Electric vehicles (EV) have become increasingly popular since the first Tesla (TSLA) Roadster hit the highways in 2008, and as the technology matures, many investors see opportunity. The EV market has expanded well beyond Tesla to become a core strategy for automakers worldwide.
The explosion of the EVs has also created new downstream technologies, such as new batteries, charging stations, and other infrastructure.
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The History of Electric Vehicles
The concept of a battery-powered automobile goes back to the 1800s. But gasoline-powered cars, including the Ford (F) Model T gasoline-powered were cheaper, and won over drivers for all of the 20th century. The tide began to turn toward the end of the 20th century, as a result of heightened environmental concerns from both drivers and the federal government.
The government encouraged the development and purchase of EVs by instituting a series of generous tax breaks. The Energy Improvement and Extension Act of 2008 offered drivers tax credits for new plug-in electric vehicles. The American Clean Energy and Security Act of 2009 also had provisions calling for the improved infrastructure for EVs.
In 2011, President Barack Obama set a goal for the United States to have a million electric vehicles on the road by 2015, and pledged $2.4 billion in federal grants to pay for the development of new EVs and batteries. Subsequent tax breaks and grants over the next five years further increased the government’s investment in EVs, as well as the related technologies and infrastructure.
That windfall supported the research and development of companies like Tesla, which took in an estimated $2.4 billion via 109 separate government grants. Tesla used that money to create eye-popping, technologically advanced cars, as well as new battery technology that increased their horsepower and their range. Drivers clamored for the new vehicle, and Tesla’s stock boomed – going from $86 at the end of 2019 to $705 by the end of 2020.
This incredible success story has both institutional and retail investors looking for the next Tesla, as more drivers shift to EVs and companies dedicate resources to building them.
EV investment may be more of a long-term play, rather than a day trading strategy, since it can take up to five years for automakers to design, produce, and bring to market an electric vehicle. They’re also still generally more expensive than gasoline-powered vehicles and prices may need to fall further before widespread adoption occurs. Still, President Biden has announced a goal of having 50% of new vehicles electric-powered by 2030.
EV Stocks: Automakers Who Could Challenge Tesla
Tesla is a clear leader in the EV market. It has the brand name and the incredible sales figures, plus it only makes EVs. While Tesla made a large splash in the auto industry, that industry has massive resources with which to respond, and they’re spending billions in capital expenditures to catch up.
Here are just a few major competitors who could be strong EV investments in the future.
The world’s largest automaker, Volkswagen (VLKAF), which also owns the Audi and Porsche brands, sold 231,600 EVs in 2020, an increase of 214% from the year before. It also sold more than 190,000 hybrid vehicles, which use both electricity and gasoline, up 175% from 2019. And Volkswagen has big plans for the EV and hybrid space, with €35 billion ($43 billion) devoted to developing and building new electric vehicles by 2025. It also announced plans to launch 70 new purely electric vehicles by 2030.
Ford recently announced plans to invest $22 billion in electric vehicles through 2025. That plan tops the $10 billion the auto giant already devoted to new EV development. It also invested $500 million in EV startup Rivian, with which it has plans to co-produce new vehicles. And it is aiming to launch an electric version of its flagship truck, the Ford F-150, in 2022.
Big Detroit competitor GM (GM) is going all in on EVs, publicly announcing that it plans to stop producing gas and diesel light-duty vehicles by 2035. Not to be outdone by Ford, it also announced that it will invest $27 billion in EVs and autonomous vehicles by 2025.
In Japan, Honda Motor Co. (HMC) made headlines by becoming the first of Japan’s automakers to announce plans to entirely phase out sales of gasoline-powered cars, setting 2040 as its goal. The company is ramping up its EV production with an eye on China, where roughly 6% of the vehicles on the road are electric. It’s worth noting that the auto giant recently signed an agreement to use battery technology developed by GM in its vehicles.
Toyota (TM) has been more cautious in its public statements about EVs, stating it is too early to focus only on electric options in its production plans. The company, whose Prius brought hybrids into many garages for the first time, still has not launched a fully-electric vehicle, but it does plan to introduce 15 fully electric vehicles by 2025. It is also working on other alternative technologies, developing fuel cell cars, like the Toyota Mirai, as well as hydrogen-combustion vehicles.
A pure-play EV manufacturer based in China, NIO (NIO) is small, but growing. The 5,291 vehicles it delivered in November of 2020, represented a 109% increase over the year before. Its unique battery technology has allowed it to create ancillary revenue streams around battery-swapping and battery-as-a-service businesses.
There are also persistent rumors that Apple (AAPL) has been working on an electric vehicle since 2014. While confirming the rumors, the company has stated that it won’t launch its first vehicle for another three to six years. But given the company’s deep pockets, brand reputation, and its history of game-changing design, it could make a giant splash when and if it does launch its first EV.
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Electric car companies aren’t the only way to invest in EV technology. Having so many new EVs on the road also opens up new investment opportunities from EV battery stocks to charging stations. For one thing, drivers will have to charge their vehicles somewhere. And those investors will have some help from the federal government, with President Joseph Biden publicly stating he wants to devote more than $15 billion to build a national network of 500,000 charging stations.
One charging station investment is Blink Charging (BLNK), which already has thousands of its EV chargers up and running across the United States. Its chargers are typically located near airports, hotels and healthcare facilities, where it rents space from the host locations.
ChargePoint (CHPT) has been in business since 2007, and made a splash in 2017, when it took over General Electric’s 9,800 electric vehicle charging spots. It now manages more than 114,000 charging stations around the world. It also boasts a large patent portfolio.
Royal Dutch Shell
Oil company Royal Dutch Shell (RDS.A) may even deserve a look, as it plans to launch 500,000 EV charging stations at its gas stations over the next four years.
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Because it is such a fast-growing field, there are also a number of shell companies and special purpose acquisition companies (SPACs) devoted to companies that create and manage EV-charging technology.
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As the automotive industry transforms, there are a host of new opportunities for major companies, new startups – and also for investors. To consider investing in EV companies you’ll need to do your own research to decide which stocks fit into your portfolio strategy. You can also get exposure to electric vehicles without investing in individual stocks by investing in mutual funds or exchange-traded funds that focus on EVs.
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