November 30, 2022
Retail shareholders investing in electric vehicles are trying to catch lighting in a bottle by tapping into one of the fastest growing – and volatile – markets seen in decades. While the growth of the electric vehicle market is sure to soar, finding the right company to invest in and timing the market is always difficult and it remains to be seen whether individual investors plug into electrified earnings or shocking losses.
There is little doubt where the overall electric vehicle market is headed. Sales of electric vehicles (EVs) doubled in 2021 from the previous year to a new record of 6.6 million, according to the International Energy Agency. According to its Global Electric Vehicle Outlook, in 2012, just 120,000 electric cars were sold worldwide. Last year, electric cars made up 10% of global car sales, four times the market share in 2019.
There are now more than 16.5 million electric cars on the road, triple the number in 2018. Global sales of electric cars have kept rising strongly in 2022, with 2 million sold in the first quarter, up 75% from the same period in 2021.
The electric vehicle market is just over 20 years old, yet there are myriad opportunities for the retail investor, from the mining companies that harvest the components needed to make the batteries, to the battery manufacturers, to companies supplying the charging stations and other components, to the automakers who put it all together.
Within each of those investing categories are multiple options.
Let’s start (literally) from the ground up. Lithium is what provides the charging power for the batteries in electric vehicles and there are several publicly traded mining companies that specialize in the soft metal. Albemarle Corp. (Tii:ALB) is a specialty chemicals manufacturing company based in Charlotte, N.C. and Livent Corp. (Tii:LTHM), based in Philadelphia, manufactures lithium for use in a range of lithium products, which are used primarily in lithium-based batteries, specialty polymers and chemical synthesis applications.
Next up are the batteries themselves. According to an industry analysis report by Markets N Research, the global lithium-ion battery market was valued at $43.5 billion in 2021. The market is expected to grow at a compound annual rate of nearly 23% from 2022 through 2028 and reach a valuation of about $150 billion by the end of the decade. Publicly traded makers of lithium EV batteries include QuantumScape (Tii:QS), Panasonic (Tii:PCRFY), Microvast (Tii:MVST) and BYD (Tii:BYDD), to name just a few.
Retail investors might also consider automotive component makers. A few companies involved in components for electric vehicles include: BorgWarner (Tii:BWA), which makes transmission systems; Amphenol Corp. (Tii:APH), a maker of electrical and fiber-optic connectors; TE Connectivity (Tii:TEL), which provides a range of connector systems, sensors and relays; and Aptiv (Tii:APTV), a supplier of autonomous driving and safety technologies, components and wiring. Hyliion Holdings Corp. (Tii:HYLN) is a manufacturer of EV drivetrains.
Of course, there are the automobile companies themselves for individual investors to vet. Car companies involved in the production of EVs fall into two categories – traditional automakers who are entering the EV market and companies like Tesla (Tii:TSLA) and Rivian (Tii:RIVN) that were launched to exploit the EV market.
We will start with the EV-first companies. While Tesla and Rivian are by far the largest, a number of other foreign and domestic companies are worth watching. They include Li Auto (Tii:LI), NIO (Tii:NIO), Lucid Motors (Tii:LCID) and Polestar (Tii:PSNY), to name a few.
Traditional automakers have huge plans for EVs as well. GM (Tii:GM) plans to sell 400,000 EVs by 2023 and Ford expects 50% of its sales to be EVs by the end of the decade. Volkswagen is targeting 70% of EV sales in Europe and 55% of sales in the U.S. by 2030. Daimler’s Mercedes-Benz will continue its massive investment in electric vehicles over the next decade. The company said all of its new vehicle platforms will be all electric by 2025.
The investment opportunities for retail shareholders doesn’t end there. Blink Charging (Tii:BLNK) makes EV charging stations and Luminar (Tii:LAZR) and Velodyne Lidar (Tii:VLDR) both make autonomous driving technology. And if you would like to go from cutting edge to bleeding edge, companies like Ballard Power Systems (Tii:BLDP) and Plug Power (Tii:PLUG) are developing hydrogen fuel cell vehicle technology.
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