“The future of the automotive industry”, “the new standard” and “there will be no other cars” are just some of the expressions that can be heard about the increasingly popular electric vehicles. All the giants of the automotive industry have already released at least a few models of electric vehicles.
Thus, there is no wonder why people invest in electric vehicle stocks. In this article, we will discuss the benefits and prospects of investing in this kind of stock.
Why invest in electric vehicles?
More and more investors around the world are looking to take advantage of the benefits of electric cars and are trying to capitalize on the growing popularity of electric vehicles.
Here are just some of the reasons to invest in electric vehicles:
- Governments patronize the development of electric cars.
- Strict policies to control energy consumption and greenhouse gas emissions around the world are drawing consumers’ attention to electric vehicles.
- More and more people are leaning towards buying electric cars as they become more affordable.
- Decreasing the cost of EV batteries makes EVs more affordable.
- Expansion of infrastructure, for example, the construction of charging stations for electric vehicles.
- Presence in one of the most popular and fastest-growing industries in the world.
- Potential for innovation.
- Opportunities for potential capital growth and achievement of financial goals.
- Possibility to create a stream of passive income by receiving dividends from shares.
- High liquidity of assets.
Of course, every investment has its own risks, and electric vehicles are no exception. For example, the reaction of governments to requests to reduce excise taxes will be interesting. Also, will the infrastructure for charging and disposing of the batteries of all-electric vehicles be put in place in time?
However, the potential of electric vehicles cannot be denied, and with an appropriate investment risk management strategy, the risks involved can be skillfully managed.
How to invest in electric vehicles?
More and more investors around the world are looking to take advantage of the potential opportunities stemming from the reasons listed above and are trying to capitalize on the growing popularity of electric vehicles.
There are three main financial instruments that will give you access to EV investments:
- Stocks of electric car companies.
- Contracts for Differences (CFDs) for electric vehicle stocks.
- Exchange-traded funds (ETFs) involving electric vehicle companies.
Each investor must choose the right instruments for himself. Let’s now take a closer look at the stocks of electric car companies.
Stocks of electric car companies
A stock is a variable-yield security that allows you to own a stake in a particular company. A stock is a unit owned by a company. Most companies issue and sell stocks to raise additional capital to finance their activities.
For example, if a company issued 100 stocks and you bought 10 stocks of that company, then you own 10 percent of the stocks.
Advantages of investing and trading real stocks of electric vehicles:
- Real ownership of the base with all property rights associated with it.
- Less risk due to no leverage.
- No swap fees, allowing positions to be left open overnight.
- More stable regulation.
At the same time, the disadvantages of investing and trading real stocks compared to stock CFD trading are:
- Inability to open short positions.
- Inability to use the leverage.
- The presence of fees and commissions when buying and selling.
- Inability to trade in different markets.
Investing in EV stocks is the most versatile and arguably the most popular option to take advantage of the potential rise in EVs in the coming years. But let’s look at other possibilities.
How much money to spend on investing in electric vehicles?
You understand the promise of investing in electric vehicle companies. Before you start working with this financial instrument, you should decide on the amount you are willing to invest in EV.
To answer this question, consider the following factors:
- Financial opportunities.
- Financial goals.
- Willingness to deal with risks.
The analysis of financial opportunities is a very individual process, so it is difficult to determine the starting amount based on this factor alone. If you have money that you are ready to lose, there are other points to consider.
To determine your financial goals, you need to think about what you want to receive in the future. You may dream of buying an apartment, a house, a yacht, starting a business, etc. The answers to these questions will give you an idea of your financial goals.
A very important factor is the investor’s ability to take risks. It depends on factors such as current income level, savings, expenses, financial obligations, as well as personality traits.
The investor should also think about the time for which he is ready to invest funds without needing them. So, you have to determine whether you are focused on short-term or long-term investments. Each option has its pros and cons, so it is advisable to consider this issue on your own or seek the advice of specialists.
Investing in electric vehicles: which companies to choose?
Even though this is a relatively young industry, there are many companies to invest in. Each investor has their own individual approach when choosing companies to add to their portfolio. However, here we will list some industries and companies that can introduce you to electric vehicles.
- Stocks of electric vehicle companies.
- Stocks of microchip companies.
- Stocks of auto parts companies.
- Stocks of companies producing raw materials for batteries for electric vehicles.
Let’s discuss the first category. The obvious choice for any investor looking to invest in the EV industry is electric vehicle companies.
Until recently, Tesla accounted for virtually the entire EV market. This is far from the case at present, and there are a number of other publicly traded manufacturing companies. In addition, all major combustion engine vehicle manufacturers now also offer electric vehicles on the market.
Tesla led the stock of electric vehicles, but now there are other players:
- Nikola Corp.
- NIO Inc.
- Xpeng Inc.
- Li Auto Inc.
Since Tesla is already quite popular among investors and will soon become a member of the elite S&P 500 index, and Nikola is unstable due to the deal with General Motors and rumors of serious fraud, you can pay a little more attention to the growing popularity of Chinese electric cars – Nio, Xpeng and Li Auto.
Final thoughts
Electric vehicles are one of the hottest topics in the world and it is no coincidence that they are considered the future of the automotive industry. The potential for the rapid growth of the electric vehicle industry in the coming years, and perhaps decades, is attracting the attention of investors around the world.
Companies like Tesla have proven their potential for a quick jump in stock prices. If you want to invest in EV companies, try Gainy as it allows users to invest in stock collections based around different industries and themes.
