One topic family members might want to steer clear of this holiday season is the debate between driving an electric vehicle or one with an internal combustion engine (ICE). While said in jest, there’s some truth to it—each side tends to dig in deeper as the discussion heats up.
However, the problem with the electric versus gas vehicle argument is that it’s being fought to the extremes. Most consumers aren’t against the idea of an electric vehicle. The U.S. Energy Information Administration (EIA) reported that the market share for battery electric vehicle (BEV) sales rose to a record 8.9% in the third quarter of 2024. And that market share is even higher among luxury car owners.
However, if you live outside a large urban area, the practical limitations of the current EV infrastructure become self-evident. It’s a solvable problem but one that will continue to take years of investment.
That’s why EVs aren’t selling as expected, and shares of EV stocks not named Tesla Inc. (NASDAQ: TSLA) are lagging the market.
Fortunately, consumers and investors have an alternative. The same EIA report showed that the hybrid vehicle market share is up to 10.6% of the light-duty vehicle (LDV) market. That’s also a record.
And if consumers are flocking to hybrids, investors could do worse than buy shares of the companies leading the way in this space. Here are three names to consider for solid growth in 2025.
Short-Term Earnings Issues Shouldn’t Sour Your Opinion of Toyota Motors
It won’t surprise many investors that the list of companies leading the hybrid vehicle market is from Japan. First up is Toyota Motor Corp. (NYSE: TM). The company has been an unabashed advocate for hybrid technology even as the push towards BEVs has moved into high gear.
In October 2024, worldwide sales of the company’s hybrid electric vehicles (HEVs) were up 28% and year-to-date sales of HEVs was up more than 20%. That accounts for about 40% of the company’s total sales, up from about 33% in the prior year.
However, TM stock is down more than 4% in 2024. That loss is largely due to a year-over-year halving of the company’s earnings in its most recent quarter. Analysts believe those certification and quality control issues will dissipate over time and are forecasting a 20% increase in the company’s share price to $211.17. That would mean the company’s earnings will be well above their current midpoints over the next two quarters.
Honda’s Slumping Sales in China Are Not Expected to Be a Long-Term Concern
If Toyota is staking out a leadership position in HEV sales, Honda Motor Co. Ltd. (NYSE: HMC) is not far behind. Honda is celebrating its 25th year of selling hybrid vehicles and reports that sales of HEVs account for 25% of the company’s total sales.
The company posted an unexpected profit decline in the second quarter of its 2025 fiscal year. This was due to slumping sales in China that offset rising sales in the United States and Japan.
HMC stock is down 18% in 2024. However, analysts believe the earnings decline will be temporary and give the stock a consensus price target of $34.90, which gives investors an impressive 37% upside.
Hyundai Motor Has an AI Halo That Adds to Its Hybrid Appeal
Hyundai Motor Co. (OTCMKTS: HYMTF) is the strongest performer of the three automotive stocks on this list. HYMFT stock is up more than 22% in 2024. However, some of that may be a halo effect as investors react to the company’s investment in the artificial intelligence darling SoundHound AI Inc. (NASDAQ: SOUN). The company also partners with the South Korean chipmaker BOS Semiconductors, which makes AI chips for in-vehicle infotainment and autonomous driving.
But that shouldn’t distract you from the company’s strong position in the HEV market. In the company’s most recent earnings report, Hyundai reported a 12.9% increase in worldwide EV sales, with each of its three reporting regions (U.S., Europe, and Other) reporting growth in the category.
Analysts are aggressively bullish on Hyundai stock. The consensus price target of 28 analysts is $77.51. That's a whopping 44% increase from its closing price on December 13.
