipments annually, has a market cap below Rivian, which only sells four electric vehicles and has only achieved its first full year of gross profitability in 2025, and remains a long way away from net profitability.

Evidence of turnaround starting

Roughly a decade ago, Stellantis, then operating as Fiat Chrysler Automobiles in this reference, was peaking in the U.S. market. By 2019, however, its market share began a sharp decline that would last until about 2023, before leveling off over the next couple of years. This is the first year investors are seeing life from its core Jeep and Ram brands in North America.

Let's take a look at Stellantis' second-quarter consolidated shipments, which reached 1.6 million units globally, a 10% increase from the prior year. That increase was due to Stellantis' results in North America, which posted strong 38% growth in shipments during the second quarter.

Stellantis' growth in North America was largely driven by new or refreshed products, which the company has lacked in recent years. Highly profitable products, such as the Ram 1500 (light-duty) HEMI, the new Ram 1500 TRX SRT, the refreshed Jeep Grand Wagoneer and Grand Cherokee, and a ramp-up of the all-new Jeep Cherokee, were highlighted as driving the turnaround in shipments.

This should just be the beginning of a surging Stellantis in North America, which remains a core engine for profitable growth. In fact, Stellantis' recently unveiled $70 billion global turnaround strategy is committing 60% of its brand and product spending to North America. Out of its 14-brand global portfolio, Jeep and Ram are two of the four brands that will receive massive investment over the next five years. Jeep is even expected to help turn the business around overseas.

Jeep will play a huge role in Stellantis' turnaround. Image source: Stellantis.

Those investments will not only help revive the Jeep and Ram brands but also give the company an identity centered on highly profitable full-size trucks and SUVs. The other side of its strategy is to attack affordability by launching seven all-new vehicles in North America priced under $40,000 and another two under $30,000. While the trucks and SUVs will carry profitability, the more affordable products will help the company utilize more of its production capacity to improve profitability more broadly.

What it all means

Wall Street is currently refusing to give Stellantis a better valuation, and that's understandable, but it gives individual investors an opportunity to get in before Wall Street changes its tune. There's early evidence that refreshed and all-new models are already sparking Stellantis sales in North America, and there are more reinforcements on the way. Stellantis has the potential to soar over the next three to five years if it gets traction with its new models -- and it's not a stretch to imagine Jeep and Ram outperforming expectations. The past three years showed GM and Ford stock trading much more favorably than Stellantis' 70% decline, but don't be shocked if Stellantis flips that graph over the next three to five years.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.

As far as young U.S. electric vehicle (EV) makers go, Lucid Group (NASDAQ: LCID) and Rivian Automotive (NASDAQ: RIVN) have managed to separate themselves from the smaller niche players, or worse, the few that have already closed their doors. One could easily argue that Rivian has even separated itself from Lucid in a positive manner.

But there's another stock, Nio (NYSE: NIO), that often flies under the radar because it was born in China, and in one crucial way it has been crushing Lucid and Rivian recently.

The bumpy road

It's not an easy life for young EV automakers, which face costly technology such as batteries, largely unprofitable early-stage scaling, and a volatile EV industry that has been impacted by changes in demand due to untimely policy, reduced tax incentives, and even unexpected tariffs.

Despite all of those headwinds, Rivian has taken a large step forward to separate itself in a positive way from rival Lucid in its ability to generate gross profits. These young EV makers being able to generate gross profits, and more importantly, sustainable gross profitability, is a crucial step to proving to investors they can become a viable long-term investment that can one day reward investors.

LCID Gross Profit (Quarterly) data by YCharts

As you can see, despite starting from a worse position than its rival, Rivian has made consistent progress on gross profitability since the beginning of 2023, while Lucid's gross profitability has languished due to multiple speed bumps.

There are two primary driving forces for Rivian's consistent improvement. One is drastically improved unit economics as the young EV maker has intensely reduced costs, expensive wiring, and the number of parts and sensors, among many other changes. That's expected to continue with the R2, which is targeting about half the costs of the R1.

Image source: Rivian.

A second driving force was Rivian's joint venture with Volkswagen, which gave the company the ability to draw non-dilutive capital, split development costs, and sell/license its valuable software stack to its German partner, which has essentially given up on its in-house software division. These software margins are much higher than those for Rivian's hardware manufacturing and helped offset early-stage, less-profitable scaling.

Rivian's improvement has been impressive and consistent, but many investors overlook another EV stock that has taken a leap ahead of even Rivian.

Nio is crushing Rivian?

Nio has witnessed an uptick in its gross profitability, driven by multiple factors, including vehicle deliveries nearly doubling in the first quarter compared to the prior year. Investors have Nio sub-brands Onvo and Firefly to thank for this, as they continue to gain traction.

Going hand in hand with Nio's rise in deliveries are its vehicle and gross margins. During the first quarter, Nio's gross profit topped $700 million, representing a staggering 428.4% increase from the prior year. First-quarter gross margin checked in at 19%, compared to 7.6% during the prior year. Vehicle margin also made a similar jump to 18.8% during the first quarter, compared to 10.2% a year ago.

LCID Gross Profit (Quarterly) data by YCharts

What it all means

While Rivian has made substantial improvements to boost its gross profitability, it still lacks the growing scale and sales volume that Nio is enjoying. That's the next step for Rivian, and a step it is expected to take with the R2 opening the door to mass-market consumers.

It's natural for U.S.-based retail investors to gravitate toward companies that were founded and operate in the U.S. market, and that's why Rivian and Lucid are more well known than Nio. However, amid the many young EV companies that are struggling globally through many different headwinds and regional speed bumps, Nio has consistently impressed with its ability to navigate a challenging domestic market and a brutal price war, expand its sales and scale, and improve margins and gross profitability.

Rivian has achieved some impressive feats over the past year or two, but when it comes to gross profitability and proving to investors it can be a viable long-term investment, Nio is crushing it -- and investors should take note.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Carvana (NYSE: CVNA) turned many investors' heads when it began scooping up brick-and-mortar dealerships recently. The strategic move seemed to go against the entire company's vision of online used-car sales (we'll get into that in a second). A smaller detail many overlooked was that Carvana opted to buy Stellantis (NYSE: STLA) dealerships primarily, a strange decision given the automaker's long list of recent struggles and receding market share. That said, this strange pairing might just be a match made in heaven for Carvana, and here's why.

What's going on?

At first glance, Carvana scooping up physical dealerships goes against its historic strategy, but in reality, it's attempting to disrupt the age-old dealership model as we know it. As it attempts this strategic pivot, there's also reason to believe the synergy created could reward investors.

Jeep will play a big role in reversing market share losses. Image source: Stellantis.

Carvana's physical dealerships still won't sell you a vehicle in person; instead, they're for test drives, showing car capabilities, and helping consumers buy from a larger selection online. What this strategy also does is give Carvana control of the entire trade-in lifecycle. One of the more challenging aspects for Carvana was bringing in valuable used-vehicle inventory. Controlling dealerships that allow consumers to bring trade-in vehicles when purchasing new ones gives Carvana a bloodline of used-vehicle inventory to boost its historical business.

Another aspect of this strategy is that Carvana's acquired dealerships still plan to use the service bay as usual, potentially unlocking additional service revenue from its consumer base that may want to continue doing business with Carvana. What some investors aren't aware of is that while new and used vehicles drive dealerships' top-line revenue, the most profitable aspects, by a large margin, are service and parts, and finance and insurance. Carvana is unlocking the bread-and-butter of dealerships that its traditional online-only business lacked: high-margin maintenance and repair.

The initial results are incredibly intriguing, with its Arizona store booming in sales and becoming a top-selling dealership. More specifically, according to reports from The Wall Street Journal, Carvana's recently purchased Arizona dealership went from averaging 30 to 50 monthly sales to selling more than 700 new vehicles in May, according to Stellantis figures given to CNBC.

Here's why it's a great match

While Stellantis would surely benefit from increased sales across many dealerships, the match is primarily important to Carvana. That's because, at least initially, Carvana has chosen to make Stellantis dealerships its primary purchase. The question is why. The old saying "Buy low, sell high" is a fitting one for this scenario. Stellantis has experienced executive turnover, including the appointment of a new CEO, and it recently unveiled a massive $70 billion global turnaround plan with a strong focus on North America.

Stellantis has faced seemingly endless questions over the past few years about its product decisions, shrinking product lineups, receding market share, delayed launches, and uncertainty about the future of some of its many brands. That story is likely to change over the next five years as 11 new vehicles are headed to the U.S. market as Stellantis is committing 70% of its future investment into four primary brands. Two of them -- Ram and Jeep -- are focused on turning around Stellantis' North America market.

Furthermore, a growing concern has been rising new-car prices. Some analysts have called this an affordability crisis. This gives Stellantis, and by extension Carvana, the opportunity to quickly boost sales from the growing consumer demand for more affordable vehicles. In fact, at least nine upcoming models are targeting launch prices starting under $40,000, and two are targeting under $30,000. Stellantis' reduced focus on less-profitable, typically pricier electric vehicles (EVs) could also help Carvana's early efforts in the new-car business.

What it all means for Stellantis and Carvana

At the same time, Stellantis' struggles have given Carvana an opportunity to purchase dealerships at lower prices than in the past. It also strategically pivots to a company putting up tens of billions to revive market share, product lineups, and brand identity. You could argue that Stellantis, because of its massive investment and potential turnaround, could be the best dealership partner over the next five years as Carvana fine-tunes its new strategy to disrupt the industry.

