Why Should You Invest in EV Stocks?
Electric Vehicle (EV) Stocks have been soaring in the last few days. Companies such as Tesla, XPeng, and Lordstown are having their average share prices rise around 30%. This is also a good time to invest in these stocks. You might be asking, “Why should I invest in EV stocks? What should I do if I decide to invest in EV stocks?” While we can say yes that you should invest in them, this blog post should provide an insightful explanation as to why and what you should do when investing in them.
While EV cars are certainly nothing new, the demand for them should not be underestimated as they will one day replace gasoline and diesel cars. The recent rise in EV stocks is showing the beginning of the electric car becoming a new norm for everyday life.
An article from Barron’s explains the reasons for EV stocks’ incredible surge. One major reason is because of Tesla’s success. Tesla has set the standards for EV manufacturers to follow. Recently, their shares have gone up by 21% and they will soon be added to the benchmark S&P 500 in December. This success would surely inspire companies to improve and compete with Tesla.
Another major reason for the rise is the growing demand for EVs. General Motors (GM) wants to sell over a million by 2025 and plans to present new forms of EVs that are affordable. Investors are noticing these demands and have begun to invest in EVs. This would mean that manufacturers would see a growth in sales and earnings.
Automotive Power Component Stocks
If you want to start investing in EV stocks now, here are four components of the EV industry you should consider buying; the first thing you should buy is automotive power component stocks. According to an article by MarketWatch, companies such as Aptiv and Valeo are leading brands in power components. These are European-based companies that sell charging ports and high voltage connectors. They have seen their earnings grow recently with Aptiv earnings jumping by 12%.
EV Battery Stocks
Another group to invest in is EV battery stocks. Obviously, this is the most important part of an EV and where most of the cost and performance of the vehicle comes from. One of the biggest companies to produce lithium batteries is Panasonic. This should not come as a surprise since the Japanese company is a big name in electronics. Recently, they have partnered with Tesla to produce batteries to make the Model 3 more affordable. Furthermore, Panasonic is planning to invest in Chinese battery operations in order to get involved in the increasing demand for EVs in China.
If you don’t wish to buy batteries, you can opt to invest in the material that creates the batteries, lithium. Although the share prices for lithium have taken a hit in the past two years, companies such as Albemarle are comfortably profitable and have good dividends and earnings. When investing in lithium, it doesn’t matter who the supplier is for the lithium, what matters is whether the vehicle has a battery.
If you find yourself not interested in investing solely in power components or batteries, you can try taking a look at an exchange-traded fund. Granted, there aren’t that many trades that specialize in EV stocks. You can invest in a few trends that help tech firms develop self-driving technologies, as well as helping older companies like Toyota move out of producing gas-powered cars. Some notable trends that are involved in exchange-traded funds include Global X Autonomous & Electric Vehicles ETF (symbol DRIV) and KraneShares Electric Vehicles & Future Mobility ETF (symbol KARS).
One EV company worth looking into is ElectraMeccanica (symbol SOLO), the Canadian manufacturer who created the SOLO, a three-wheeled, single-seat EV. The company is looking to expand its marketing to the United States, Europe, and Southeast Asia. According to a review article by Stocknews, ElectraMeccanica has a good grade in Trading and is rated as Buy & Hold. The fact that the company is competitively priced and environmentally friendly has also helped it grow significantly.
Although they are ranked far below the big names in the auto industry (i.e. Toyota and Tesla), the great things about ElectraMeccanica are taking them on a path to success. Stocknews finalized their overall rating with an A, and say it is a strong investment.
Another company to take a look at is Xpeng (stock symbol XPEV), a Chinese automotive company that is planning to take on Tesla. Recently, their shares have risen by 13.1%, and they have presented a new limited-run model at a major auto show in Guangzhou, China. The company has said they have upgraded their advanced driver-assist systems to include lidar sensors. This would make XPeng the first automaker to include lidar sensors according to CEO He Xiaopeng.
Having said all of that, this can change. We can’t be certain if the shares will continue to go up or start coming down within the coming weeks or months. Obviously, this is due to the world being damaged by COVID-19 and the consumption of automobiles has gone down.
Still, there are predictions that vehicle purchases will rise again in 2021. There are a set of new models coming out that should help increase the interest in EV cars. Should these new models become successful, the stocks will go up even further and would lead to greater capital gains than before.
With all of this information, we have given you reasons to invest in EV stocks and what to do when you are going out to invest in them. While it may not look like it right now, EV cars are certainly going to become the main fuel for cars that will lead us into the future.
Before investing in an EV stock research the management and see if they have a good business plan, experience in developing cars and or EVs, and if their pricing brings good value.
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Ghosh, I. (2020, November 20). SOLO: Is Now the Right Time to Invest in EV Manufacturer Electrameccanica? Retrieved November 23, 2020, from https://stocknews.com/news/solo-tm-pag-is-now-the-right-time-to-invest-in-ev-manufacturer/
Reeves, J. (2019, September 04). Here’s how to capitalize on the electric car revolution — without buying Tesla’s stock. Retrieved November 23, 2020, from https://www.marketwatch.com/story/heres-how-to-capitalize-on-the-electric-car-revolution-without-buying-tesla-2019-09-04
Root, A. (2020, November 20). Tesla, XPeng, Other EV Stocks Are On Fire. This Is Why. Retrieved November 23, 2020, from https://www.barrons.com/articles/tesla-xpeng-other-ev-stocks-are-on-fire-this-is-why-51605901707
Rosevear, J. (2020, November 23). Why Xpeng Stock Is Higher Today. Retrieved November 24, 2020, from https://www.fool.com/investing/2020/11/23/why-xpeng-stock-is-higher-today/