EV Stocks: The Lowdown On The Market And How To Navigate It As An Investor
Key takeaways
- The EV industry is taking off and is set to expand in the next decade
- Aside from EVs, stocks on batteries and infrastructure are also doing well at the moment
- But there are some tensions and pain points in the industry that savvy investors should take heed of
The world is ready for electric vehicles (EVs) to take over – and so is Wall Street. The industry has swelled in size since Tesla disrupted the car industry, with EVs set to take on trucks and buses in the near future. The infrastructure for EVs is ramping up too, presenting plenty of opportunities for the would-be EV investor.
In Wall Street’s eyes, it’s a burgeoning sector with plenty of potential returns in the long run. But for a regular investor, it can be difficult to know where to start. We’ve laid out the industry’s current position, what it’s composed of and the headwinds it’s facing that could scupper future gains.
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The EV industry is growing
The International Energy Agency (IEA) published a report last year predicting EV sales to account for 60% of the new car sales market by 2030. Given EVs made up 16% of the market share last year, that’s a lot of growth that’s set to happen.
Of course, the most well-known company in the space that’s given life to the new industry is Tesla. The stock has gained a mind-boggling 853% in five years, lightning speed ahead of the S&P 500, but it’s still 44% down from its top-ever price of over $400. Tesla has its own charging station network and is also looking to secure its own lithium supply with a $375 million lithium refinery site set to open in Texas.
But it’s not without competitors now as the major vehicle players have moved into the space. Ford plans to manufacture 2 million EVs by 2026, while General Motors
GM
China also has a huge market after the Chinese government introduced tax incentives for households to create a market boom. BYD is the major EV supplier in China, with the stock skyrocketing nearly 300% in five years. Sales were strong in 2022, but 2023 has seen a slump as those all-important government subsidies have disappeared.
The wider EV investing scene
There’s more to the EV market than the vehicles: an entire ecosystem around EV product manufacturing presents opportunities for investors. Here are the main two to watch in the coming years.
Lithium
Albemarle is the biggest lithium producer in the world; with a mine based in Nevada, it’s also the only operational lithium mine in the U.S. at the moment. While the stock price has lost roughly 5% in value over the last year, it’s grown a massive 109% in a five-year period. Not too shabby.
Other lithium mines or refineries have had similar trajectories. Piedmont Lithium has dropped 21% in value over 12 months but has made a whopping 400% increase in five years. Meanwhile, Lithium Americas plunged nearly 32% in the same period but has grown 236% since 2018.
The price of lithium has dropped by over half in 2023, so there is what looks to be a short-term drop in returns currently, but analysts have this pegged as a blip thanks to unique circumstances rather than a full-blown trend.
EV charging stocks
As more EVs come onto the roads, the infrastructure to charge the vehicles should also scale up. EV charging companies are a major part of this, and there are a number of important players in the space.
ChargePoint Holdings operates the biggest network in the US and operates on a pay-to-play basis for EV companies without their own infrastructure. The stock hasn’t performed well since going public – it’s lost 40% in price in the last 12 months – but it has the potential to increase as EV demand grows.
Other EV charging companies are looking lackluster at present. Evgo lost 43% of its share price in the same period, and Blink Charging is down 66%.
This relatively untested part of the stock market has yet to pick up steam thanks to lower EV adoption rates in the US. There’s potential for these stocks to both soar and plummet, which may put off more risk-averse investors.
Potential pitfalls for investors
The real question is whether EV adoption will be as widespread as Wall Street is betting on, especially as EVs are prohibitively expensive for households despite moves like Tesla’s recent price drop. A relatively new industry opens a window for massive returns and huge losses.
The geopolitical landscape is another factor. If relations between the US and China sour, this could disrupt the EV market and impact share prices. China controls 60% of the world’s lithium refining, putting it in a prime position to scupper US EV manufacturing should it choose to.
The US is slowly clawing back its lithium capabilities – new sites are set to open in North Carolina, Arkansas and California in the next five years – but until then, the US is significantly behind in the market.
The bottom line
The world is looking to go greener, and EVs are the car industry’s future. As long as governments still want gas-guzzling vehicles phased out, EV demand will only grow over time.
The EV industry is set to take the world by storm, making it an attractive option for investors. But be sure to research which part of the market best suits your risk appetite, given the somewhat bumpy road manufacturing EVs faces now and in the future.
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