It's certainly a strange pairing, considering Carvana's history of used-car and online-only sales, but it might just be a match made in heaven over the next five years, especially if early results continue. As far as these two companies go, this is a much bigger deal for Carvana. Not only is it perhaps timing the brands of physical dealerships perfectly, considering Stellantis' upcoming massive investment in product and branding, Carvana opening the doors to new-car sales will give it entirely new revenue and profit streams, including servicing that is higher margin, that its historical business has lacked. If Carvana executes its strategy and disrupts the new-car dealership model, its earnings and stock price could soar over the next five years.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

About five years ago, there was a mini gold rush in the electric vehicle (EV) industry. It was due to growing infrastructure support and a flood of public and private funding from investors hoping to get their hands on what might be the next Tesla.

This gold rush ended poorly for many involved: from the more well-known Fisker Automotive, which was supposed to rival Tesla, to the lesser-known companies such as Canoo and Lordstown Motors. Even more capable companies, such as Lucid Group (NASDAQ: LCID), will almost certainly face more funding questions and capital raises within 12 to 18 months.

Rivian Automotive (NASDAQ: RIVN), however, appears to be gaining real traction; here are three reasons to believe in it long-term.

Shareholder dilution

While Lucid and Rivian are similar in many ways, one factor that has separated the two is shareholder dilution. Unlike Lucid, Rivian has been able to protect its shareholders from more severe shareholder dilution due to capital discipline and its strategic joint ventures, such as with Volkswagen.

It also helps to have a little luck on your side. Rivian executed one of the largest initial public offerings in U.S. history by raising roughly $13.7 billion in gross proceeds, which gave the young EV maker a long capital runway. In contrast, Lucid entered the public markets through a SPAC merger that had a lighter cash balance to help pave the way forward.

Another example of how the two differ is that Lucid has relied heavily on Saudi Arabia's Public Investment Fund (PIF), which now owns a controlling stake in the company. While Lucid has repeatedly issued new equity that dilutes existing shareholders, Rivian largely took a different route by leveraging its internal software and electrical stack to ink a $5.8 billion deal with Volkswagen that has helped generate non-dilutive licensing and convertible loans.

RIVN Shares Outstanding (Quarterly) data by YCharts

You can see in the graph above that Lucid was expanding its shares outstanding much more, until last year when the EV maker executed a 1-for-10 reverse stock split, which reduced its share count to proportionately increase its share price, enabling it to remain listed on the Nasdaq. That's not a great situation to be in. Make no mistake, when considering either of these EV stocks long-term, Rivian is certainly more enticing, even considering only its lesser shareholder dilution.

R2 is a crucial pivot

To say that Rivian's R2 is a crucial pivot point for the business would be an understatement. The R2 marks Rivian's transition from luxury-niche EVs to mass-market production and scale. The young EV maker might not even get enough credit for the efforts it has taken to improve unit economics, which have helped power the company to its first full-year gross profit.

Rivian is taking what it's learned from that process and applying it to the R2. And it's expecting to reduce the manufacturing cost per vehicle by 50% compared to even previous improvements on the R1. Rivian's goal was to aim for nearly $7,500 in gross profit per vehicle; here are a couple of unique examples of how it can drive toward that target:

• Battery and drive units: The new "Maximus" drive unit contains 41% to 43% fewer parts than the previous Enduro system.
• Electronics and harnessing: Rivian cut expensive high-voltage cabling down by a significant 70% and simplified its computing architecture by removing 2.3 miles of wiring, cutting down connectors by 60%, and reducing weight by 40 lbs. Rivian even adjusted the R2 to a unibody structure, which reduced costs by 44% and weight by 37% compared to the R1 body-on-frame style.

Image source: Rivian.

Combine those examples, and many more, with growing scale as the lower price tag enables a mainstream consumer to purchase the R2, and it should have investors feeling optimistic that Rivian can one day be a self-funding and profitable company. Though it still has a long way to go.

High-margin potential

Circling back to Rivian's lucrative joint venture with Volkswagen, it's important for investors to understand the potential of this business. Typically, legacy global automakers like Volkswagen buy parts from suppliers and write their own coding, but the deal with Rivian implies that Volkswagen has admitted its deficiencies in doing so and essentially gave up on its in-house software division.

Volkswagen isn't just buying Rivian motors or interior infotainment screens, either; Rivian is essentially selling its German joint venture partner its vehicle nervous system, operating system, and zonal architecture. This has given Rivian the potential to transform from a pure hardware manufacturer into a business that includes high-margin software and intellectual property licenses.

Thanks in large part to Volkswagen's partnership, Rivian's software segment operates at roughly 37% gross margin, which has become a crucial way to offset early-stage scaling and expenses.

What it all means

Rivian still has a long road ahead to reward long-term shareholders, but these three reasons should give investors the belief that it can achieve that vision. Rivian has separated itself from rivals such as Lucid with capital discipline and the avoidance of severe shareholder dilution, tapped into high-margin software sales and cost-sharing with partnerships, and made significant progress on improving R2 unit economics ahead of the scale it hopes to soon build.

Rivian's road will still be tough, but it certainly has some unique attributes that separate it from many rivals.

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

The Detroit auto trio, General Motors (NYSE: GM), Ford Motor Company (NYSE: F), and Stellantis (NYSE: STLA), have much in common and generally have similar strategies across the globe. However, that hasn't stopped GM from separating from the pack, as you can see in the graph below.

GM data by YCharts

GM's stock has far outperformed its rivals thanks to strong cash flow driven by high-margin sales of internal combustion engine (ICE) full-size trucks and SUVS, huge share buybacks, and effective cost-cutting. Those factors all propelled GM to consistently beat earnings estimates, and Wall Street has rewarded it with a premium valuation compared to most mainstream automakers. GM isn't perfect, however, and it's worth noting its one big nagging problem: China.

What's going on?

In the early 2000s, China seemed like the holy grail for Detroit automakers. The country boasted a blossoming middle class hungry for vehicles and transportation, domestic automakers were in their infancy, and consumers flocked to foreign brands. Foreign automakers were all too ready to accept forced joint ventures, which has now come back to bite them; domestic automakers gained knowledge and rapidly advanced into elite competition to get a piece of the growing pie.

General Motors peaked in China in 2017 with record sales topping 4 million vehicles, and financially, GM and its joint venture peaked a few years before in 2014. Since then, however, it's essentially all been downhill, and it has cost the company a pretty penny. At the end of 2024 GM restructured its joint venture with SAIC Motor Corp in China with a price tag topping $5 billion in noncash charges and write-downs.

Image source: General Motors.

During the past decade, GM's operations in China flipped into reverse, from a profit engine to a financial liability, but its 2024 restructuring gave investors hope that things could turn around. Although there was a bit of initial success, including a 23% rise in new-energy vehicles in 2025 compared to the prior year, things haven't quite gone according to plan, requiring a second roughly $1 billion charge in the 2025 fourth quarter.

Worse yet, the most recent numbers out of the region are gloomy: GM's China sales extended their slide during the second quarter, dropping 20% to 357,000 vehicles in the world's largest automotive retail market. That marks the third year-over-year decline in consecutive quarters.

In fairness to GM, it doesn't help that the region itself isn't so hot currently, with China's new car sales shrinking for nine consecutive months as of June. Year to date, China's new car volume has declined 20% to 8.75 million, in part due to the government taxing electric vehicles (EVs) in January, amplified by increased electric vehicle demand amid the Iran conflict.

Now what?

The Detroit automaker's SAIC-GM contract expiring in 2027. GM has unveiled a three-year electrification strategy to attempt to revive lagging sales, hoping that deploying more premium Buick and Cadillac EVs with locally developed software-defined interiors, as well as safety and suspension systems.

GM has also taken a page out of rival Ford's playbook and made a strong push into turning China into an export hub. Ford has relied on its capital-light joint ventures with Changan Automobile and Jiangling Motors to offset its domestic sales slump and send tens of thousands of locally manufactured models across the globe. At the same time, Ford is also closely studying its Chinese partners and competitors, while slashing costs.

What it all means

Investors should watch GM's latest iteration of a turnaround attempt in China, because it's cost the company a pretty penny during the past decade and dinged earnings at times. Years ago, analysts warned Detroit automakers it might be wise to throw in the towel and give up on China entirely. GM's impending contract expiration could give us an idea of how the next stretch of this battle will, or won't, go, and because it's one of the few knocks against a thriving automaker, savvy investors should keep it on their radars.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.

The narrative surrounding the automotive industry hasn't always been a great one for investors. The industry is known for being brutally competitive, highly capital-intensive, unpredictable, and cyclical. And worse than anything, it's known for razor-thin margins.

That said, those narratives are changing as vehicles and the industry evolve toward more technologically advanced automobiles, including autonomous driving technology and other high-margin services. The following three stocks have all thrived in their own unique ways and are poised to beat the market going forward.

Ferrari's first full EV played a role in its lower stock price, which is an opportunity for investors. Image source: Ferrari.

Ferrari

Ferrari (NYSE: RACE) is a unicorn in the sense that it flips nearly all traditional automotive industry stereotypes on their head. Not only does Wall Street see the stock -- and value it -- more as a luxury brand than a traditional automaker, but Ferrari also earns its historically lofty valuation in multiple ways. First, as you can see in the graphic below, it boasts gross margins above 50%, like many luxury stocks, and dwarfs those of competitors.

RACE Gross Profit Margin data by YCharts.

Ferrari's EBITDA (earnings before interest, taxes, depreciation, and amortization) and operating margins are also 2 to 3 times higher than most of its competitors and are consistently rising. This emphasizes the company's ability to hold durable competitive advantages in an industry not known for having economic moats.

