Umair Gaines
Electric vehicles (EVs) are driving the growth in new cars, and the market is expected to grow at a compound annual rate of 25.6% from 2019 to 2026. With the UK government's plan to phase out the sale of new diesel and petrol cars by 2030, the mass adoption of zero-emission vehicles is on the horizon. This shift presents a unique opportunity for investors as government legislation supports the growth of the electric vehicle industry. When considering investing in this sector, it is essential to look beyond automobile manufacturers and explore companies specializing in electronic safety equipment, connector systems, batteries, and other EV components.
There are several ways to invest in this growing industry, such as purchasing stocks of electric car manufacturers like Tesla, Apple, Toyota, and XPeng, or investing in funds like the iShares Self-Driving EV and Tech ETF (IDRV) or the KraneShares Electric Vehicle and Future Mobility ETF (KARS). Additionally, companies that produce EV parts, such as NIDEC, and those that focus on electric vehicle architecture like Aptiv, offer investment opportunities.
Before investing, it is crucial to conduct thorough research and understand the specific interests and investment goals. Investors must consider market capitalization, sales and earnings growth, cash flow, and the cost of production. The electric vehicle industry is subject to technological advancements, and investors should assess a company's ability to meet these standards.
| Characteristics | Values |
|---|---|
| Electric car market growth | Expected to grow at a compound annual rate (CAGR) of 25.6% from 2019 to 2026 |
| Electric vehicle stocks | Tesla, Apple, Toyota, XPeng, General Motors, Nikola, Kandia Technologies, Aptiv, Canoo, BYD, Sunwoda, EVE Energy, Ganfeng Lithium, Uber, Qualcomm, Intel, Ford, Analog Devices, Enphase, Li Auto Inc., Lucid Group Inc., Fisker Inc., Hyliion Holdings Corp. |
| Electric vehicle market | Expected to release around 50 new models in 2024 |
| Electric vehicle advantages | Cheaper to run, lower fuel and maintenance costs, lower emission charges, no congestion charges, and better performance in urban areas |
| Electric vehicle disadvantages | Higher initial purchase price |
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What You'll Learn
The environmental benefits of electric vehicles
Electric vehicles (EVs) have been around for over 120 years, but technological innovation and advances in recent years have led to unprecedented growth in the industry. Several countries have made the switch to electric cars a priority in their plans to reach their climate goals.
Environmental Benefits of Electric Vehicles
One of the most significant environmental benefits of EVs is the reduction of tailpipe emissions. While EVs produce zero tailpipe emissions, it's important to consider the carbon pollution generated by the electricity used to charge them. The environmental impact of EVs depends on the energy sources used for electricity production in a particular region. In areas with low-polluting energy sources, EVs typically have a life cycle emissions advantage over conventional gasoline or diesel vehicles. However, in regions heavily dependent on conventional electricity generation, such as coal plants, the emissions benefit of EVs may be less significant.
EVs offer a strong fuel-to-cost advantage over their conventional counterparts. They have flexible charging options, as they can be charged at home, the workplace, or public charging stations. The high efficiency of electric-drive components in EVs results in reduced fuel costs and improved fuel economy.
The electrification of the transportation sector goes beyond cars and includes bikes, motorbikes, buses, freight trains, tractors, and heavy trucks. This silent revolution contributes to cleaner air, reduced dependence on oil, and quieter cities.
While there are concerns about the environmental impact of EV battery disposal and manufacturing, advancements in battery technology are leading to improved performance, reliability, and reduced environmental impacts. The expansion of renewables and the increasing prevalence of renewable energy sources contribute to addressing concerns about emissions during the lifetime of EVs.
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The cost of electric vehicles
There are several reasons for the higher upfront cost of EVs. Battery technology is currently the most expensive part of an EV. However, this is expected to become more affordable as manufacturers improve the technology and produce more EV models.
Despite the higher upfront cost, EVs promise savings over time. They are cheaper to maintain as they have fewer mechanical parts and do not need oil changes or tune-ups. They also offer significant fuel cost savings. A 2018 study by the University of Michigan's Transportation Research Institute found that the average cost to fuel an electric car was $485 a year, compared to $1,117 for a gas-powered vehicle. This is because EVs are more efficient at traveling a mile compared to a gasoline internal combustion engine.
It is worth noting that charging an EV at home will cause electricity bills to rise, but this cost can be mitigated by taking advantage of lower electricity rates during off-peak hours, which many EVs can be programmed to do automatically. Additionally, the federal government offers qualified buyers electric car incentives of up to $7,500 for select new fully electric, plug-in hybrid, and fuel-cell vehicles, further reducing the cost of EVs compared to their gas counterparts.
