How to invest in the top EV stocks

How to invest in the top EV stocks
Here’s a breakdown revealing some of the most popular EV stocks in the market and everything you need to know about investing in electric cars.
George Sweeney
Published
July 26, 2022

Overview of the auto industry

It’s hard to imagine a world without cars and vehicles because they’ve become such an integral part of our lives, all over the planet.

Once cars became more affordable and cheaper to build, some major car stocks saw accelerated growth and ended up becoming among the most valuable companies in the world. 

The automotive industry is largely made up of firms that manufacture, advertise, and sell vehicles. Often, our mind just wanders to passenger cars, but the sector also builds:

  • Trucks 
  • Buses
  • Vans
  • Utility vehicles
  • Commercial vehicles
  • Transport lorries
  • Motorbikes
  • Vehicles used for agriculture, construction, and forestry

The push toward more renewable forms of energy and transport makes it seem like the demise of the fuel and diesel automotive industry could be around the corner.

But, we still need a way to move about. How else will we travel, commute, and of course, enter fast-food drive-ins?

Evolution of the electric vehicle market

The electric vehicle (EV) industry has supercharged the automotive industry, injecting life into a sector that was, for lack of a better word, tired. 

This renewed lease of life and interest in cars means plenty of opportunities for innovation.

It also means you no longer have to be a dedicated petrol head if you want to invest in car companies.

A new wave of EV stocks is attracting investors excited about tech, the green revolution, and what might be the next transport boom. 

The EV market is still blossoming, but it’s hoping to envelop the whole automotive industry. 

This is why there are plenty of stand-alone EV stocks but you’ll also notice that most of the major car companies are transitioning some or all of their focus into electric cars too. 

At the moment, according to market research firm Canalys, electric vehicles only make up around 9% of the total passenger car sales. So, there’s still a lot of empty road for the EV sector to race across.

The EV sector boom

And that vastly untapped market could be why the sector seems to be picking up steam. 

Data from EV-Volumes suggests global EV sales reached 6.75 million units in 2021, an impressive 108% growth on 2020. 

So, the sector has had some favourable tailwinds lately. But is it showing signs of slowing down?

Some of the biggest problems for EV stocks include ramping up production, sourcing raw materials, and meeting customer demand. 

And while the broader auto industry has seen some contraction over the last few years, EVs have still managed to rev up sales. 

Europe has overtaken China to become the world’s biggest EV market, registering 1.3 million electrically-chargeable vehicles in 2020 compared to China’s 1.2 million. But, China still has the largest number of EVs on the road. 

What does the future hold for the EV sector?

Even though EV sales had a good year last year, that’s not to say there won’t be obstacles and challenges ahead., and there’s no such thing as an overnight success.

But, climate change and a shift from fossil fuels aren’t only on consumers’ minds, governments and companies are taking note too.

The result is that the International Energy Agency (IEA) estimates there will be roughly 50m EV cars on the road in 2025, a fair amount more than the estimated 12m we have today.

Yet, an important thing to remember with EVs is that although it’s a burgeoning sector, there are no guarantees which stocks and companies will end up coming out on top. Nor is there any guarantee that your investment will pan out in the way you hope.

There are likely to be successes and failures across the board. 

Just because the sector is showing signs of growth doesn’t mean every stock will be the right investment for you.

How do I invest in the EV sector?

If you want to invest in the electric vehicle industry, you’ll need a share dealing account that gives you access to a wide range of stocks.

The global nature of the EV market for both sales and manufacturing means you might have to be able to plug into different markets, depending on the stock you’re considering investing in.

There are plenty of companies to choose from. There are EV makers, but there are also:

  • Raw material miners
  • Battery producers
  • Manufacturers of tech components and semi-conductor chip companies
  • Robotics firms
  • Software, AI, and autonomous technology businesses

Popular EV stocks to watch in 2022

Here’s a rundown of some of the most popular EV stocks from the Freetrade platform in 2021. 

Being popular doesn’t necessarily make these the best EV stocks to buy, but it will give you an idea about the types of electric car stocks investors are looking at. 

Before we get stuck in, it’s important to highlight that this is a wrap-up, not a suggestion or recommendation that you buy or sell any of the securities mentioned. 

Remember that everyone has their own goals and unique financial circumstances. These, along with your tolerance for investment risk and time horizon, should inform the mix of assets in your portfolio. 

Our resource hub for investing in the stock market might be able to help make that blend a bit clearer for you and our guide on how to invest in stocks is a great start for first-time investors. And if you are still unsure of how to pick investments, speak to a qualified financial advisor.