Another aspect of the automotive industry that Ferrari flips on its head is its resistance to economic downturns and cyclicity. That's driven by two factors: Ferrari's strict exclusivity and hyper-wealthy consumer base.

Because Ferrari limits the volume of production well below demand, there are always consumers lining up to buy a vehicle when the opportunity presents itself, regardless of the economic situation. That factor is only amplified by the fact that the ultra-wealthy consumer base is far more insulated from traditional economic downturns, changes in interest rates, and other factors.

Currently, Ferrari isn't cheap by automotive industry standards, but its valuation is cheaper than its average over the past five years. That's in part because of internet backlash about the design of its first fully electric vehicle (EV), the Luce -- but it's going to sell out anyway, and over 40% of Ferrari's shipments in 2025 were hybrids. Ferrari is built more for the future than people give it credit for, and it's been winning for a long time.

BYD

BYD (OTC: BYDDY) (OTC: BYDDF) is another global automaker juggernaut, only in ways different from Ferrari. BYD switched to selling only EVs years ago and has watched its reach expand globally and sales volume soar, even passing Tesla in global EV sales last year. It wasn't even particularly close, with BYD selling 2.26 million full EVs to Tesla's 1.64 million. And when you include plug-in hybrids, that number from BYD jumps to 4.6 million vehicles.

One big reason for BYD's success is its ability to undercut the competition on price without sacrificing its vehicle quality or advanced EV technology. BYD is able to keep its costs impressively low through its unparalleled vertical integration and growing scale. It manufactures its own Blade batteries and semiconductors and generates large cost efficiencies that position it better than competitors amid price wars, which China's market is currently facing.

These are wildly affordable and well-designed vehicles, and BYD's sales are surging overseas in Latin America, Southeast Asia, and Europe. In fact, because of China's current price war and brutal competition, BYD's export business has turned from a nice surprise to a primary growth engine. As recently as June, the company's overseas sales jumped nearly 95% year over year to a record 175,349 vehicles in only one month. BYD's foreign markets now generate 43% of total sales, which helps offset a 22% domestic decline in China as subsidies and tax changes weigh on the market.

BYD is thriving globally, and when the Chinese market turns around, perhaps after some much-needed consolidation, it will be as well positioned as ever to profit for its investors.

General Motors

A big advantage for General Motors (NYSE: GM) is its co-dominance in full-size internal combustion engine trucks and SUVs -- a dominance it shares with crosstown rival Ford Motor Company. These full-size trucks and SUVs cost only marginally more to produce than sedans and carry far higher price tags and much fatter margins. That's why Ford went so far as to end production of all sedans in the U.S. market, other than its iconic Mustang. But keep in mind that the Mustang Mach-E even outsells the traditional internal combusion version.

While Ford is also well-known for its lucrative dividend that often yields between 4% and 5%, General Motors takes a different approach to its rival: share buybacks. For years, while GM's price-to-earnings ratio traded in the single digits, the company spent tens of billions of dollars to buy back an enormous number of shares. The market finally caught on toward the end of 2025, pushing its valuation roughly 3 times higher.

GM PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.

GM also has its eye on the future, expanding its high-margin -- think tech company margins -- OnStar and Super Cruise products and services. GM is playing the long game with this strategy and is giving every new GM vehicle eight years of basic OnStar and, in vehicles with the capability, three years of Super Cruise. GM is embedding these long-term subscription packages, hoping to drive renewal rates of these high-margin services higher. Early signs are positive, as the attach rate has consistently landed in the 30% to 40% range after the initial prepaid period ends.

Top global autos

These three automakers are all global juggernauts in their own way. Whether you prefer the pricing and brand power of Ferrari, BYD's intense vertical integration and low cost efficiencies, or GM returning massive value to shareholders through buybacks, they are all positioned to continue doing exactly what made them top, unique automotive stocks going forward.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Ferrari and Tesla. The Motley Fool recommends BYD Company and General Motors. The Motley Fool has a disclosure policy.

Stellantis (NYSE: STLA) stock is down a staggering 70% over the past three years due to a plethora of problems spanning the globe.

The beleaguered automaker has a $70 billion turnaround strategy it is calling "FaSTLAne 2030." Stellantis will focus on launching 60 new vehicles by 2030, aggressively cutting costs, and funneling 70% of its product investment into four primary global brands: Jeep, Ram, Peugeot, and Fiat. This focus on core brands, increased investment in core brands, and a slowdown in electric vehicle (EV) strategies will finally give the automaker an identity it has sorely lacked.

Stellantis' stock could certainly pop in the near term if this turnaround gains traction, but investors need to keep an eye on a near-term issue that could hinder margins.

Image source: Stellantis.

Shipments vs. sales

The different levels within the automotive industry can be a little tricky with wording, so let's sort that out. Shipments are not the same as sales. Rather, shipments count the vehicles delivered to dealers and distribution companies, while sales track the number of vehicles actually purchased by end consumers.

Stellantis' second-quarter 2026 results give us a prime example of why the distinction between shipments and sales matters. Stellantis' global shipments increased by 10% year over year during the second quarter to 1.6 million. That increase was driven in large part by a 38% surge right here in North America.

In contrast, Stellantis' North American sales rose only 5.7% during the second quarter, well below the 38% surge in shipments to dealers. This suggests a buildup of inventory on dealership lots.

In fact, according to recent data from Cox Automotive, core Stellantis brands Dodge, Jeep, and Ram all have over 140 days' supply of product in North America. That's a concerning inventory glut, given that the historical "healthy" level is around 60 days and the industry average is around 76 days.

Things to consider when it comes to Stellantis

Automakers typically have planned summer downtime to adjust manufacturing lines, among other things, and Stellantis defends its inventory as "stocking up" product ahead of those shutdowns. Despite that reasoning, the inventory glut is potentially problematic for one reason: The oversupply is expected to result in much higher consumer incentives and discounts to help push products off dealer lots and make room for newer models. Newer models are also important because fresh product simply sells faster and requires fewer margin-eroding incentives to do so -- which is why automakers and dealerships need to find an inventory equilibrium to optimize margins and sell rates.

What it all means

Stellantis offers investors an intriguing opportunity through 2030, when its stock could easily beat broader market returns, simply because it's been sold off so deeply over the past three years. If Stellantis' turnaround drives new, compelling, and more profitable vehicle options, the last thing the company wants is to have 140 days' supply of older models to clear the way.

Stellantis shares are poised to pop with its turnaround strategy, but investors should hope the inventory glut drops before the turnaround gains traction.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Lucid Group (NASDAQ: LCID) is accustomed to speed bumps in its business, and they came in the form of production snags, delays, and disappointing financial results early in its limited history.

Then Lucid seemingly got things turned around enough to achieve eight consecutive quarters of record deliveries, culminating in a full-year record of 15,841 vehicles in 2025. Production issues faded, and launching the Gravity SUV was set to bring in new demand and build scale for the automaker.

That said, it's been another bumpy start in 2026. Here are three reasons it might be time to give up on Lucid becoming a worthy investment.

1. Talent jumping ship

If you want to put some public relations spin on this, you can, but the optics are bad at the very least, and at worst, it sure appears a lot of talent is fleeing Lucid. Let's start with the most notable, Marc Winterhoff, former interim CEO, who was supposed to stay on board as Lucid's COO under the newly appointed CEO. Plans changed rather quickly, and Lucid opted to eliminate the COO position entirely.

That's just one example. There have been roughly a dozen high-profile executive and VP-level exits over the past two years. The sweeping executive and other organizational changes have halved the number of positions reporting directly to the CEO. These moves also go hand in hand with Lucid cutting 18% of its workforce, targeting about $158 million in annual savings.

Lucid's Gravity SUV EV. Image source: Lucid.

You can try and spin this as streamlining the organization, but the truth is Lucid is gearing up for another mass-market vehicle, and you would think it should be building its employee base to support that, rather than cutting them.

2. Rough financials

It's easy to see Lucid's struggles in its quarterly financial numbers. Lucid has always been criticized for its high cash burn, but the first quarter of 2026 was staggering, with a free cash flow loss of $1.44 billion -- more than double the cash burn rate a year ago. Lucid also posted a large GAAP net loss of $1 billion for the quarter, driven by lower margins and unused factory production capacity.

It's also important for investors to grasp Lucid's liquidity situation. Lucid ended the first quarter with about $3.2 billion in liquidity. Add in the company's $1.05 billion capital raise in April, as well as an expansion of its credit line; Lucid's liquidity sits at about $4.7 billion. Even using a conservative $1 billion quarterly cash burn, you can see how the company could be in financial trouble without more capital by this time next year.

That's a perfect segue into the next reason investors should think twice or perhaps give up on Lucid: shareholder dilution.

3. Worse than rivals

Lucid has received several capital injections over the years, but it has consistently raised capital by issuing massive amounts of new shares, which shrinks the value of existing stakes for long-term shareholders. In theory, investors can stomach some shareholder dilution because the fresh capital should enable the company to pursue growth more aggressively. And while that's true for Lucid in some respects, it's also true that its massive cash burn simply needs additional incoming capital support.

LCID Shares Outstanding (Quarterly) data by YCharts

As you can see in the chart above, Lucid has significantly increased its outstanding shares. That's especially true when compared to rival Rivian Automotive, which has been far more calculated in its fewer raises, and also boasts a Department of Energy loan for about $6.6 billion, as well as capital injections from its joint venture partner, Volkswagen.

You'll also notice the drastic decline in shares outstanding, which is because Lucid completed a 1-for-10 reverse stock split to artificially boost its trading price and avoid being delisted from the Nasdaq. It's not a matter of if, but when Lucid will need to raise more capital, and consistent shareholder dilution is something for all investors to consider.

