Serena ChenTesla Inc. is frequently the first business that people think of when discussing electric vehicles (TSLA). Even though Tesla has established itself as a leader in the industry, technology has changed a lot and there is a lot of focus on reducing emissions around the world.
This implies that, compared to when Tesla’s first production vehicle left the plant in 2008, there are now a lot more opportunities for investors to get exposure to electric vehicles (EVs) and green transportation.
This article looks at a variety of investment strategies, from buying shares directly from EV manufacturers to taking a more indirect approach by buying stock in important suppliers of raw materials or component makers.
In a Nutshell
- As the globe concentrates on lowering emissions and moving toward carbon neutrality, electric vehicles are growing in popularity.
- Investment options can involve purchasing stock directly from EV producers or pursuing a more decentralized route by purchasing stock in raw material or component producers.
- The usage of EVs and the reduction of emissions are being promoted by governments all over the world, which will have a huge impact on the financial markets.
- Manufacturers of all electric vehicles include NIO Inc., Rivian Automotive Inc., Lucid Group Inc., and Tesla. Established automakers like General Motors are converting to electric mobility as well.
- The Inflation Reduction Act, a spending program worth more than $430 billion that Congress passed in 2022, intends to boost domestic manufacturing and energy output while lowering carbon emissions by almost 40% by 2030.
Reducing Carbon Emissions
Plans to attain carbon neutrality in the ensuing decades are a topic that predominates the mission statements of almost every major carmaker in the world, whether as part of the COP26 declaration on accelerating the transition to 100% zero emission vehicles and vans or as a stand alone accord.
I really do encourage other manufacturers to bring electric cars to market. It’s a good thing, and they need to bring it to market and keep iterating and improving and make better and better electric cars, and that’s what going to result in humanity achieving a sustainable transport future. I wish it was growing faster than it is.
Elon Musk
Additionally, the move toward carbon neutrality extends beyond passenger cars; it is a top priority for the whole transportation industry. For instance, a memorandum of understanding (MOU) requiring all new sales of medium and heavy duty vehicles, such as trucks and buses, to produce zero emissions by 2040, with intermediate targets along the way, was signed in 2021 by a number of nations, subnational governments, and automakers. The American nonprofit organization CALSTART, which promotes clean transportation technology, started this MOU.
President Biden set goals for 50% of all new passenger cars and light trucks sold by 2030 to be zero emission vehicles by issuing an executive order in August 2021, which put the US on the path to reducing emissions. Investors won’t be able to ignore the tsunami of momentum as the United States and other governments across the world put their plans for a cleaner future into action. The massive investments and adjustments that will be made over the next few decades will result in societal changes that will have a significant impact on financial markets for many years to come.
Emily RobertsThe Inflation Reduction Act (IRA), a $430+ billion spending package approved by Congress in 2022, aims to increase domestic manufacturing and energy production while lowering carbon emissions by about 40% by 2030. Individuals would be eligible for tax credits of up to $7,500 for brand new electric vehicles and up to $4,000 for used electric vehicles under the new bill. However, these credits would be subject to limitations on the amount of the car bought and the buyer’s income.
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Shares
There are various sorts of companies on the main exchange that investors looking for exposure to the electric vehicle and green transportation segments can look to. Manufacturers of fully electric vehicles and those who produce essential parts utilized in their construction are both on the spectrum of options.
Producers of Pure Play Electric Vehicles
There aren’t many publicly traded automakers who produce only electric vehicles, but the number is rising. Again, Tesla is the most well known brand. In the fourth quarter of 2021, it reported record quarterly deliveries of 308,600 electric vehicles. The business shipped 936,172 vehicles in 2021.
Tesla CEO Elon Musk stated on Twitter that he hopes to boost Tesla’s yearly vehicle sales to 20 million “probably before 2030.” One of the reasons Tesla is mentioned in almost every conversation on the future of electric vehicles is because of the leadership and innovation displayed by the company in recent years. Manufacturers of all electric vehicles include Lucid Group Inc., Rivian Automotive Inc., and NIO Inc. (LCID).
Established Automakers
As was already said, leading manufacturers have quickly adapted to the move toward electric mobility and are already establishing themselves as market leaders. The initiatives being undertaken by automakers are illustrated by the following examples.General Motors (GM) said in January 2021 that it wants to be carbon neutral by 2040 and has set science based goals to make this happen. The company said that over the next five years, it would spend $27 billion on research, design, and production of electric and driverless cars. The money will be used to fix up the building, develop more battery technology, and buy different parts for making things.
By 2023, the BMW Group (BMWYYY) hopes to have 13 fully electric vehicles on the market. This will put the business on schedule to provide 25% of BMW Group vehicles that are electric by 2025, and it anticipates that number to climb to 50% by 2030.