10 EV stocks on Freetrade
EV stock Ticker Industry
Tesla TSLA Cars, Energy, Tech
Rivian RIVN Cars
Arrival ARVL Cars, Tech
TI Fluid Systems TIFS Cars
NIO NIO Cars
Xpeng XPEV Cars
BMW BMWd Cars
Lithium Americas LAC Energy
Toyato TM Cars
ChargePoint CHPT Cars
Blink Charging BLNK Energy

US EV stocks

Tesla (TSLA)

As the single most-bought investment on Freetrade in 2021, and regularly one of the most traded stocks, you can’t have a conversation about EVs without bringing up Tesla. 

Though just because it’s a popular talking point doesn’t mean it’s a strong investment.

The company’s share price has risen over the years and arguably was the stock to spearhead the EV movement, really giving the legacy car companies a run for their money.

Tesla has been working hard to vertically integrate several parts of the production process to gain more control. All this means that, Aas Tesla has gronws, so have its costs. The $47.3bn of operating costs in 2021 was much higher than the $29.54bn spent in 2020. So, if it can achieve improved efficiency it will hopefully reduce some of the cost burden for the business moving forward.  

Rivian (RIVN)

Rivian generated a lot of interest with its much anticipated initial public offering (IPO) at the end of last year. 

The market value topped $150bn shortly after its listing, and RIVN has been gradually ramping up car production, delivering 4,467 vehicles in Q2. A number nearly four times higher than Q1 deliveries.

But, even though production is slowly plugging along, recent layoffs could signal trouble ahead. Rivian has plenty of preorders to deal with but the higher price tag of its vehicles compared to those of legacy automakers could lead to customers shopping around, resulting in fewer sales than projected. 

Oh, and that market cap? Its current level below $30bn seems to reflect just how much of an eye-opener market life has been so far.

UK EV stocks

Arrival (ARVL)

Technically, Arrival isn’t a UK EV stock in the eyes of some investors because it was acquired by a SPAC and is now listed on the NASDAQ exchange.

However, for all intents and purposes, the company is British. It’s based in Oxfordshire, operating out of Banbury and Bicester, where the bulk of the operations take place. But, it does have a US headquarters and a corporate foothold in some other countries.

What makes Arrival unique is its focus on electric commercial vehicles. This includes things like buses and delivery vans, attracting interest from huge firms such as FirstGroup and Royal Mail.

But, it’s still early days. The shares have suffered alongside many other EV and tech stocks. The firm's cash projections are not looking too stable if it wants to continue with ambitious plans into 2023. So, there might be a need to take on a significant level of debt which will be costly in this environment of rising interest rates.

TI Fluid Systems (TIFS)

This is one of those stocks that doesn’t necessarily catch the headlines but could be a dark horse in the UK EV market.

The firm is a major supplier of car components, including fuel tanks, air conditioning tubes, and brake lines.

It’s now concentrating on the EV industry and managed to secure contracts to supply a huge number of components to EV companies in both Europe and America. 

But, the stock has been very volatile. Even as a supplier itself, it's struggling with supply chains and the global chip shortages are hampering production and revenue figures.

Chinese electric car stocks

NIO (NIO)

This is probably the most well-known Chinese EV stock and investors flocked to it in recent times looking for the ‘next Tesla’.

Based in Shanghai, originally an EV battery-swapping company, the firm is laser-focused on becoming the top Chinese electric SUV maker. But, it’s also now building sedans to compete with Tesla’s Model 3. 

Like Tesla, NIO is putting a lot of energy into creating ‘smart vehicles’ with assisted-driving features. But unlike Tesla, the bulk of NIO’s investment goes into the designs and tech rather than the manufacturing, allowing it to be relatively nimble. Throughout 2022, it plans to double its research and development investment. 

However, the company has flirted with bankruptcy, not helped by uncertainty in the Chinese stock market which is being exacerbated by ongoing lockdowns and supply problems.

Xpeng (XPEV)

This is an EV stock coming from Guangzhou, China, is also building smart vehicles. Ones that combine cutting-edge technology from areas like autonomous driving and AI. 

Xpeng is doing a good job of sticking to production schedules and actually getting its EVs on the road, which is more than can be said for some of the other firms listed here. June was a great month and it managed to deliver more vehicles than the other Chinese EV stocks.

The reported figure was 15,295, up 51% from May and up 133% year-over-year. But, the threat of Covid still looms over China. So, Xpeng is going to have to compete against its competitors whilst also trying to maintain stable production levels, which is increasingly challenging during lockdowns.

European EV stocks

SONO Group (SEV)

This is the parent company of Sono motors, an ambitious EV outfit based in Germany looking to develop one of the world’s first solar electric vehicles (SEVs), the ‘Sono Sion’.