What it all means

Lucid has always been an intriguing investment, as the company is widely lauded for its advanced electric vehicles (EVs) and compelling designs. That said, with the company's persistent supplier and production issues, recalls, and inability to improve unit economics, Lucid has driven into serious problems.

Given the sizable executive talent loss, its consistently high cash burn that requires fresh capital, and potential shareholder dilution, Lucid is not currently a viable long-term investment. If you've been holding shares, it might be time to consider other options.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

To say Tesla has been a solid investment might be the understatement of the century. A $10,000 purchase during Tesla's initial public offering would be worth roughly $2.57 million now.

TSLA data by YCharts.

It's also fair to say that some investors might not want to take on the added risk from Tesla as it drives toward a future that includes humanoid robots, driverless vehicles, and artificial intelligence (AI). It's not the same electric vehicle (EV) maker it once was, for better or worse.

If that business transition has you reconsidering your investment options, there's another automaker -- arguably the best auto stock out there -- named Ferrari (NYSE: RACE) that warrants your attention. Here are three reasons to consider it if Tesla is no longer an investment you're comfortable with.

1. Money, money, money!

Ferrari has long separated itself from the traditional automotive industry investment thesis. The industry is known for being capital intensive, cyclical, and for having thin margins. As you can see in the graphic below, Ferrari's margins for earnings before interest, taxes, depreciation, and amortization (EBITDA) dwarf the mainstream automotive industry.

RACE EBITDA Margin (TTM) data by YCharts; TTM = trailing 12 months.

Ferrari's gross profit margins routinely check in above 50%, and often Wall Street values and views the automaker as a luxury goods stock. That's more than fair considering that Ferrari's pricing power and brand image enable it to deliberately limit production to drive scarcity and exclusivity. The result is that Ferrari simply doesn't need discounts or incentives to sell vehicles, and that means more money flows to the bottom line.

That's an important topic for Tesla investors because the company still operates in the mainstream automotive business, where discounts, price wars, and other factors can easily hinder margins. Not only does Ferrari generate much higher margins at any level you choose to look, but those margins are much more stable than Tesla's and consistently rising.

This is a good segue into what drives Ferrari's margins.

2. "One fewer car ..."

Another way Tesla can't match Ferrari is in the latter's brand image and pricing power, which help drive the previously mentioned lofty margins. Enzo Ferrari's famous mantra was to build "one fewer car than the market demands."

It's a simple concept that few can pull off, but Ferrari does it famously. While Tesla hopes to produce millions of vehicles for a mass market, the Italian automaker produces under 15,000 units a year, creating exclusivity and an emotional draw. It's why Ferrari is a lifestyle luxury brand, not a traditional automaker.

Here's an example of how powerful the brand already is: The company spends nothing on advertising, essentially. Instead, the Scuderia Ferrari Formula 1 team is the engine that powers its marketing and reach. It's not all show and no-go, either, because racing technology filters down into its high-end models, helping support their sky-high price tags.

Ferrari's F80 drove a near $4 million price tag. Image source: Ferrari.

Another example of how different Tesla and Ferrari are is that the former still needs to fuel demand through price cuts at times, or with other incentives such as financing. Ferrari, on the other hand, won't even let you buy its limited-edition top-tier supercars unless you have already purchased its other vehicles in the past.

Buying a Ferrari takes a lot of money, but it's not all about that -- the company has to invite you into the club. These factors, among many more, make its brand and the pricing power nearly unmatched.

3. A different consumer base

Many investors throw around the phrase "Ferrari is recession-proof," but to be fair, it's closer to "recession-resilient." Its buyers have ultra-high net worths and are thus highly insulated from traditional economic downturns, inflation, or moves in interest rates. They can afford multimillion-dollar hypercars even amid a global recession, and they give the company a much more stable business that avoids the auto industry's historical cyclicity.

The loyalty that the brand generates is as intriguing as anything else the company does. It even ranks its customers based on how many cars they currently own, how long they've owned them, and their participation in official Ferrari brand events. In return, only the most loyal multicar owners are invited to purchase extremely exclusive models, which are highly priced and sell out even before being publicly announced.

What it all means

Ferrari is just a different animal, and while it shares the industry with mainstream automakers, they really operate in different worlds. It's evident in the company's lucrative margins that continue to rise, its powerful global brand and prestige that support extreme pricing without any discounts and incentives, and its supremely loyal consumer base.

Those are all things Tesla wants to generate one day, but right now, Ferrari is an excellent investment if you want to buy Tesla but are unsure about its future direction.

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

It's a shame that Carvana (NYSE: CVNA) doesn't have its headquarters in Las Vegas, because it's been quite a magic show. Years ago, there were legitimate questions about whether the company was heading into bankruptcy. Then, through a series of moves, management turned everything around and began to thrive as consumers adopted the online-sales strategy. If you had invested $10,000 in Carvana three years ago, it would be worth over $140,000 now.

For its next magic trick, the company is going to scoop up a bunch of brick-and-mortar dealerships, expand into new-car sales, and refuse to sell you a vehicle in person. Sounds crazy, right? My prediction to the rest of the industry: It's going to work scarily well.

What's the scoop?

Ask any used-car retailer, and they'll probably tell you Carvana has built a better mousetrap and disrupted its industry. Evidence backs that up: The company's $70 billion market capitalization makes it the most valuable auto retailer in the U.S.

Carvana spent $171 million to buy seven Stellantis dealerships as its way to break into new-car sales for incremental revenue and profits, but it's so much more than that. And, just as importantly, it isn't breaking away from its online-sales mousetrap that has worked so well.

Jeep would become a big brand for Carvana new-car sales. Image source: Stellantis.

If you want to buy a new car in person, spend all day at a dealership, haggle with commission-based salespeople, and work through paperwork for financing, then go across the street. But Carvana is replacing stereotypical salespeople and offices; instead, it will have couches and chairs and a small staff only to help if you need advice browsing its online selection, customizing options online, or test-driving vehicles.

Essentially, the auto dealer is removing much of the overhead for a typical new-car sales process, and this is important. What most investors might not know is that selling new cars isn't the lucrative part of owning a dealership. Since Carvana hasn't opened its books for this new business segment, let's use AutoNation as a benchmark of a huge auto retailer that has opened its books.

During the first quarter of 2026, new and used vehicles combined to generate 76% of AutoNation's total revenue, and yet those two segments combined to generate only 22% of gross profit. The lucrative part of owning a dealership comes from two other segments: parts and service (P&S), and finance and insurance (F&I). Those two segments generated only 24% of AutoNation's first-quarter total revenue, but 78% of total gross profit.

The good news is that Carvana is offering financing online through its own loans backed by Ally Financial, and its dealerships' service bays will continue to operate as normal.

There already is evidence it's working

The first new-car dealership purchased by Carvana is in Casa Grande, Arizona, and it has grown impressively. According to Stellantis data shared with CNBC, that one dealership sold over 700 new vehicles in May. That dwarfs the same store's prior average of between 30 to 50 new vehicle sales before Carvana took over, per The Wall Street Journal.

It gets better, too, because while Carvana's used-car business is already lucrative, the company still needs to get its hands on more valuable inventory, and consumers trading in vehicles checks that box.

Any questions?

There are still many questions to answer. Can Carvana cut enough new-car sales overhead to improve the profitability of this segment beyond that of traditional dealerships? Can management find a way to synergize its huge online used-car business with a handful of brick-and-mortar new-car dealerships? Will it consider expanding its handful of dealerships beyond Stellantis?

My prediction is that Carvana's Arizona store is not a one-hit wonder, and its online-sales strategy will work and disrupt the legacy 16,990 new-car retailers and their $1.3 trillion market. While it's doing that, it's going to synergize new and old parts of its business, generate new revenue streams, build its competitive advantages, expand its shipping points and reach, and evolve into a more lucrative overall business.

Despite refusing to sell you a new vehicle in person, Carvana's new-car mousetrap makes a lot of business sense.

Ally is an advertising partner of Motley Fool Money. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

When investors are considering young electric vehicle (EV) stocks, Rivian Automotive (NASDAQ: RIVN) and Lucid Group (NASDAQ: LCID) often pop up. Both Rivian and Lucid have proved capable of developing compelling vehicles, albeit at lofty prices initially, and they have advanced EV technology and software.

More recently, Rivian achieved its first full-year gross profit in 2025, while Lucid has struggled to improve its unit economics, further separating the two in favor of Rivian. That said, Rivian just did something that Lucid investors groan about: raising capital and diluting shareholders. Does this change how investors should view the two?

History shows the trend

A little Investing 101: Shareholder dilution is simply the decrease in a shareholder's existing ownership percentage due to a company issuing new shares of stock for raising capital and employee compensation, among other factors. You can argue that investors are OK with some dilution because in theory, the company now has more capital to pursue growth, which in turn improves its investment potential.

The drawbacks are lower earnings per share and reduced voting power. That's important to remember, because shareholder dilution might have made some Rivian investors cringe recently when it announced a public offering of 75 million shares of common stock, worth roughly $1.5 billion. This added capital comes at a cost, which works out to about 6% dilution.

The good news for Rivian investors is that the young EV maker has been reserved about raising capital and diluting shareholders. That's primarily because of its large initial public offering's cash cushion, and later capital injections from joint ventures such as one with Volkswagen – also a driving force behind Rivian's full-year gross profit – and a $6.6 billion loan facility from the U.S. Department of Energy.

In the graph below, you can better see the longer-term trend between Rivian and Lucid.

RIVN Shares Outstanding (Quarterly); data by YCharts.

