Should You Invest in EV Stocks in 2024?
According to the Global EV Outlook 2022, sales of electric vehicles, including both fully electric and plug-in hybrids, surged to 6.6 million in 2021. The latest edition of the IEA’s annual Global EV Outlook reveals that over 10 million electric cars were sold globally in 2022. Moreover, projections indicate a further 35% increase in sales for 2023, reaching a total of 14 million units.
However, the market is facing a few challenges, such as limited charging infrastructure, changes in government policies and regulations, rising competition, and concerns over battery technology, rising commodity costs, as well as supply chain bottlenecks.
As Electric Vehicle (EV) manufacturers have faced declines in their stock prices since the start of the year, with stocks such as Tesla, Nio, Li Auto, Xpeng and BYD being down more than 25%, 31%, 13%, 39%, and 5% respectively, investors may be wondering whether the current valuations present an opportune entry point into the EV market, or if it’s prudent to hold off for the time being. Let’s take a closer look.
What Should You Expect From the EV Market in 2024?
According to projections by the IEA, the proportion of electric cars in the total automotive market has surged from approximately 4% in 2020 to 14% in 2022 and around 18% in 2023. This share is anticipated to continue growing in the next few years for several reasons.
Governments worldwide are intensifying their focus on reducing carbon emissions and promoting sustainable transportation through electrification.
This emphasis translates into favorable policies and incentives to encourage EV adoption, including subsidies for EV purchases, investments in charging infrastructure, and regulations aimed at phasing out the production and sale of internal combustion engine vehicles. Notable examples include the Fit for 55 package in the European Union, implemented in 2021, and the Inflation Reduction Act in the United States, enacted in 2022.
Although limited charging infrastructure presents challenges to widespread EV adoption, ongoing advancements in battery technology are anticipated to mitigate concerns regarding range anxiety and charging times, thereby enhancing the attractiveness of EVs to consumers.
Moreover, the expansion of charging infrastructure, encompassing both urban areas and highways, will play a pivotal role in fostering market growth. As infrastructure continues to evolve and become more accessible, it will facilitate increased convenience and confidence among consumers, further propelling the adoption of electric vehicles.
Despite the concentration of electric car sales and manufacturing in a handful of major markets such as China, Europe, and the United States, with China dominating the battery and component trade, as well as car assemblage, there are encouraging developments in other regions, notably India, Indonesia, and Thailand.
It’s also interesting to note that in emerging and developing economies, there is a growing recognition that electric mobility initiatives should prioritize two or three-wheel vehicles over cars. This shift in focus presents another avenue for growth in the electric vehicle sector.
Moreover, rising competition from traditional automakers and newcomers, and ongoing advancements in EV battery technology, are poised to exert pricing pressures, impacting the profitability of EV manufacturers. However, this trend is anticipated to simultaneously render EVs more affordable and broaden the array of options available to potential users. Consequently, this is expected to stimulate an uptick in EV sales.
Finally, increased charging options are poised to further bolster the EV market. Tesla’s charging plugs are emerging as a standard for the industry, potentially facilitating the continued development of the sector. Companies such as Hyundai, Volvo, Ford, General Motors, Honda, and Polestar have expressed readiness to adopt Tesla’s charging ports and leverage its supercharger network.
How to Pick the Right EV Stocks for Your Portfolio
When selecting EV stocks to include in your portfolio, it’s essential to choose companies whose profile aligns with your investment horizon and risk tolerance. This ensures that they contribute to building a robust and diversified portfolio that can help you achieve your financial goals over time.
One factor to consider is whether you prefer to invest in established players or innovative newcomers in the EV industry. Established companies may offer stability and proven track records, while newer companies might provide higher growth potential but also come with greater risk.
You should also conduct thorough research into each company’s financial health, technological advancements, sustainability efforts, and market position.
Look for indicators of solid growth prospects, such as increasing revenue, expanding market share, or strategic partnerships. Companies with a competitive edge in technology or infrastructure, such as superior battery technology or a comprehensive charging network, may be particularly attractive long-term investments.
Try to assess how much a company’s EVs contribute to reducing carbon emissions and enhancing energy efficiency compared to traditional vehicles. This involves analyzing vehicle emissions data, battery efficiency, vehicle weight, aerodynamics, and overall design. Higher energy efficiency leads to lower energy consumption and environmental impact over the vehicle’s lifecycle.
Also consider the company’s advancements in battery technology and recycling, focusing on improvements in energy density, charging times, and longevity while minimizing the use of rare or harmful materials. It’s also important to take into consideration a company’s efforts in expanding EV charging infrastructure to facilitate widespread adoption and alleviate range anxiety.
Finally, verify that the company adheres to pertinent environmental regulations, emissions standards, safety protocols, and sustainability certifications. This ensures compliance and helps mitigate the risk of facing scrutiny from regulatory authorities or experiencing product recalls in the event of non-compliance.
A Few EV Stocks Ideas for Your Portfolio
Here is a list of a few EV stocks you might want to have a look at:
Tesla
Nio
Li Auto
Xpeng
BYD
Rivian
Polestar Automotive
Fisker
Lucid Group
You might also want to keep an eye on traditional carmakers that are increasingly widening their EV offer:
Ford
General Motors
Volkswagen
Nissan
Hyundai
Toyota
Honda
It’s also interesting to consider companies that play a crucial role in the EV industry, such as those specializing in EV battery technology:
Panasonic Holdings
Lithium Americas
Solid Power
Albemarle
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This article was originally posted on FX Empire