When considering the cost of EVs, it is important to factor in the potential for future savings, especially as the market grows and prices become more competitive.
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Electric vehicle stocks to watch
The electric vehicle (EV) industry is experiencing unprecedented growth, driven by technological advancements, environmental concerns, and shifting consumer preferences. With that in mind, here are some electric vehicle stocks to watch:
Tesla (NASDAQ: TSLA)
Tesla is a force in the global EV industry and is the brand most associated with electric vehicles. The company has a huge chunk of the marketplace, with predictions of nearly 1.8 million vehicle deliveries across 2024. Tesla produced more than 250,000 vehicles in the second quarter and is on track to produce one million electric vehicles in 2022.
NIO (NYSE: NIO)
NIO is a Chinese electric vehicle manufacturer known for its premium electric SUVs and innovative battery-swapping technology. The company is expanding its product line and geographical presence, with recent entries into European markets. NIO delivered a record 61,855 units in Q3 and estimates it will have up to 75,000 EV deliveries in Q4 of 2024, more than doubling its 2023 deliveries.
Lucid Motors (NASDAQ: LCID)
Lucid Motors is scaling production of its first model EV, the Lucid Air electric vehicle. The high-end luxury sedan was named the MotorTrend 2022 Car of the Year and has an EPA estimated range of over 500 miles and 1,000 horsepower. Lucid recently announced a partnership with the government of Saudi Arabia, which has committed to purchasing up to 100,000 Lucid electric vehicles over ten years.
Rivian Automotive (NASDAQ: RIVN)
Rivian is an EV automaker building sport utility and pickup vehicles at its Illinois manufacturing facility. The company has a partnership with Amazon to build electric last-mile delivery vans. Rivian is also building a nationwide charging network across 600 sites in North America, with plans to match its charging network with 100% renewable energy sources.
Canoo (NASDAQ: GOEV)
Canoo, in partnership with Walmart, plans to roll out its lifestyle delivery vehicles in 2023, with the deal including an initial purchase of 4,500 all-electric delivery vehicles and an option to buy an additional 10,000 units.
Global X China Electric Vehicles ETF
This fund invests in Chinese companies listed on the Hong Kong, Shanghai, or Shenzhen exchanges, including BYD, Sunwoda, EVE Energy, and Ganfeng Lithium.
Nikola (NASDAQ: NKLA)
Nikola is a US manufacturer that focuses on zero-emission battery-electric and hydrogen fuel-cell vehicles, with headquarters in Arizona. The company develops EV drivetrains, components, energy storage systems, and hydrogen station infrastructure solutions. Its models include heavy-duty vehicles such as the Nikola Tre daycab semi-truck.
XPeng
XPeng is a Chinese company that designs, develops, manufactures, and retails smart electric vehicles across China. Its models include the compact G3 SUV and four-door P7 SUV. XPeng also provides maintenance, charging, vehicle leasing, and ride-hailing services and is a developer of autonomous vehicles.
Kandia Technologies
Kandia Technologies is a Chinese EV and battery manufacturer in its early growth stages. Its products include EV parts, products, and off-road vehicles such as ATVs, utility vehicles, and go-karts.
General Motors
General Motors is an established manufacturer headquartered in Detroit, US. While it primarily produces cars with combustible engines, it has invested heavily in cleaner energy in recent years. Operating under brands such as Chevrolet, Cadillac, GMC, Buick, and Opel, GM aims to translate its large automotive market share into the emerging EV segment.
It is important to note that investing in stocks requires careful analysis of financial data to understand a company's true worth. The information provided here should not be considered financial advice, and independent professional advice should be sought before making any investment decisions.
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Electric vehicle market growth
The electric vehicle (EV) market is experiencing significant growth and development worldwide. This growth is driven by several factors, including customer preferences for environmentally friendly transportation options, government initiatives and incentives, advancements in battery technology, and local special circumstances.
One of the main reasons for the increasing popularity of EVs is the growing concern for the environment and the need to reduce carbon emissions. Customers are becoming more conscious of their ecological footprint and are opting for greener transportation options. EVs offer a cleaner and more sustainable alternative to traditional gasoline-powered cars, making them a preferred choice for environmentally conscious consumers. Additionally, the rising cost of fuel and the desire for energy efficiency have also contributed to the rising demand for EVs.
Government initiatives and incentives have played a crucial role in fostering EV market growth. For example, the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme in India, which includes purchase incentives and tax benefits, has boosted demand. Similar initiatives have been implemented in other countries, such as subsidies for domestic battery manufacturing and lower import and excise taxes, further stimulating EV sales. China, in particular, has experienced significant growth in EV sales, becoming the largest auto exporter in the world in 2023, with 1.2 million EVs exported.