The graph above was cut off at the beginning of 2025 because shortly thereafter, Lucid performed a 1-for-10 reverse stock split, drastically shrinking its share count and potentially misleading investors who don't account for that (the graph could not).

A different way to look at it is to take Lucid's reported 1.644 billion shares outstanding after its public debut via a merger with a special purpose acquisition company. Adjusted for the split, that equates to a current figure of 164.4 million shares, compared to its current total of outstanding shares of about 390.26 million, giving us a total increased share count of around 137%. In comparison, Rivian's lifetime share-count increase sits at about 58%, including the recent July offering.

Is it justified?

Simply put, this is dilution. Mathematically speaking, it's simply not good news for existing investors. That said, you can put a public relations spin on it, making this capital raise fairly easy to get behind for investors.

Rivian is entering a capital-intensive stretch as it ramps up production of its recently launched R2 and builds its Atlanta, Georgia, factory. Management broke ground on it late in 2025 and will begin vertical construction this year, with R2 and R3 production expected in 2028.

Management's primary focus is a successful and (crossing fingers) a nearly flawless R2 production ramp up. This capital raise will remove any potential liquidity concerns as the automaker also accelerates investments into research and development for autonomous-driving technology.

Image source: Rivian.

It's also fair to say that Rivian has separated itself in a positive way from Lucid. The young EV maker has built more scale through volume of sales, as well as consistently improved unit economics to help drive gross profits, and it has diluted shareholders far less than one of its primary rivals.

Rivian, especially considering its history of shying away from capital raises, is at a justifiable point in time for a capital raise. As a bonus, the shares had a bit of a rally before executing this, optimizing the value raised.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Most of us enjoy a good comeback story, and that's exactly what Stellantis (NYSE: STLA) hopes to achieve by the end of this decade. The struggling carmaker is putting its money where its mouth is with a $70 billion turnaround strategy that focuses not just on North America, but Europe as well, through a multipronged approach to affordable pricing as the price of new vehicles continues to rise.

Stellantis is committed to driving 70% of its investment through four core brands: Jeep, Ram, Peugeot, and Fiat. If the automaker executes its strategy well, investors should be well rewarded with market-beating returns through the rest of this decade. Lost in the shuffle, though, is a key resurgence in Europe. Let's dive in.

What's the plan?

It appears that Jeep will be instrumental in reversing Stellantis' fortunes in Europe. Investors know SUVs are big business in the U.S. market, but many don't realize that small SUVs and crossovers are Europe's second-largest segment, and compact SUVs and crossovers remain the largest segment.

The turnaround could be considered low-hanging fruit for the automaker, as about five years ago, strict European emissions standards reduced its product lineup to only two SUVs. Jeep stopped importing its Grand Cherokee and Gladiator pickup back in 2024; imports of the Wrangler ended last year because those gasoline-powered vehicles would have bumped its corporate average CO2 emissions too high in the near term.

The game plan is roughly this: Stellantis will import the Jeep Recon electric midsize SUV in 2027, after it launches in North America this year. That will be followed by another Jeep import developed with Chinese partner, Dongfeng, in 2028. Two more small Jeep SUVs will then be produced in Europe on the STLA One platform between 2028 and 2030, which aims to cut production costs by 20% compared to current platforms.

Jeep's smaller SUVs should do well in Europe. Image source: Stellantis.

What it all means

While North America is likely to remain Stellantis' growth engine, especially when it comes to profitability driven by full-size trucks and larger SUVs, Jeep looks to be a crucial part of the game plan with smaller SUVs and crossovers in Europe. It's a solid first step to turning around its overseas business, and it gives Jeep a chance to thrive as one of Stellantis' core brands, especially while receiving more investment, as the brand deserves.

It's an intriguing time for the automaker that has watched its stock price decline nearly 70% over the past three years alone. As Stellantis works through its turnaround, while building a core identity through more investments in fewer brands, it gives investors willing to take some risk the opportunity to scoop up shares before a potential rebound through the end of the decade.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Only a few years ago, much of the automotive industry including Ford Motor Company (NYSE: F) made a sizable gamble that the U.S. consumer would largely skip the hybrid option as the world transitioned from gasoline-powered vehicles to full electric vehicles (EVs). That proved costly and through changes in strategy, cancellation or delays of vehicles, and other special charges, it cost the broader industry tens of billions of dollars.

Despite that rather large speed bump, there are a couple of positive developments for full-line automakers such as Ford and not-so-great news for fully EV-focused companies such as Rivian Automotive (NASDAQ: RIVN) and Lucid Group (NASDAQ: LCID).

Image source: Ford Motor Company.

Trends are becoming more clear

A few years ago automakers expected a rapid increase in EV sales, similar to trends seen overseas, but growth in the U.S. would prove slower to gain traction than expected and will almost certainly fall well short of the 50% market share initially expected by the end of the decade.

"The key takeaway is that supply and demand are converging, and that's what is driving sustained growth in hybrids," according to Stephanie Valdez Streaty, director of industry insights for Cox Automotive. "More models, broader participation, and strong consumer pull driven by fuel savings without the range and charging trade-offs that still give some buyers pause."

Now gasoline-powered vehicles are expected to still account for 50% of the U.S. market by the end of 2030, a decline from 73% last year, while hybrid EVs are expected to rise 16 percentage points to 34% of the market over the same time frame, according to estimates from AlixPartners.

Positive developments

Knowing what we know now, Ford investors would have preferred a more balanced strategy between powertrains, but with hybrid demand coming on strong, the full-line automaker will more quickly adapt unlike younger EV makers such as Rivian and Lucid waiting for full EV demand to gain traction in the coming years.

Ford is quickly responding with plans to match evolving consumer demand by offering a hybrid powertrain choice across nearly its full vehicle lineup by the end of 2030. The Detroit automaker is now aiming to drive roughly half of its global sales through hybrid options.

The good news, and the bigger development, is that Ford's profitability with hybrids is much stronger than with its full EVs, which have hindered the automaker's bottom-line by the billions in recent years. The progress that Ford has made after being initially surprised by the strong demand from its F-150 hybrid option, has been impressive. By the middle of 2024, many of Ford's hybrid vehicles were profitable, a fact the company had admitted wasn't true as recently as a year prior.

Later, Ford CEO Jim Farley went as far to say that F-150 hybrid margins were higher than its gasoline-powered version. That was an unexpected development but a pleasant surprise. That's because Ford's F-Series lineup is responsible for a large chunk of its global revenue, roughly one-third by most estimates, but is estimated to generate a staggering 90% of the company's net profit.

What it all means

Sure, this transition from gasoline-powered vehicles to full EVs and the in-between options could have gone much more smoothly and been less costly. That said, it's absolutely a positive development for investors that as hybrids surge and achieve record demand recently, Ford can quickly adapt and push a near full lineup of hybrids within a few short years.

Furthermore, it's even a bigger development that Ford's hybrid profitability has come so far, so quickly. Hybrid vehicles appear to be here to stay and poised to thrive in the near term. That's not great news for Rivian and Lucid currently, but Ford remains well positioned.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

For Detroit automakers such as Ford Motor Company (NYSE: F), big trucks mean big business. Ford's lucrative F-Series truck lineup is estimated to bring in about one-third of the company's total revenue, and it's long been estimated by Wall Street firms such as Morgan Stanley that it generates as much as 90% of Ford's net profit. During the first six months of 2026, Ford's F-150 now trails a Japanese rival for best-selling vehicle, and that's a big deal for investors.

Wording is key

Let's first clear up some confusing wording. Ford's F-Series has been America's best-selling vehicle for over four decades, but the sales figure comprises the entire line of not only F-150s but also heavy-duty F-250s and larger trucks. Ford's F-150 is one component and has individually been the U.S. industry's top seller for 15 of the past 16 years.

Image source: Ford Motor Company.

However, thanks to not only one, but two supplier fires dating back to last fall, the aluminum supply and ensuing supply of Ford's important trucks have dwindled during what is historically a strong selling season. Ford wasn't the only major automaker hitting speed bumps; Toyota also had issues, opening the door for Honda's popular CR-V to overtake the Ford F-150, General Motors' Silverado 1500, and Toyota's RAV4.

Honda's CR-V turned up the heat to finish the first half of the year with a 19% U.S. sales surge in May, followed by an even more lucrative 30% jump in June, for a total first-half tally of 226,114 units. While numbers are still trickling in, GlobalData estimates Ford's F-150 has fallen just short of that, with estimates just under 210,000 units, while GM's Silverado 1500 checked in just under 195,000 units. Toyota's RAV4 lost more ground, with reported sales checking in at 153,955.

Through Honda's increased incentives (for now), high lease customer retention rate, and strong demand for hybrids -- the hybrid CR-V accounted for 55% of its total sales during the first half of 2026 -- the CR-V is thriving and has only about 15 days' worth of inventory with its CR-V production lines running at full capacity.

Ford can offset some losses

Late last year, the Novelis supplier plant fire, and its delayed restarting of production due to a second fire, forced management to reduce last year's earnings guidance as it wasn't able to immediately offset production losses. Initially, Ford said the production hiccup would cost it about $1.5 billion to $2 billion in earnings before interest and taxes (EBIT), although it is aiming to add additional shifts to offset about $1 billion of that throughout this year.

While Novelis does supply other major automakers such as Toyota and Stellantis, Ford's impact was more severe due to its F-150 using a primarily aluminum body. Ultimately, Ford's F-150 is losing a sales race it has rarely lost over the past 15 years, but more importantly for investors is how much production it can recoup during the second half of the year. It's certainly a major ongoing development to keep track of.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.