BMW plans to produce 10 million electrified vehicles over the next ten years, giving you an indication of the scope.Between now and 2030, Toyota Motor Corp. (TM) plans to introduce 30 models and spend the equivalent of $30 billion on battery powered electric vehicles. By 2030, the business wants to sell 3.5 million more battery electric vehicles annually around the world.
In addition to adopting an electric vehicle strategy, Ford Motor Co. (F) will invest $22 billion in electrification through 2025. Aside from a few items that are already on the market, such the F-150 Lightning pickup truck, the all electric Mustang Mach E, and E Transit van. Although the adoption of electric technology in heavier vehicles, like trucks and buses, is still in its infancy, statements of this nature might be viewed as a sign that the shift has started.
Integral Parts for Manufacturing Electric Vehicles
The creation of electric vehicles can be funded in a variety of indirect ways. Examples include batteries, light detection and range sensors, semiconductor chips, and the numerous materials required to make everything function properly. Investors may even be interested in growing their exposure to lithium and cobalt miners as they go further down the supply chain because these metals are essential to modern battery technology.
Infrastructure
The White House published the Biden Harris Action Plan for Electric Vehicle Charging in December 2021. The strategy aims to boost American efforts to take the lead in the electric future. The action plan highlights the efforts government agencies are taking to encourage the creation and introduction of chargers in American towns and cities all around the nation. It is crucial to understand the investment potential for charging stations and the various energy management solutions that are now offered or in development given the amount of electric vehicles that will be on the road in the upcoming decades.
Exchange Traded Funds (ETFs)
One of the several exchange traded funds that are available may be of interest to investors looking for diversified exposure to the electric car sector (ETFs). ETFs can range from those that are narrowly focused on electric vehicles and their essential components to those that are more broadly focused on cutting edge technology, depending on the goals of the investors. Here is a sample of some of the current ETFs that are available, for illustration only:
- Global X Autonomous & Electric Vehicles ETF (DRIV)
- iShares Self Driving EV and Tech ETF (IDRV)
- KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)
- Global X Lithium & Battery Tech ETF (LIT)
- SPDR S&P Kensho Smart Mobility ETF (HAIL)
Wrap Up
Although electric vehicles have been around for a while, rising competition, quick technology advancements, and current governmental goals indicate that electric vehicles are unquestionably the way of the future in terms of mobility. There are many opportunities for investors to get involved with electric cars and environmentally friendly transportation.
While some may opt to purchase stock in well known producers of electric vehicles, others could be more interested in what startups are doing. Others may look into the suppliers of vital EV parts like batteries and sensors, or even the raw materials used to make them. Investors might search for certain ETFs that incorporate these themes if they want to adopt a more diversified strategy.
There are many chances for investors in the future of EVs and green transportation, regardless of one’s investment style.
FAQs
A vehicle powered by an electric motor rather than an internal combustion engine is referred to as an electric vehicle. The motors are powered by electricity that is stored in batteries, which may be recharged by connecting them to an electrical power source.
Because EVs produce no emissions and can aid in lowering carbon emissions and air pollution, they are gaining attention around the world. Additionally, EVs are a crucial element in achieving the global goal of carbon neutrality.
Investing in raw material suppliers or component manufacturers is a more indirect EV investment strategy than purchasing shares directly from EV manufacturers.
The companies Tesla, Lucid Group Inc., Rivian Automotive Inc., and NIO Inc. are among those that produce just electric vehicles.
Investing in EVs can help achieve environmental and social impact objectives and expose you to a developing market. Government programs to encourage EV use and cut emissions will also probably benefit the market and the financial performance of businesses in the field.
A $430+ billion spending package known as the Inflation Reduction Act was approved by Congress in 2022. By 2030, it wants to cut carbon emissions by about 40% while boosting domestic industry and energy generation. Additionally, it gives people tax breaks for buying electric cars.
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- Tesla, Investor Relations – Tesla Motors Begins Regular Production of 2008 Tesla Roadster
- Global Commercial Drive to Zero Program – Global Memorandum of Understanding on Zero-Emission Medium- and Heavy-Duty Vehicles
- The White House – Executive Order on Strengthening American Leadership in Clean Cars and Trucks
- U.S. Senate – Summary: The Inflation Reduction Act of 2022
- Washington Examiner – Inflation Reduction Act Promises $7,500 Vehicle Credits After Ford and GM Raised Prices
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- Twitter – Elon Musk, Sept. 28, 2020, 3:48 AM
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- Xe – Convert Japanese Yen to U.S. Dollars
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- Toyota Motor Global – Video: Media Briefing on Battery EV Strategies
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- The White House – Fact Sheet: The Biden–Harris Electric Vehicle Charging Action Plan