In addition to government initiatives, advancements in battery technology have also contributed to EV market growth. Improvements in battery performance, range, and energy density have made EVs more attractive to consumers. Moreover, the development of charging infrastructure, particularly in densely populated countries like Japan and some European nations, has increased the convenience and practicality of owning an EV.
The EV market is also influenced by underlying macroeconomic factors, such as the availability of raw materials for battery production. Countries with abundant reserves of minerals like lithium, cobalt, and nickel have an advantage in EV production. Local carmakers have maintained a strong presence in the market, supported by advantageous import tariffs, with local brands accounting for a significant portion of EV sales.
The EV market is expected to continue its growth trajectory, with projected revenue of US$828.6 billion worldwide in 2025 and a steady annual growth rate leading to a market volume of US$1,084.0 billion by 2029. This growth will likely be driven by sustained consumer demand, technological advancements, and supportive government policies promoting the adoption of EVs.
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Electric vehicle maintenance and charging
Electric vehicles (EVs) are becoming an increasingly popular alternative to traditional combustible engine vehicles. With this shift, the market for EV charging infrastructure is also growing.
Maintenance and Repair
Maintenance and repair services for EV charging stations are essential to ensure that the stations are running smoothly and efficiently. These services can be provided by a team of technicians who are knowledgeable about the technical and logistical issues that may arise after installation. Some common maintenance practices include storing charging cables securely, periodically checking parts, and keeping the equipment clean.
Charging station hosts should be prepared for potential hardware failures, which can occur due to issues with input current, fuses, breakers, charging connectors, wires, or display screens. These issues can be especially prevalent in harsh environments or with repeated use over time. It is important to establish clear maintenance contracts with specified response times and uptime requirements to address any necessary repairs.
Charging Infrastructure and Costs
The costs of operating a charging station include electricity, maintenance, and any applicable networking fees. The electricity costs depend on the type of equipment, time of day, and length of use. Charging station hosts can choose from various pricing structures, such as by kilowatt-hour (kWh), by session, by length of time, or through a subscription.
Utilization data, which can be provided by most charging networks, is crucial for tracking progress toward emissions and energy goals, evaluating pricing structures, and determining the need for additional infrastructure in the area.
Service Providers
Several companies, such as Smart Charge America and Utility Partners of America (UPA), offer installation, maintenance, and repair services for EV charging stations. These companies have experienced technicians who can handle hardware issues, provide troubleshooting, and ensure that charging stations are functioning optimally.
Investment Opportunities
When considering investment opportunities in the EV sector, it is important to look beyond vehicle manufacturers. Companies like Aptiv, which focuses on electric vehicle architecture and autonomous driving, and Kandia Technologies, a Chinese EV and battery manufacturer, offer unique investment prospects.
Additionally, funds like the Global X China Electric Vehicles ETF provide exposure to Chinese EV companies listed on the Hong Kong, Shanghai, or Shenzhen exchanges. For those interested in the broader ecosystem, the Renewable Energy basket offers investment in US companies within the renewable energy sector, including manufacturers of battery cell systems essential for EV production.
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Frequently asked questions
Some of the top-performing electric vehicle stocks include Tesla, Toyota, Apple, BYD, XPeng, Nikola, Kandia Technologies, and Canoo.
The electric vehicle industry is experiencing significant growth, with an expected compound annual growth rate (CAGR) of 25.6% from 2019 to 2026. Investing in this sector can be attractive as government legislation and initiatives are supporting the industry's growth. Additionally, electric vehicles are expected to create over 1 million jobs, and companies may benefit from tax credits and incentives.
It is essential to research and understand the companies and industries within the electric vehicle sector. Investors should consider market capitalization, sales and earnings growth, cash flow, and the cost of production. Additionally, the use of cutting-edge technology in electric vehicle manufacturing requires companies to meet technological standards, and investors should consider this capability.
Electric vehicles have higher initial purchase prices than traditional petrol or diesel cars. However, they offer long-term cost savings due to lower fuel, maintenance, and emission-related charges. They are particularly suitable for short to medium-distance commutes and can save money on congestion charges in certain cities.
Investors can consider not only electric car manufacturers like Tesla but also companies that supply parts and components. For example, NIDEC is a dominant supplier of electric motors, and BYD develops batteries for electric vehicles. Additionally, funds like the iShares Self-Driving EV and Tech ETF (IDRV) offer exposure to various industries related to electric vehicles and information technology.
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