Investing in Electric Car Stocks
Investing in Electric Car Stocks
Electric cars continue to gain in popularity and acceptance as the world’s automakers pledge to ween us off gasoline powered cars by 2035. It certainly seems that investing in EV-related stocks might be a good idea. Should you invest in EV stocks, and if so, which ones? GreenCars.com takes a deep dive on the subject.
Faster Adoption Drives Stocks
Every year, the rate of adoption for new technology continues to compress. Think of it like this, when fossil fuel-powered vehicles appeared around 1900, it took 55 years for them to reach 80 percent adoption in America. Compare that to the cellphone that hit 80 percent adoption in 15 years. Now look at Tesla’s growth. Back in 2013 when the company launched its Model S, they were lucky to produce 20,000 units a year. In 2018, their sales topped 192,000 cars and in 2020 they produced 499,550 vehicles and sold every one of them. In fact, global sales of electric vehicles rose by 43 percent in 2020.
According to Seth Goldstein, chair of Morningstar’s Electric Vehicle Committee, the best potential stock investments in the current electric car business is shifting away from the automakers themselves in favor of investing in the companies that supply EVs. Choosing to invest in companies that make electronic components and lithium-ion batteries that keep EVs on the road might be the real play. “As EVs gain wider adoption over the next decade or two, I see a lot of good long-term opportunities owning high-quality companies throughout the entire EV supply chain,” Goldstein told USA TODAY.
Power Component Stocks
While Tesla (TSLA) stock has skyrocketed, so has the stock of semiconductor makers such as Nvidia (NVDA), Maxim Integrated Products (MXIM), NXP Semiconductors (NXPI) and TE Connectivity (TEL) that produce the computer chips, connectivity and sensor products that keep electric cars going. You can’t have a battery-powered EV without lithium-ion batteries these days, so companies such as Albemarle (SLB) that produce low-cost lithium could also be a solid investment.
Companies that supply all the various parts and components found in electric vehicles are worth watching. Auto parts suppliers such as Aptiv (APTV) of Dublin, Ireland, builds such key components as charging ports, high voltage connectors and shielding for EV. Its stock earnings are seen jumping by as much as 12 percent. A Michigan company called BorgWarner (BWA) is transitioning from supplying conventional gas-powered cars to parts for EVs, making it worth keeping tabs on as well.
When it comes to batteries, one of the world’s biggest producers is Panasonic (PCRFY), known for supplying batteries for Tesla’s popular Model 3. A more aggressive play would to invest in China’s BYD (BYDDF) that builds EV batteries for the quickly expanding Chinese EV market.
Large tech companies such as Alphabet (GOOGL) works primarily in the emerging autonomous driving tech field that goes hand-in-hand with EV production. Blink Charging (BLINK) specializes in charging networks, equipment and services as does ChargePoint Holdings (CHPT) which operates one of America’s largest EV charging networks.
What About Automaker Stocks?
According to a recent report, electric vehicle sales will top 21 million units a year by 2030. This surge is expected to begin gaining momentum next year when the cost of an EV will be roughly the same as a gas-powered car. Currently, around 40 percent of Americans say they are considering an electric car as their next vehicle purchase. Because fossil fueled vehicles are making way for electrified ones, EV stocks are seen as a long-term growth opportunity, making stockbrokers bullish on EV futures.
Top American automakers such as Ford (F) and General Motors (GM) are investing heavily in the EV future. Ford recently hiked its EV investment commitment to $29 billion by 2025 and released its all-electric Mustang SUV this year and its F-150 Electric pickup by the end of 2021. General Motors will be releasing the new all-electric Hummer EV in 2023 while their Chevy Bolt continues to be a top-selling EV in the U.S.
Volkswagen Group (VWAGY) plans to build one million electric cars by 2023 and invest over 23 billion dollars on its EV technologies through 2024. VW also offers EVs in its Audi and Porsche brands. Meanwhile, BMW predicts that 50 percent of its global sales will be electric vehicles by 2030.
And then there’s Tesla (TSLA) that just released a stunning quarterly report after an off-the-chart 743 percent stock rise in 2020. Some are calling Tesla stock the next Apple. Last year, Tesla surpassed Toyota as the most valuable car company in the world.
When it comes to automakers’ stocks, it is important to remember that it is best to play for the long haul. Don’t stress out about short-lived ups and downs in the market due to such things as interest rates temporarily rising or falling. Stay the course. Just remind yourself that we are running out of oil. You know, that stuff that fossil-fueled vehicles run on. Zero-emission, all-electric vehicles are clearly where transportation technology is going.