Polestar (NASDAQ: PSNY) was initially an attractive and intriguing investment for a handful of reasons. Its early products, such as the Polestar 1 and Polestar 2, were rated well and showed the company could produce compelling and stylish vehicles. It also had more established and reliable production early on, as it was producing thousands of vehicles at the time it went public, and had the backing of bigger automakers Geely and Volvo. Fast-forward to now, and Polestar vehicles are now banned in the U.S. market, leaving investors in a bad position. Let's dig into how bad this scenario is and where investors can now turn for a better investment option.

A brutal blow

Polestar, majority-owned by Geely Holding, may have sent some warning signals, but now it's official: The young electric vehicle (EV) maker says the Trump administration is barring U.S. sales of its EVs after the current model year due to prohibited Chinese connected technology. The Trump administration isn't solely to blame, as the decision was driven by the Biden-era provisions on Chinese hardware and software, barring Polestar sales in the U.S. for the 2027 year and beyond.

While this is a brutal blow, at least in the near term, especially for investors hoping to uncover unique and high-potential young EV stocks, Europe still remains the automaker's growth engine. Europe generated about 78% of Polestar's first-quarter sales, compared to a more modest 6% from the U.S. market. Still, it's a bitter pill to swallow as Polestar's roughly 32 U.S. dealerships will largely now be used for service and repairs for existing customers. It's also a blow to future growth as the U.S. is expected to continue gaining steam in EV sales over the next few years.

Two reasons the decision is strange

There are a lot of questions facing investors, dealerships, and Polestar management, and few concrete answers. One reason this is a strange development is that it's not an automotive bankruptcy, which leaves the company operating in unusual waters and with few answers for the franchisees that have invested millions of dollars. Another reason this decision is a little strange is that while Polestar didn't receive authorization to continue selling its vehicles in the U.S., Polestar's sibling brand, Volvo, did receive such authorization, despite similar ties and shared Chinese ownership.

For investors not prepared to give up on young EV stocks, Rivian (NASDAQ: RIVN) is becoming a more compelling option. Thanks primarily to the company's joint venture with Volkswagen, and the latter's multifaceted investments and payments, Rivian has now achieved gross profitability, which is a big step toward proving to investors it has the ability to become a viable long-term investment. Further, Rivian is currently ramping up production of its R2, the highly anticipated, more affordable electric SUV from the company, which will be far more compelling for investors with the significant reductions in costs per unit.

Image source: Rivian.

What it all means

For investors who have been interested in Polestar from the beginning, this is just the latest (albeit large) geopolitical setback that has consistently provided speed bumps for the business. Polestar has a large Chinese export hub, and tariffs on Chinese-built vehicles essentially forced Polestar to discontinue sales of the Polestar 2 fastback in the U.S. market, delay the Polestar 4 crossover, and increase the price on the upcoming Polestar 5, which made it far less compelling. While this is certainly a blow to Polestar's near-term growth, and there are more questions than answers for investors right now, the automaker can at least focus all its efforts on its more lucrative overseas markets.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

It was always going to be a groundbreaking moment when Ferrari (NYSE: RACE) unveiled the Luce, its first-ever full electric vehicle. Ferrari pushed the boundaries a bit too far for some people, and the internet was ablaze after the May launch with memes and backlash revolving around the Luce's minimalist and un-Ferrari-like design, designed by industry outsider and ex-Apple designer Jony Ive's firm. The backlash was intense, and then Ferrari's chief marketing and commercial officer, Enrico Galliera, left roughly a month after the Luce unveiling.

The Luce launch is an important one, and it sets the precedent for how Ferrari transitions into a new electrified era, despite its history and heritage of high-end racing and the roar of gasoline-powered engines. There's already evidence that the Luce will be successful, and history reminds us many times over that a dustup-to-success phenomenon isn't unusual.

Luce. Image source: Ferrari.

Numbers don't lie

Let's cover some simple numbers and timelines. The first hint that the Luce would be fine, as would sales and demand, was from Ferrari's CEO himself, Benedetto Vigna, who, per Bloomberg, confirmed that the Luce was receiving orders from existing and new customers and that the order book already extended toward the end of 2027. An order book soaking up production toward the end of 2027, for a new EV that starts deliveries this October, suggests Ferrari customers aren't the ones driving backlash on the internet (who would have guessed?).

The Chinese market perhaps missed the kerfuffle, because, according to CarNewsChina, all of the country's allotment of Luce vehicles starting at roughly $586,000 were sold "immediately." To be fair, there have since been conflicting reports that Ferrari may still be accepting orders in China, though it's unclear if that's due to additional supply or false initial reports. To be fair a second time, Ferrari could slap a logo on a cardboard box with four wheels, maybe only three, and almost certainly sell out of the small allotment of units.

Finally, while Ferrari's stock quickly sold off 6% the day of Luce's unveiling, since the day after, the stock is up over 10% while the S&P 500 has remained slightly lower.

History tells us this

History tells us this has happened plenty of times before. Let's start with Detroit automaker Ford Motor Company (NYSE: F), when it ditched the iconic Mustang design and moved to the electric Mustang Mach-e version. Mustang purists and fans cried foul and similarly set the internet ablaze. It was doomed to be a flop, many said. But by 2024 the Mustang Mach-e had sold 51,745 units for a 27% increase over the prior year, while the traditional Mustang had sold 44,003 units for a 9.5% drop compared to the prior year. In 2025, that growth trend would have been similar if not for the ending of the $7,500 federal EV tax credit, but even so, the electric Mustang still won the head-to-head sales battle by roughly the same number of units.

Another example: Volkswagen-owned Lamborghini launched the Urus in 2018 and faced wild criticism for taking a sharp turn away from its low-slung, aggressive, sleek hypercars to more of a luxury SUV. Then, however, the Urus became an absolute status symbol among the ultra-wealthy and essentially doubled Lamborghini's global sales volume. That example held true for Porsche's Cayenne as well as Ferrari's own Purosangue. Change is rarely fun, but sometimes it's essential.

What it all means

This all goes to say that if you're an investor interested in owning shares of arguably the best automotive stock in the world, don't let the backlash against the Luce dissuade you. Early evidence shows that the Luce will be fine, history tells us that this has happened many times before, and Ferrari still has many high-quality attributes of a strong business that can fight off typical automotive industry narratives such as low margins and cyclicality.

RACE Operating Margin (TTM) data by YCharts

As you can see in the graph above, Ferrari's margins dwarf those of its automotive competitors, and Wall Street gives it valuations closer to those of high-end luxury stocks -- and rightfully so. Ferrari's business is also far less susceptible to economic downturns and industry cyclicality because, simply put, ultra-wealthy Ferrari consumers aren't impacted as much financially. Ferrari is a fine-tuned business machine that races and wins on Sunday and sells on Monday, and the stock is still a smart buy for those willing to dig into the research.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Apple and Ferrari. The Motley Fool recommends BYD Company and General Motors. The Motley Fool has a disclosure policy.

The automotive industry has long been plagued with negative narratives. A primary example is that operations are capital intensive and leave automakers with thin margins, which hurts earnings potential and valuations.

But the automotive industry is evolving rapidly to include more software and technology to power automated driving features, advanced infotainment solutions, and over-the-air updates that can lower costs due to no required service center visits -- all while improving the driving experience.

These factors can fundamentally change automakers as investments, and here are two examples of how Rivian Automotive (NASDAQ: RIVN) and General Motors (NYSE: GM) could generate billions through unique software innovations and strategies.

First up: Rivian

Toward the end of 2024, Rivian and Volkswagen partnered to develop a state-of-the-art, software-defined-vehicle (SDV) architecture that could be used across the duo's vehicle portfolios. The initial investment was significant, the potential is massive, and its financial implications are already powering Rivian. Let's dive deeper.

Volkswagen's initial investment into Rivian was for up to $5 billion, which was quickly bumped to $5.8 billion and would be delivered upon completion of certain objectives and milestones. Upon the late 2024 launch, a $1.3 billion lump-sum investment was sent Rivian's way, followed by an early 2025 $1 billion tranche, a mix of equity and debt, to complete operational milestones. After passing winter testing in the spring of 2026, it unlocked another $1 billion investment from Volkswagen and also established the latter as Rivian's largest shareholder, displacing Amazon.

Investors need only glance at first-quarter 2026 results to see the impact Rivian's software is having on its financials. Consolidated revenue checked in at $1.28 billion, which was largely driven by two segments: automotive and software and services. The former generated $908 million, or a 2% decrease compared to the prior year, while software and services generated $473 million, a 49% increase.

The revenue growth was positive, but the impact on gross profit is arguably more important. The automotive segment gross profit was $62 million during Q1, while the software and services segment gross profit totaled $181 million.

The profitability boost from the software business has already powered the young electric vehicle (EV) maker to a positive gross profit result during Q1 -- superior to rival Lucid Group, which is struggling to improve gross profitability -- and giving investors reason to believe it can one day generate bottom-line profits and become a viable long-term investment.

Keep in mind there's plenty of software business growth from Rivian's partnership with Volkswagen alone, and it opens the door for other traditional automakers to explore potentially lucrative software opportunities with Rivian.

Next up: General Motors

General Motors gives investors another angle in how to monetize software innovations. The Detroit automaker expects massive growth from OnStar and Super Cruise subscriptions, and it even has a long-term strategy to help drive this into reality.

Image source: General Motors.

Let's take a look at some real-world data to emphasize the software potential. Last year, GM logged $2.7 billion in realized revenue and $5.4 billion in deferred revenue from OnStar and Super Cruise subscriptions -- healthy growth from $1.7 billion realized and only $200 million deferred as recently as 2020. This business is growing quickly with management expecting those software services to generate $3.1 billion in realized revenue and $7.5 billion in deferred revenue this year.

