Beatrice Lang
The electric vehicle (EV) market has experienced a recent growth spurt, with global EV sales increasing by 35% from 2022 to 2023. This trend is projected to continue, with the International Energy Agency estimating that EV sales in the US could account for almost one-fifth of total passenger car sales by 2035. As the EV market heats up, investors are eager to learn about the various opportunities to get involved. While some ETFs offer exposure to companies expanding into the EV space, others provide access to established automotive stocks. Investing in companies that manufacture EVs, batteries, or mine and process battery minerals are also popular options. Taking a global approach is recommended, with China and Europe expected to dominate the EV market in the coming years.
| Characteristics | Values |
|---|---|
| Investment approach | Work with an advisor to design a personalized investment strategy or invest on your own |
| Market | The market includes cars, parts, raw materials, and infrastructure |
| Market participation | Startups, newly public companies, and automotive giants |
| Market risk | The EV market is still relatively speculative, and investing involves market risk |
| Market growth | Global EV sales grew by 35% from 2022 to 2023, and by 25% in Q1 2024 compared to Q1 2023 |
| Market forecast | The International Energy Agency projects that EV sales in the U.S. could account for almost one-fifth of total passenger car sales by 2035 |
| Market capitalisation | The combined market capitalisation of pure-play EV makers increased from USD 100 billion in 2020 to USD 1 trillion in 2023 |
| Market competition | Chinese carmakers have started to export at scale, increasing competition for European and US carmakers |
| Market volatility | Supply chain disruptions, price fluctuations, and increasing competition have led to significant volatility |
| Investment opportunities | Invest in companies that make electric vehicle batteries, mine, and process the minerals used in batteries |
| Investment options | Exchange-traded funds (ETFs), individual companies, or stocks |
| Investment risks | Investing in individual companies or stocks carries more risk than ETFs |
| Investment research | Investors should conduct their own research to understand the risks in the EV market |
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What You'll Learn
- Investing in companies that make electric vehicle batteries
- Investing in companies that mine and process the minerals used in batteries
- Investing in ETFs (exchange-traded funds)
- Investing in individual companies or working with an advisor to design a personalised investment strategy
- Taking a global approach to the industry
Investing in companies that make electric vehicle batteries
The electric vehicle (EV) market has experienced a significant growth spurt, with global EV sales increasing by 35% from 2022 to 2023. This trend is expected to continue, with EV sales in the US projected to account for almost one-fifth of total passenger car sales by 2035. The increasing demand for electric vehicles has brought about a corresponding rise in the demand for EV batteries, making companies that manufacture these batteries an attractive investment prospect.
When considering investing in companies that make electric vehicle batteries, it is important to keep in mind that these investments in emerging technologies will likely exhibit above-average volatility. The best EV stock to buy will depend on your goals and risk tolerance.
Some companies that specialize in EV batteries include Panasonic, QuantumScape, Solid Power, and FREYR Battery. Panasonic has expected earnings growth of 89.5% for the next year and is a battery supplier for companies like Honda. Toyota, a leading car manufacturer, is also investing in in-house battery manufacturing and technology development, with plans to ramp up electric vehicle production to 1 million units by 2030.
In addition to battery manufacturers, companies that mine and process the minerals used in batteries are also worth considering. Lithium is a key metal in EV batteries, and lithium prices have skyrocketed due to increased demand from the EV industry. Albemarle, a lithium miner based in North Carolina, is a good investment option, as is the Chinese company Ganfeng Lithium.
Finally, it is important to remember that investing in the EV industry involves market risk, and investors should conduct their own research to understand the risks involved.
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Investing in companies that mine and process the minerals used in batteries
When investing in companies that mine and process these minerals, it's important to consider the geographical concentration of production. For lithium, cobalt, and rare earth elements, the world's top three producing nations control over three-quarters of global output. In some cases, a single country is responsible for around half of the worldwide production. For example, the Democratic Republic of Congo (DRC) holds more than half of all global cobalt reserves, and the DRC and China were responsible for 70% and 60% of global production of cobalt and rare earth elements, respectively, in 2019. China also has a strong presence in processing operations, with a refining share of around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements.
It's also worth noting that some minerals, such as lithium raw material and cobalt, are expected to be in surplus in the near term, while others, such as lithium chemical, battery-grade nickel, and key rare earth elements, may face tight supply in the years ahead. This can impact the level of grid investment, as higher prices resulting from tight supply can affect investment costs.
Some dominant companies in the lithium space include Sociedad Química y Minera (SQM) and Albemarle. Cobalt, which is mostly mined as a copper and nickel byproduct, is also important for lithium-ion batteries and is used in alloys for jet engines and turbines.
In addition to these large companies, there are also lithium exploration companies that have stepped up to meet forecast demand. With lagging EV demand creating a lower price environment for lithium, experts predict increased M&A activity in the sector due to the strength of the battery metal's long-term outlook.
Graphite, a native element mineral, is the most stable form of carbon and the only non-metal element that is a good conductor of electricity. It is used in lithium-ion batteries, nuclear reactors, and the refractory and steel industries. Vanadium, on the other hand, is increasingly being used in vanadium redox flow batteries for renewable energy storage, although most of it is used as a steel additive.
