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How to Invest in EV Stocks

By Colin Dodds · August 10, 2023 · 6 minute read

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How to Invest in EV Stocks

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.

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. As of mid-July 2023, Tesla stock was $281.38.

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 announced a goal of having 50% of new vehicles electric-powered by 2030.


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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.

Volkswagen

The world’s largest automaker, Volkswagen (VLKAF), which also owns the Audi and Porsche brands, sold 572,100 EVs in 2022, an increase of 26% from the year before. And Volkswagen has big plans for the EV space. The company says that by 2030, every second car the Volkswagen Group delivers is expected to be all electric.

Ford

Ford is investing $50 billion globally in electric vehicles through 2026. It plans to manufacture 600,000 EVs by the end of 2023, and 2 million by 2026. In 2022, Ford was the number two EV brand in the U.S.

General Motors

Big Detroit competitor GM (GM) is going all in on EVs, publicly stating that it’s “on its way to an all-electric future.” GM also announced that it will invest $35 billion in EVs and autonomous vehicles by 2025.

Honda

In Japan, Honda Motor Co. (HMC) announced that it would invest at least $40 billion through 2030 in order to make EV and hybrid vehicles 40% of its sales. It’s worth noting that the company is also working with GM to bring two new EVs to market in 2024.

Toyota

Toyota (TM) has been more cautious about EVs. However, in 2023, the automaker announced that it would significantly boost EV production, including 1.5 million EV sales annually by 2026, and introduce 10 new models in the U.S. and China. Toyota also said it would invest an additional $7.5 billion in EV development and production by the end of 2030.

NIO

A pure-play EV manufacturer based in China, NIO (NIO) is small, but growing. In June 2023, the company announced that it had gotten $738.5 billion in capital from a fund owned by the government of Abu Dhabi. NIO has eight EVs on its advanced EV platform known as NIO Technology 2.0. The company plans to double its EV sales in 2023.

Apple

There are also persistent rumors that Apple (AAPL) has been working on an electric vehicle since 2014. In late 2022, there were reports that the launch of the EV might come in 2026. 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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Downstream Technologies

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 committing to building a national network of 500,000 charging stations by 2030, including a $5 billion initiative to build charging stations on major highways from coast to coast.

Blink Charging

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

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 174,000 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 have around 200,000 EV charging stations globally by 2030.

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SPACs

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.

Recommended: A Guide to High-Risk Stocks

The Takeaway

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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Photo credit: iStock/EXTREME-PHOTOGRAPHER

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