Electric vehicle (EV) stocks have been among the best-performing shares in recent years.
But don’t just take my word for it. According to Saxo Markets, its ‘Green Transformation’ stocks basket is one of the best-performing of the past half a decade.
The basket — a financial instrument whose holdings include electric vehicle stocks Tesla Inc (NASDAQ:TSLA), NIO Inc and Rivian Automotive — has soared 365% in value over the past five years.
Such stocks have suffered more recently as supply chain problems and fears over the global economy have grown. But research from RBC Wealth Management suggests that investing in electric car stocks remains a great idea for long-term share investors.
A bright outlook for EV stocks
In a recent report Frédérique Carrier, head of investment strategy in the British Isles and Asia at RBC, commented that:
“Demand for EVs will likely soar, underpinned by national targets to phase out internal combustion engine cars, manufacturers’ efforts to electrify their fleets, the falling cost of ownership, and improved consumer perceptions.”
Carrier said that several key factors will supercharge EV sales in the years ahead. These are:
- Increasing global legislation. Governments around the world are accelerating steps to phase out the use of internal combustion engines (ICEs). These include tightening emissions regulations and EV purchase incentives in Europe and North America.
- Rising manufacturer targets. Some automakers are planning to electrify their model ranges even ahead of government targets, Carrier noted. This gives consumers a greater number of clean vehicles to choose from.
- Falling ownership costs. Boston Consulting Group estimates that the five-year total ownership cost should move close to parity of a petrol or diesel car by 2030. This considers purchase price, maintenance cost, miles driven, and fuel or electricity costs.
- Changing consumer attitudes. Carrier said that in China, for example, “the success of emerging manufacturers such as NIO and Xpeng… [is] convincing consumers of the staying power of these new cars.”
Time to buy Tesla?
Buying electric car stocks isn’t necessarily a slam dunk for investors, though. Let’s look at Tesla for example, an EV stock that has sunk in value in 2022.
Supply chain problems are severe and last month the EV manufacturer slashed its full-year delivery forecast. It now expects to have produced 242,000 vehicles in quarter two, down from a prior estimate of 295,000.
Sales at Tesla are also under threat as a possible recession creeps up and consumer spending sinks. Finally, competition from other EV-only manufacturers and established carmakers is also heating up.
Having said all that, I still believe Elon Musk’s company could prove a brilliant long-term investment. The company has market-leading brand recognition, helped by the widely-praised performance of its models, which are packed with new technology.
I also like Tesla’s ambitious plans to build a global network of gigafactories. It’s a programme that could supercharge profits growth as EV sales take off.
Electric car stocks give investors a chance to significantly boost returns from their shares portfolio. Tesla is just one I believe could help me improve my wealth over the next decade.
