Has the spectacular profits outlook for electric vehicle (EV) stocks been greatly exaggerated?
The rapid share price growth of EV stocks like Tesla would suggest that the market thinks ‘no.’ The massive investment that the world’s major autobuilders are making in the field of low-emissions vehicles also suggests that the market is set for explosive growth.
However, I need to address the possibility that economists and industry experts could be overestimating the rate at which EV sales are set to grow. And this could have a significant impact on my wealth if I decide to buy shares with exposure to the EV market.
The case against EV adoption
It’s true that EV sales are rocketing right now. According to the Society of Motor Manufacturers and Traders, more battery-powered vehicles were sold in 2021 than in the previous five years combined.
But there’s still a lot of reluctance among drivers to trade in their gas guzzlers for one of these next-generation cars.
As Auto Trader commented: “While there are clear environmental advantages to the use of electric cars, it would be naive to assume there aren’t also barriers to owning, driving and charging one.”
Concerns over the distance that EVs can cover versus the range of a petrol or diesel motor remain. They’re a big obstacle for many buyers. So are anxieties of charging point availability away from the home. This means EV stocks may take some time to really pay off.
Why I think sales will surge
I don’t have a crystal ball. All I can do is make an educated guess based on a complex blend of data. And I share the broader view that EV sales will rocket in the next couple of decades, so I feel I need to ensure I have exposure in my stocks portfolio.
After all, worsening fears over the climate crisis are a major driver for EV demand. And in my opinion, such concerns are only going to grow as extreme weather patterns intensify.
What’s more, the cost of building an EV is falling and is tipped to continue over the medium-to-long term as battery manufacturing costs decline.
Stocks I’d buy for the EV boom
Most importantly, though is the fact that new petrol and diesel vehicle sales are to be banned in the coming years. Naturally this will boost demand for cars running on alternative energy sources.
The UK plans to stop selling cars with internal combustion engines by 2030. The US, China and the European Union are looking to follow suit in 2035 too.
I’ve invested my own cash to make money from the EV revolution. I bought car component builder TI Fluid Systems as a way to do this. And I’m thinking of increasing my exposure to the EV industry as well.
Electric vehicle stocks Tesla and Nio are two very-attractive buys for me. But I can also buy companies that produce essential commodities for the manufacturing and running of these vehicles. Lithium stock Zinnwald Lithium and copper producer Antofagasta for example could see profits jump over the next decade.
British car retailers like Lookers might be other great stocks for me to buy for the EV revolution. There are plenty of other EV stocks for me to choose from in the US and the UK too.
