Increasing competition in the EV space is causing manufacturers to drop prices. That is causing EV stocks to dip as the market anticipates price drops could lead to weakening revenues and lower margins.

But there is always a flip side to every story. Tesla (NASDAQ:TSLA) just lowered prices on its Model X and Model Y vehicles by $5,000 while also lowering pricing on its other vehicles. The company anticipates that the move will spike demand, ultimately leading to stronger growth. For investors, the benefit is clear: EV stocks across the board are falling, resulting in undervalued opportunities to buy on the dip.

Polestar (PSNY)

Polestar (NASDAQ:PSNY) is basically Volvo’s electric vehicle arm that trades as an independent stock. Investors must understand that fact makes Polestar fundamentally different from other legacy names now entering the EV space. The EV sales contributions of Ford (NYSE:F) and GM (NYSE:GM) are inseparable from those firms and their stocks.

Polestar’s aren’t. The simple truth is that Polestar benefits from its legacy vehicles that have now become an EV company. Ford and GM EVs are inextricable from their legacy owners as an investment currently.

That’s one clear advantage of the Polestar brand. Another is that Polestar leverages a very well-respected brand legacy, especially across Europe. The Polestar 2 was the most popular EV in Germany in 2022, beating familiar European names, including Volkswagen (OTCMKTS:VWAGY), Dacia, and Tesla.

Polestar sold nearly 10,000 EVs in the U.S. in 2022. That means roughly 20% of the company’s 51,000 vehicle sales were attributable to the U.S. market. It is also targeting the Chinese market with its Polestar 3 SUV priced above $100k. If Polestar can establish a strong sales base there, it’ll be in a prime position with a strong, diversified sales base across the major markets.

Nio (NIO)

Nio (NYSE:NIO) stock isn’t in a great position as Tesla again slashes prices. The last time Tesla slashed prices, at the end of 2022, sales jumped by 76% to 12,000 vehicles in a single week. Tesla’s latest reductions apply to the U.S. market. If those same discounts are applied in China, another sales spike could result.

I would expect a few things to happen if that is indeed what happens. Just as at the end of 2022, customers will rush in to buy due to discounted prices, and those who bought prior will seek refunds. The latter issue won’t be honored, just as it wasn’t when buyers complained of feeling cheated by the late 2022 price reductions.

And Nio, which is deeply connected to the Chinese state, might see some beneficial treatment. China doesn’t want Tesla to initiate an EV price war in the country, especially as Nio’s losses deepen. As a result, it could incentivize Nio and other Chinese EV manufacturers if Tesla’s price drop is extended to China and drives up demand there.

Albemarle (ALB)

Albemarle (NYSE:ALB) stock is alternately a great stock on the notion that the growing EV market benefits it and a sell as lithium prices fall from 2022 highs. In fact, lithium prices have recently crashed below $22,000 per tonne after going hyperbolic in 2022 and reaching $60,000.

But the truth is more likely somewhere in the middle. Albemarle anticipates continued strong demand for lithium sales measured by volume. It provided guidance for an expected 20-30% compound annual growth rate for lithium volume sales between 2022 and 2027. The company has certainly run various models that consider a range of outcomes, with lithium prices figuring prominently. The point is that Albemarle can’t logically expect prices to remain at 2022 levels indefinitely, and its analytics teams modeled various scenarios.

Albemarle is riskier than its competitors for the simple fact that it relies on market pricing rather than futures contracts for those lithium sales. That will sting the company immediately, but the price dip could become an opportunity moving forward.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.