With government policies and high levels of investment boosting electric vehicle (EV) production, many investors are looking to learn about this market.
The market includes the cars, parts, raw materials and infrastructure. There is broad participation from startups and newly public companies to the automotive giants making inroads in EVs.
Many parts of the EV market are still relatively speculative and investing involves market risk, so investors should conduct their own research in the EV market to understand the risks.
When you hit the road, are you behind the wheel of an electric vehicle (EV)? Although EVs have been cruising American highways for nearly 20 years, the EV market has recently experienced a growth spurt. $Tesla Motors(TSLA)$ $BYD Co., Ltd.(BYDDY)$
1. Global EV sales grew significantly from 2022 to 2023, marking a 35% year-over-year increase.
2. In Q1 2024, EV sales grew by 25% compared to Q1 2023.
3. The International Energy Agency projects that this trend will continue and that EV sales in the U.S. could account for almost one fifth of total passenger car sales by 2035.
4. EV production has been boosted by the government and investors alike – relevant set the goal that half of all vehicles sold in the U.S. by 2030 be either fully electric or hybrid and companies invested nearly $85 billion into the EV industry in 2021 and 2022.
5. As of 2022, there were more than 130,000 charging stations in the U.S., but if EV production ramps up as projected, there will be a pressing need for many more. The administration aimed to build a network of 500,000 chargers by 2030.6 As of February 2024, there were over 61,000 public EV charging stations across America, and that number is only expected to grow.
With all these factors in play, it’s easy to see why many investors are eager to learn about the EV market.
Parts and raw materials
If you want to understand where to put your money within the EV industry, you may want to start with looking under the hood. It’s important you have a sense of what parts and materials are needed to make and power electric vehicles so you have the full picture of where your investment can go.
Batteries are the most integral part of an EV – so, what makes up a battery? Lithium is a key metal in EV batteries – in fact, the majority of manufacturers of EVs and plug-in hybrid cars use lithium-ion batteries. There’s also copper, nickel, iron, silver, aluminum and several others. These materials are crucial for creating electric vehicles and are expected to increase in demand as EVs do.
Companies involved in mining and processing the aforementioned materials are another important piece of the EV industry. With metal prices on the rise for crucial metals like lithium, EV companies are investing in bolstering their supply chain. There is also a need for more mines as demand for electric vehicles continues to rise.
Cast a wide net: From blue-chip stocks to startups
You don't have to invest in an electric vehicle company to invest in electric vehicles. Certainly, you can look to legacy automakers as you make your investment given the expectation that they will be releasing new EVs to market in the coming decade. However, you can also look at startups, foreign companies and companies that are just going public. Also, don’t forget to look at companies in the charging infrastructure space that manage everything from the construction of physical charging stations to overseeing the rollout of charging networks that can operate seamlessly across the country.
Do your research before you invest
At this point in time, it’s difficult to determine which specific companies are best positioned in the EV market – there are a lot of players in the industry, and it’s hard to discern which ones may rise to the top of the heap in the coming years. This is part of what makes investing in the EV industry risky – but it may be worthwhile for investors willing to put some time into research and building a diversified EV portfolio.
Keep in mind that not all EV companies are created equal – some are further along with their technology and developments than others. Do your homework to find out which companies are best positioned for the future. Many EV stocks are still highly speculative and can be suitable for investors who have a higher risk tolerance.
Exchange-traded funds (ETFs) are an option for gaining exposure to a variety of securities in the EV world, including battery makers and clean energy companies, alongside tech companies that make the communications and charging systems that EVs require to function. While some ETFs are comprised exclusively of companies that are just looking to expand into the EV world, others allow investment into blue-chip “legacy” automotive stocks. ETFs offer streamlined diversification, thus exposing you to less risk than you would be if investing in a single company or stock. That being said, please be sure to keep in mind that diversification does not guarantee a profit or protect against a loss. Consider speaking to an advisor if you need help making an investment decision.
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