With electric vehicles (EVs) on the cusp of becoming mainstream, many experts are advising that now is a good time to invest in EV company stocks. It’s clear the future of motoring lies in EVs, making EV-related investments is a must for those wishing to stay ahead of the curve. But understanding the EV investment market and where to focus your investment can be difficult.
Sales are high, but so are concerns
Global EV sales reached 6.75 million in 2021, a 108% increase from 2020 sales. Despite that, there has been a widespread reluctance to adopt EV motoring. Range anxiety is one of the key barriers to EV uptake, with many Google search queries relating to electric vehicles on the theme of how easy it is to charge an EV while away from home, how far can one full EV charge take you, and how long doEV batteries last.
Until electric vehicles truly become part of society thanks to the upcoming ban on new combustion engines in the UK in 2030, and motorists understand how and where to charge an EV, these simple issues could hold back the current profitability of the EV market. This means that it may take longer to see a return on investment with EV stocks.
Signs point to sales increasing
So is it worth the gamble? While we can’t say for certain, there are signs that indicate EV investments will be worthwhile. There’s a good environment for sales to increase. To start, there’s gathering pressure for consumers to switch to EVs because of the UK legislation that will cease the sale of cars with internal combustion engines by 2030. In addition to this, the culture of fear over the climate crisis will push the environmentally conscious to make the change to an EV, and the cost of building an EV is actually falling, making them much more available.
What to look for in an EV stock
As for which EV company stocks to invest in – the markets are constantly changing and we recommend thoroughly researching expert advice before investing your money, but there are a few characteristics you can look for in a healthy EV stock.
Firstly, look for a strong track record of earnings growth. Companies that already have a strong foundation to grow from are likely a sounder investment than startups with shaky performance.
Next, check the company’s price-to-earnings ratio. This will show the current share price in relation to the company’s per-share earnings and will help you gain an understanding of how much return you might expect on your investment.
The next thing to look for is an EV stock that shows signs of market outperformance. This is what’s known as “bullish” growth and is usually indicated by a sharply rising chart pattern. Take cues from stock price movement charts.
Which EV models to invest in
While research and expert advice is essential, there are some prominent EV models that those in the EV stock market appear to agree on, and the indicators that they could be wise EV investments.
Tesla:
● Currently the biggest EV seller in the world
● Sold over 1 million Model 3 sedans since 2017
● Became the sixth US company to reach a $1tn valuation in 2021
● Developing high-performance EVs such as the Cybertruck
General Motors:
● An established US manufacturer
● Large automotive market share
● Chevrolet Bolt first EV battery capable for running over 200 miles
● Produced one of the most-sold mini EVs in the world with SAIC-GM-Wulling
Nio:
● Designs, develops and retails high-performance EVs
● Unique, modern elements such as AI and autonomous driving
● Valuation jumped from a penny stock in 2020
Lucid Motors:
● Plans to produce 300,000 cars over the next few years
● Luxury EV reported having the longest range and fastest charger globally
Rivian:
● Established manufacturer and technology company
● Two 2022 EV models – yet to make a profit or revenue
XPeng:
● Smart EV retailer
● Developing autonomous vehicles
● Impressive growth, but be wary of small earnings
Don’t limit your investments to EVs
Not all EV investments need to be in companies that manufacture EV models. In fact, some of the wisest and most consistent investments may be found in companies that produce EV components and elements essential running an EV.
Lithium:
Essential for manufacturing EV batteries, lithium is an increasingly sought-after commodity. Look for stocks in companies such as QuantumScape.
Copper:
A major component in EV production, copper is used for electric motors, wiring, batteries, inverters and charging stations. Demand is set to be substantially impacted by the increase in EV production, putting companies such as Antofagasta on the investment radar.
Battery Packs:
As a separate commodity, companies that manufacture battery packs are set to benefit from the increase in EV demand. While EV batteries do last many years, they will need replacing even if the models themselves do not – meaning companies like Romeo Power will need to exceed the demand for EV sales in order to have a stock of replacement batteries.
EV Retailers:
Most car manufacturers are forbidden by law to sell directly to their customers, so it stands to reason that car retailers will benefit from the rise in EVs in a big way.
Charging Networks:
No charge means no EV – so investing in charging networks that provide nationwide coverage of electric charging points could be wise. By the time the UK legislation comes into force, it would be logical to expect a big increase in charging network usage from companies such as ChargePoint, EVgo and Blink Charging.