Investors would be wise not to underestimate how this business -- with margins that could approach 70% gross margin, according to GM -- stands to change GM as an investment in an industry known for low margins. "These software-like margins that are coming in the connected business can actually drive, and potentially over time, dwarf even the wholesale business, which is remarkably strong and remarkably large," CFO Paul Jacobson said, according to Automotive News.

GM is putting its money where its mouth is, too. Beginning with the 2025 model year, every new GM vehicle that rolls off the production line includes an eight-year basic OnStar subscription, and vehicles with Super Cruise will have a three-year subscription built into the price. This is essentially opening the widest funnel top to its software and services businesses, and banks on customers getting accustomed to these, and resubscribing and/or repurchasing them with their next vehicles.

Early evidence is fairly positive. At least 30% of the 35,000 GM drivers with an expiring three-year Super Cruise subscription renewed in 2025.

What it all means

Automakers are quickly evolving with the industry, and vehicles are becoming packed with more software technology and innovations. This is enabling new business models to generate incremental revenue streams, as well as higher margins. Furthermore, in the long term, it could help an industry plagued with paltry price-to-earnings (P/E) multiples to rise as Wall Street acknowledges the more profitable businesses in the years ahead.

Rivian and GM aren't tech stocks, but software could certainly power their stocks higher over the next decade.

Daniel Miller has positions in General Motors. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.

BYD (OTC: BYDDY) made a splash last year when it surpassed Tesla (NASDAQ: TSLA) in full-year electric vehicle (EV) sales globally. It was the first time BYD had achieved the feat, although Tesla regained its edge during the first quarter of 2026.

BYD has had to switch gears amid a slowdown in domestic Chinese EV sales at the same time that a brutal price war has eroded margins across the industry. Because of its domestic struggles, BYD has emphasized exports and overseas EV sales, and it just set another record and is still gearing up for an offensive push. Here are the must-know details.

Another record

While BYD isn't new to setting records, in May the Chinese juggernaut sold over 160,000 new energy vehicles (NEVs) -- a category that includes full-electric vehicles as well as plug-in hybrids -- overseas, the most it has ever sold overseas in a single month. That surge was apparent in several large markets, including the U.K., where BYD surpassed Tesla and Kia as the best-selling EV brand for the first few months of 2026. Plus, according to the European Automobile Manufacturers' Association (ACEA), BYD vehicles registered in Europe were up 158% in May compared to the prior year.

Here's the kicker, and what some investors may not realize: Despite setting a record for overseas sales in May, BYD is just now about to go on the offensive. In fact, BYD is preparing to highlight and showcase eight new vehicles that span three brands at the Goodwood Festival of Speed in July.

Take it from BYD Executive Vice President Stella Li, who said: "This is more than a product showcase. It is a statement of intent." Li said the automaker would show "how innovation, performance, premium design and sustainability can coexist within one of the most comprehensive automotive portfolios in the world."

Image source: BYD Co.

What the plan covers

A big part of the plan will focus on BYD's higher-end Denza brand. At the Goodwood Festival of Speed in England, BYD will present:

• A Denza Z sports car in both coupe and racing forms, making its global debut.
• A Bao 5 SUV.
• Two U.K.-bound models: the Dolphin G DM-i supermini and the Shark pick-up.

While there will be a handful of other launches overseas, one of the most intriguing will be the automaker's Great Tang, which the company calls the largest and most luxurious SUV to launch under its namesake brand. Despite a bumpy domestic market, if its early success is any indication, it should be poised to do well overseas.

In China, the Great Tang tallied an impressive 150,000 orders ahead of its official launch -- the highest number for a single BYD model yet -- and if all goes to plan, it'll hit roads in Europe by the end of 2026.

What it all means

This all presents an intriguing opportunity for investors. That's because while BYD is setting records with its progress overseas, the automaker's stock is in reverse after the company's bottom line took a hit due to the brutal price war in China. In fact, over the past year, despite all of Tesla's troubles, its stock increased 17% while BYD's sank 40%.

It's a fool's errand to guess when BYD's stock will rise again. But with all of the progress it's making overseas, not even including the offensive it's preparing to unleash, when its domestic Chinese market works through the price war and the industry likely consolidates, BYD will be incredibly well positioned to thrive globally. Investors should take note of the opportunity and absolutely add BYD to their watch list for further research.

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

Detroit automakers such as General Motors (NYSE: GM), Ford Motor Company (NYSE: F), and Stellantis (NYSE: STLA) (if you still count the latter) have long been plagued by low valuations. While Wall Street is slowly changing its perception of these automakers as investments, thanks to a more intriguing and lucrative future centered on driverless vehicle technology and increasing software monetization, automakers' valuations seldom rise above a modest 10 times price-to-earnings ratio.

Let's cover what holds valuations down and, with one simple graph, show how GM has finally broken free of this confinement.

Stereotypes are changing

In the past, investors shunned automakers as long-term investments due to many negative factors. Those include the view that automakers were highly cyclical, leaving them exposed to boom-and-bust economic volatility; ballooning legacy costs such as pension and healthcare obligations; capital-intensive operations that left them with thin margins; and the "dinosaur" narrative, in which management was slow to adapt and sometimes arrogant.

Image source: General Motors.

Those narratives are slowly changing, but for the most part, automakers' valuations have stayed stuck in neutral -- that is, except for General Motors. A rare longtime exception to these low valuations was Ferrari (NYSE: RACE), which has long recorded absurdly high margins and broke free of being viewed as a traditional automaker long ago, and is treated more as an ultra-luxury stock. That's why the following graph is so telling for long-term investors, because finally, another automaker has broken free of these chains and, impressively, matched Ferrari's lofty valuation.

Data by YCharts.

As you can see, especially over the past year, GM's valuation has rapidly approached Ferrari's lofty position, while the remainder of the automotive industry struggled to break a 10x P/E ratio.

How did GM break free?

One of the primary driving forces behind GM's rapid valuation increase is how it chooses to return value to shareholders. While crosstown rival Ford is heavily lauded for its often lucrative dividend yield, which generally checks in between 4% to 5% and in recent years has been boosted with an annual special dividend due to better cash flow, General Motors has taken a different approach and essentially bet on itself and repurchased massive amounts of stock on the cheap.

In fact, GM has spent a staggering $30 billion on share buybacks over the past five years and retired about 500 million shares over that span. Going hand-in-hand with share buybacks is that Wall Street is rewarding GM's free cash flow, enabling it to make these massive purchases: GM has generated roughly $53 billion in free cash flow since 2021 despite the COVID-19 pandemic, inflating prices, tariffs, and trade policy changes. The next graph shows just how drastically GM has reduced its shares outstanding and the price increase it helped drive.

Data by YCharts.

One major drawback right now is that, because share repurchases have been a big driver of GM's improving valuation, it's become more challenging as the shares aren't nearly as cheap as they once were. Don't expect GM to pull back on its strategy just yet, but it could change the benefits the strategy has driven recently.

What it all means

Investors could certainly argue that Ford deserves a better valuation than it's currently receiving, especially given that it returns significant value to shareholders through its dividend and has seen a large boost in market capitalization following the unveiling of Ford Energy, which seizes on the growth in AI infrastructure and energy demand. However, Ford also has much work to do on its vehicle quality and has led the U.S. industry in massive recalls, which have increased warranty costs that dinged its earnings on a couple of occasions.

However, Ford's crosstown rival, GM, is doing something that only Ferrari has achieved, driving its P/E multiple nearly three times that of many of its competitors. That's because Wall Street is recognizing not only GM's impressive cash flow, but its reduced share count thanks to buybacks, as well as growing high-margin business and recurring revenue from digital services such as OnStar and Super Cruise. One major reason for investors to buy into GM over its competitors is that it's finally broken free of historically low automaker P/E multiples. These graphs may be simple, but they speak volumes.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Ferrari. The Motley Fool recommends Bayerische Motoren Werke Aktiengesellschaft, General Motors, and Stellantis. The Motley Fool has a disclosure policy.

If investors hoping to find the next Tesla only glanced at Lucid (NASDAQ: LCID), it's easy to understand the intrigue. Lucid designed and delivered some of the most technologically advanced and efficient electric vehicles (EVs) in the world. They helped set benchmarks in range and battery efficiency, and the company strung together eight consecutive quarters of record deliveries, which ran through the end of 2025. Lucid even had an extremely wealthy backer in Saudi Arabia's Public Investment Fund (PIF), which poured billions into the young EV maker.

If investors dug deeper, they would have found just as many, or more, flaws with the company, including production hiccups, massive cash burn, and a failure to drive down vehicle unit economics. Worse yet, red flags have been popping up recently, and the situation appears increasingly dire.

What now?

Last week, Lucid announced it would lay off roughly 1,500 employees, or about 18% of its current workforce. And this isn't the first recent instance. Just four months ago, Lucid cut 12% of its workforce.

Public relations can try to spin this as a smart move to make the EV maker more competitive and cost-efficient moving forward, but the truth is this is a substantial workforce slashing across multiple moves in a short four-month span.

Lucid's recent red flags don't stop with its employee cuts, either. The company also confirmed last week that it eliminated the second production shift at its Casa Grande, Arizona, factory.

There isn't much of a positive spin you can put on this, as it's simply trying to match production with lower-than-anticipated consumer demand for its vehicles and to balance inventory that had become bloated after a supplier issue slowed deliveries of the Gravity SUV. During the first quarter of 2026, the company produced 5,500 vehicles and delivered only just over 3,000, prompting it to pull its guidance and indicating it will provide more insight during the second-quarter earnings call.

