Electric Vehicle Market Now Where Chips Were in ‘90s; Massive Growth Ahead

Governments & Automakers Firmly Behind Growth of Electric Vehicle Industry

Investors in electric vehicle-related stocks should be excited, given the expected significant growth on the horizon.

Allied Market Research predicts that the global electric vehicle market will jump to $802.8 billion by 2027, compared to $162.3 billion in 2019. (Source: “Electric Vehicle Market,” Allied Market Research, last accessed August 23, 2021.)

And that estimate could be on the conservative side, considering the major push by governments and automakers around the world to reduce carbon emissions.

While it’s estimated that the Asia-Pacific electric vehicle market will grow to $357.8 billion by 2027, electric vehicle sales in North America are expected to rise to $194.2 billion.

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I actually think the number could be much higher.

President Joe Biden’s administration is aggressively supporting the adoption of electric vehicles, which will likely be driven by tax credits and rebates.

The Senate-supported, bipartisan, $1.0-trillion infrastructure bill should make EV stock investors happy. The plan calls for tens of billions of dollars to be assigned to the electric vehicle space. This is huge, and should drive electric vehicle-related stocks upward.

Tesla Dominates Electric Vehicles; Others Are Pretenders

The electric vehicle sector is broad and comprises numerous areas, ranging from the raw materials to the software and hardware necessary to power electric vehicles.

At the top of the electric vehicle food chain is Tesla Inc (NASDAQ:TSLA). It’s the leading pure-play electric vehicle company in the world.

Tesla Inc has a proven history of accelerating unit sales, versus the multitude of electric vehicle start-up companies, which are speculative. Tesla has a solid presence in the global electric vehicle space, having the highest market share in China and rapidly picking up in Europe.

Chart courtesy of StockCharts.com

After Tesla, there are the hybrid automakers that are aggressively shifting into making electric vehicles, spending tens of billions of dollars on development.

These include General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F), and Volkswagen AG (FRA:VOW, OTCMKTS:VWAGY).

You may have noticed that I excluded the major Chinese electric vehicle players: NIO Inc (NYSE:NIO) and XPeng Inc (NYSE:XPEV). That’s because the immense regulatory risk and uncertainties in China’s policies make the investment situation unclear.

My view is that the Chinese regulators will not target its domestic electric vehicle plays, but you can’t be sure, given what has occurred recently.

Other Electric Vehicle Stocks to Watch

The building of electric vehicles requires key metals, including copper, aluminum, iron, and minerals that are rarer. Therefore, along with the growth of the electric vehicle industry will be the demand for the raw materials.

The most important raw material is high-grade lithium, which is the key metal used in electric vehicle batteries.

In the lithium space, one of the leading suppliers for electric vehicle batteries is Livent Corp (NYSE:LTHM). The company has been around for years and should benefit from the expansion of the electric vehicle industry.

Chart courtesy of StockCharts.com

Meanwhile, for the electric vehicle market to succeed, the U.S. and other countries will require an extensive network of charging stations.

Assuming that the distance for one charge range is 250 to 400 miles, we’ll need a massive network of charging stations.

To play this, a top stock in the electric vehicle charging sector is ChargePoint Holdings Inc (NYSE:CHPT). The company’s charging network currently comprises hundreds of thousands of stations in North America and Europe. And it will need to get much bigger.

Chart courtesy of StockCharts.com

Analyst Take

Unlike some of the fads of the past, the electric vehicle market is real and will grow at breakneck speeds around the world as countries race to achieve carbon neutrality.

Vehicles are some of the biggest polluters, so it makes sense for electric vehicle demand to rise. And this could lead to big gains for stock investors.