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Investing in ETFs (exchange-traded funds)
ETFs are a great way to invest in the electric vehicle (EV) boom as they offer streamlined diversification, thus exposing you to less risk than investing in a single company or stock. Some ETFs are comprised exclusively of companies that are expanding into the EV world, while others allow investment into blue-chip "legacy" automotive stocks.
One of the most important components of an EV is its battery, which can represent 35 to 50% of the production cost of the vehicle. As such, a number of ETFs invest in battery makers, miners, and mineral processors. For example, the Global X Lithium and Battery Technology E.T.F. has over $4.6 billion in assets under management and has major holdings in Albemarle, a lithium miner based in North Carolina, as well as in battery makers like Panasonic and the Chinese company Ganfeng Lithium.
Lithium, the lightest metal on earth, is a key component of most electric car batteries, along with nickel, cobalt, and manganese. As demand for lithium has skyrocketed due to EVs and mobile phones, investors may want to consider ETFs that focus on lithium and battery technology.
In addition to batteries, investors should also consider the broader EV supply chain, including companies involved in mining and processing other metals such as copper, nickel, iron, silver, and aluminum.
When investing in ETFs, it is important to keep in mind that diversification does not guarantee profit or protect against loss. Conduct your own research and consider speaking to a financial advisor to make informed investment decisions.
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Investing in individual companies or working with an advisor to design a personalised investment strategy
If you're looking to invest in individual companies in the electric vehicle (EV) industry, it's important to conduct thorough research to understand the market risks. The EV market has experienced a significant growth spurt, with global EV sales increasing by 35% from 2022 to 2023 and a projected growth of 33% in 2025. This growth is driven by government policies, high levels of investment, and increasing consumer demand for climate-friendly alternatives.
When investing in individual companies, consider the various components and materials that are crucial for EV production. Batteries are the most integral part of an EV, with lithium-ion batteries being the most commonly used type. Companies involved in mining and processing lithium, copper, nickel, iron, silver, and aluminium are essential to the EV industry and are expected to benefit from the increasing demand for EVs.
Additionally, carmakers are racing to introduce electric vehicles to meet consumer demand. Tesla, the market leader, sold over 300,000 electric vehicles globally in the first quarter, and other established automotive companies like Volkswagen, General Motors, and Ford are also transitioning to electric fleets. These companies could be worth considering for investment opportunities.
However, it's important to remember that investing in individual companies comes with higher risk compared to diversified investment strategies. If you want a more tailored approach, consider working with a financial advisor who can help design a personalised investment strategy based on your risk tolerance and financial goals. They can provide insights into the EV market and guide you towards opportunities that align with your investment objectives.
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Taking a global approach to the industry
The electric vehicle (EV) market has experienced a recent growth spurt, with global EV sales increasing by 35% from 2022 to 2023, and by 25% in Q1 2024 compared to Q1 2023. This growth is expected to continue, with an analysis by Gartner estimating that the number of EVs in use will grow by 33% in 2025, bringing the total number of electric cars and trucks to 85 million. This growth will be driven primarily by brisk adoption in China and Europe, which together are projected to represent 82% of the total EV market in 2025.
Given the global nature of the EV industry, investors looking to capitalise on this growth should consider taking a global approach to their investments. This means looking beyond the US, where the majority of EV start-ups are headquartered, and towards other regions, such as China and Europe.
One way to invest in the EV industry is through exchange-traded funds (ETFs), which offer streamlined diversification and expose investors to less risk than investing in a single company or stock. Some ETFs are composed exclusively of companies that are expanding into the EV world, while others allow investment into "legacy" automotive stocks. For example, the Global X Lithium and Battery Technology E.T.F. has over $4.6 billion in assets under management and holds stakes in companies like Albemarle, Panasonic, and Ganfeng Lithium.
In addition to ETFs, investors can also consider investing directly in EV stocks. Some of the hottest EV stocks for 2025 include Tesla, which is expected to deliver nearly 1.8 million vehicles in 2024, and Volkswagen, which reported over 500,000 battery electric vehicles across the first three quarters of 2024 and is on pace for nearly 700,000 vehicles for the full year. Another EV stock to watch is Li Auto, which is smaller and currently unprofitable but is on a tremendous growth path. For investors who want to support companies closer to home, ChargePoint, the largest electric vehicle charging company in the United States, offers an investment opportunity, although it carries a higher level of risk.
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Frequently asked questions
One way to invest in the electric vehicle boom is by investing in companies that make electric vehicle batteries and those that mine and process the minerals those batteries use. Another way is to invest in ETFs (exchange-traded funds) that invest in battery makers, miners, and mineral processors. Additionally, investors can look at investing in the big picture of EVs, such as electric vehicle charging companies.
Some of the top EV stocks to buy for 2025 include Tesla, Volkswagen, and Li Auto. Tesla has a huge chunk of the marketplace, with predictions of nearly 1.8 million vehicle deliveries across 2024. Volkswagen is also significant because of its overall scale, with battery electric vehicles topping 500,000 units in the first three quarters of 2024. Li Auto is currently unprofitable but is still a top EV stock to watch because of its tremendous growth path.
The EV market is still relatively speculative, and investing involves market risk. Investors should conduct their own research to understand the risks. The EV market is highly competitive, and as incumbents ramp up their investments and manufacturing plans, barriers to entry for new actors get higher, and investor perceptions of risk increase. Additionally, there have been supply chain disruptions, battery metal price fluctuations, and geopolitical tensions that have impacted the EV market.