Image source: Lucid.

Jumping ship?

Further complicating matters is that Lucid's recent CEO is a bit of an unusual choice, and executive turnover is mounting.

Marc Winterhoff, who did an admirable job as interim CEO for over a year and was supposed to stay on as chief operating officer after the new CEO, Silvio Napoli, took over, has now left the company. In a regulatory filing, Lucid noted that it had eliminated the COO position.

Winterhoff's departure follows a slew of executive turnover. Starting from the top, founder and longtime CEO Peter Rawlinson unexpectedly resigned in February 2025, followed by chief engineer Eric Back being let go later that year. More recently, Emad Dlala resigned earlier this month, which also seemed a bit odd after receiving a promotion just a few months earlier. In total, more than a dozen top executives have left the young EV maker in the past two years.

This makes the executive turnover more curious: Napoli appears to be an unusual pick to run the EV start-up. Napoli built a career at a Swiss company, Schindler Group, a maker of elevators and escalators -- while an industry outsider, his overall experience could still be valuable to Lucid.

What it all means

Lucid's moves to cut workforce and overhead by the third quarter are expected to cost the company roughly $32 million in severance pay but will save about $158 million in annualized costs. No matter how you slice it, those are not a level of cost cuts that can save Lucid as it heads toward a conundrum of cutting significant workforce while also preparing for its next more affordable mass-market vehicle, the Cosmos SUV, expected to start under $50,000.

While investors believed Lucid could produce high-quality vehicles, it never delivered the financial metrics to keep them on board. Lucid's net loss in 2025 hit $2.7 billion, flat with the prior year's $2.71 billion; its operating loss widened from $2.4 billion in 2024 to $3.5 billion in 2025; and its cash burn was a staggering $3.8 billion in 2025 alone.

It's easy to root for Lucid, but it is increasingly difficult to imagine how it becomes a viable investment and much easier to see how it could speed toward bankruptcy, especially if the PIF backing were to end.

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

When investors are searching for high-flying stocks, they likely wouldn't start in the automotive industry. That said, General Motors (NYSE: GM) has been firing on all cylinders over the past three years. The stock is up 116% over that time. Over the past 12 months, it has gained more than 62% compared to the broader S&P 500's 21% rise.

The good news for investors who missed the rise is that GM is poised to keep driving higher for these three reasons.

1. GM is returning value to shareholders

Ford Motor Company (NYSE: F) and its Detroit rival, GM, have much in common, but the two return value in distinctly different ways. Ford is well-known for its lucrative dividend, currently yielding roughly 4.2%, and it often dishes out annual supplemental dividends when cash flow is strong.

A GMC Hummer. Image source: General Motors.

Ford gets more attention for the value it returns through its dividend than GM does for its buybacks, but GM's buybacks are quietly impressive. More specifically, over the past five years, GM has slashed its shares outstanding by a huge chunk, as you can see in the graph below.

Data by YCharts.

Thanks to high-margin, lucrative full-size truck sales and valuable SUV sales, the company generates significant cash. It's used this cash to fund development of a long list of new vehicle launches, and has also retired roughly 500 million shares valued at $30 billion over the past five years -- a staggering number.

While rival Ford's dividend yield sits at roughly 4.2%, much higher and more recognizable than GM's 0.9% dividend yield, the latter's total shareholder yield (which adds buybacks into the equation) sits at a much more impressive 7.6%. Expect GM to continue its buyback strategy, and more investors should be aware of just how valuable it is.

2. GM's OnStar is on point

Another factor that many investors overlook with General Motors is its ongoing bet with OnStar and Super Cruise. The automaker is making a long-term bet that it can generate meaningful recurring revenue through its software business.

Last year, GM logged roughly $2.7 billion in realized revenue. It has an even larger $5.4 billion in deferred revenue from OnStar and Super Cruise subscriptions. For context, that's real growth from the $1.7 billion realized and $200 million deferred as recently as 2020. There's more growth ahead, with the company expecting to generate $3.1 billion in realized revenue and $7.5 billion in deferred revenue this year.

Here's the kicker: Starting with 2025 model years, GM is including an eight-year subscription to OnStar services, as well as a three-year subscription to Super Cruise. The simple strategy behind this is gambling that when people go to purchase their next vehicle, they will have become so used to these services that they'll purchase them again. There is some evidence already that this strategy is working: At least 30% of the 35,000 GM owners who had expiring three-year subscriptions to Super Cruise resubscribed last year. These are high-margin sales, comparable to those seen in the software industry.

3. GM's vehicle model balancing act has been successful

Most investors are aware that almost everyone in the automotive industry misjudged electric vehicles (EVs) and how quickly they anticipated the shift in demand trends. This caused the broader industry to take billions and billions in charges to rebalance between production and capacity between EVs and traditional gasoline-powered vehicles. GM was no exception, taking a special items hit of $7 billion in the fourth quarter of 2025.

While EVs are largely unprofitable and continue to hinder most automakers' earnings, GM has invested much time, effort, and capital into LMR battery chemistry that is expected to reduce cell and battery pack costs by several thousand dollars per unit. That puts GM on the path to EV profitability, which management expects to achieve within three to five years, reversing billions in annual losses. Reversing EV losses is arguably the easiest way for GM to boost its bottom line and reward investors with an appreciating stock price -- and, likely, a better valuation.

What it all means

GM has quietly been thriving for the better part of the past decade, and has managed to talk Wall Street into rewarding it with a price-to-earnings ratio in the lower 30x. That's rare for automakers, which are typically valued around 10x price-to-earnings. That's simply because the automaker is well-positioned to continue thriving in the years ahead, for the three reasons stated above, among others. GM is far from the Detroit automaker of old, and don't be surprised if it keeps beating the broader market over the next three to five years.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.

Over the past decade, Ford Motor Company (NYSE: F) has seen some high highs and some low lows. It has won numerous awards for its lauded F-Series trucks and developed its Ford Pro commercial division into a consistent higher-margin business.

The company has also delivered highly successful new nameplates such as the Maverick, revived another successful model in the Bronco, and recently unveiled Ford Energy to focus on battery storage systems. It even recorded some of its most profitable years in history over the past decade.

What the company hasn't done is reward investors with a higher valuation or rising stock price. In fact, its roughly 7% increase over the past decade is downright abysmal. Despite that gloomy performance, the future should be brighter: Here are three forward-looking reasons Ford could still warrant a buy today.

1. A margin of safety

One bright spot for most of Ford's history has been its often lucrative dividend. It currently sits at a robust 4.25%, well above the S&P 500 average, and has a couple of unique attributes.

One that some investors aren't aware of is that the Ford family has a special class of shares that receive the common dividend as well as special voting rights. The family generates much wealth from these dividend payouts, which align the interests of shareholders and ownership. Both would prefer the dividend to increase and only be cut in dire circumstances.

Another intriguing attribute is that in recent years, cash flow has been mostly strong, and when cash is aplenty, the company has at numerous times awarded a special dividend that can boost value returned to shareholders. To understand how valuable the dividend is to investors, especially when Ford's stock price is stuck in neutral, compare its share appreciation alone versus total returns over the long term.

F data by YCharts.

Including its dividend, Ford offered some margin of safety compared to its price appreciation alone. While it still lags the broader market returns, investors can still bank on the dividend to provide strong value.

2. A Model T moment

Management has been busy hyping its upcoming Universal EV Platform as well as its new "assembly tree" production process that it will begin using next year. The new platform will be flexible enough to support multiple vehicle styles and will use techniques to drastically reduce the number of parts in production and costs.

The universal platform will debut on the company's next electric vehicle, a $30,000 midsize truck, aimed at an early 2027 release. Management has worked diligently to bring down other EV costs (including expensive batteries), and the universal platform and new production process mean that the vehicle is expected to be profitable early in its life cycle, even at such a low price point.

This is notable for two reasons. First, it enables Ford to take a giant step forward in reversing billions in EV losses annually, and prepares it for a future that will see increasing EV demand. Second, its innovation and cost efficiencies are preparing it to compete head-on with the advanced and affordable Chinese competition it will face around the world -- and perhaps eventually on its home turf.

The jury is still out on whether or not this is truly a Model T moment, but these developments will be crucial for the automaker to thrive as the universal platform underpins a long list of vehicles.

3. Enter Ford Energy

Unless you've been hiding in a cave -- and some end-of-days scenarios might make you want to -- you know that artificial intelligence (AI) has swept the globe in performance improvements matched only by its growing hype. Powering this evolution in AI are huge data centers that need immense computing power and energy

A Ford battery storage system. Image source: Ford Motor Company.

They also need reliable battery storage systems to help mitigate costs during peak hours and provide backup power to prevent downtime. And that's where Ford Energy comes in, with its new battery energy storage system (BESS), which the automaker has discreetly developed over the past few years.

Management aims to deploy roughly 20 gigawatt-hours annually, with the first customer deliveries beginning late 2027. The announcement quickly sent Ford shares higher last month, and Wall Street was quick to support the strategic initiative. Analysts believe Ford Energy could generate $3 billion in incremental revenue and $500 million in operating profit by the end of this decade.

Turning the corner

No, Ford has not been a great long-term investment over the past decade, and it has certainly disappointed investors despite its numerous accomplishments and highly profitable years.

That said, Ford has a real energy business in the works, one that makes sense and fits its manufacturing experience, and which can generate incremental bottom-line profits. It has also innovated its production process and developed a much more cost-efficient platform for the future of its EVs.

While investors wait for the stock price to gain traction and earn a higher valuation, the company's dividend offers a margin of safety that will continue to provide shareholder returns. For those reasons, the next decade should be much better for Ford investors.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.