Although it’s a German stock, this electric car company is listed on the NASDAQ, making it accessible to investors around the world. 

It's attracting a lot of interest due to its smart solar tech, and has begun working with one of the biggest global logistics firms, Rhenus Group.

If it’s able to pull off the solar gambit or make some breakthroughs with its tech, then perhaps it’ll be able to pull in some revenues and ultimately earn a profit. But until then, the stock doesn’t yet have a fully functional SEV prototype, so it feels a bit more like a moonshot.

BMW (BMWd)

Although BMW isn’t a fully-fledged EV stock right now, it's in the process of converting an increasing proportion of its fleet into electric models. 

It plans for 50% of its car sales to be electric vehicles by 2030, and recently spent $2.2bn opening an EV factory in China. BMW has also paid a dividend in the past, but that’s not to say it will in the future. 

BMW has been investing heavily into software and recently started rolling out subscription services for the vehicles. These allow customers to sign up for heated seats on a monthly basis to heat up backs and bums throughout the winter, for example. 

This German blue-chip has ambitious plans to grow its electrified fleet, but there are some fears it's already playing catch-up and too far behind the competition. 

Alternative ways to invest in the electric vehicle market

EV battery stocks provide an interesting way to indirectly invest in electric cars. Rather than picking out individual car companies, these stocks have the potential to become suppliers to whichever EV stocks end up succeeding in the long run. But, EV battery stocks also come with their own risks, including the possibility of new technology rendering a battery company obsolete. 

EV battery stocks

Lithium Americas (LAC)

This Canada-based stock has a heavy hand in lithium exploration, mining, and production. Lithium is a material that’s essential to the batteries in most EVs. 

But investors should keep in mind that the company isn’t generating any revenue at the moment. 

Strong demand for lithium compounds and a limited global supply could lead to growing demand if and when it manages to explore and produce lithium. But right now it relies heavily on debt and equity to fund operations.

Toyota (TM)

You’re probably familiar with Toyota as a car company, but it’s making big moves as an EV battery player too.

This Japanese stock is focused on making hybrid vehicles, but that’s mostly to bide time whilest it attempts to research and develop the best EV solid-state battery technology. That’s tech that could potentially overtake the lithium-based batteries most EVs use, changing the whole battery landscape. 

Investors will have to see how things play out and whether Toyota’s $13bn plan to invest in batteries by 2030 pays off and impacts the rest of the EV market.

EV charging stocks

ChargePoint (CHPT)

This is the largest US-based EV charging station stock and is in the process of expanding into Europe.

It has a long list of commercial clients, putting charging stations in universities, hospitals, shopping centres, and corporate real estate. 

With roughly 70% of the US EV charging market under its belt, it’s managed to reap a large chunk of the market so far. But, competition is ramping up and inflation is starting to dent its plans as investors think high prices could deter more new EV customers.

Blink Charging (BLNK)

This is a smaller EV charging stock with a much slimmer slice of the US charging station pie.

That said, the firm is growing quickly and managed to sell almost double the number of charging points year-over-year. It has both commercial and residential clients and theoretically with a broader customer base than some of its competitors, Blink might be able to grow revenue faster.

However, the company’s costs are tracking upwards, faster than revenue. So although this stock could have opportunity for growth, profitability might be a hurdle too big for it to jump. 

How to choose the best EV stocks for the long-term

It’s important to make sure you take the time to analyse EV stocks with the same due diligence you would with any stock from another industry. If anything, because many of these companies are new to the market or investing in emerging technologies, they might be worth some extra scrutiny. 

Companies in growth mode can make for higher-risk investments. And while that higher level of risk can result in higher returns if companies are successful, that’s far from always the case. 

Although the sector has demonstrated signs of growing demand, this doesn’t mean every company will succeed or be a successful investment.

When aeroplane travel started taking off, investors presumed all of the stocks would be guaranteed money-makers.

In reality, most of the airline industry isn’t particularly profitable and runs on very tight margins. 

So, try and find EV stocks that have a good financial foundation to build on, but also look for stocks that can become more cost-efficient. Or, that have the potential to branch out into business segments with greater profitability. 

Pros and cons of investing in electric vehicles

Like with any investment, there are plenty of potential advantages and drawbacks to consider.

Here’s a quick breakdown of a few of the major benefits and pitfalls worth thinking about with the EV market.

Advantages of EV investing

  • The opportunity to invest in what is so far a growing sector.
  • Some investments can be environmentally friendly or more sustainable than competitors. As it’s a new industry, you have the opportunity to invest relatively early. That means higher risk, but if companies prove to follow a positive growth trajectory, it could mean a greater return on your investment. 

Disadvantages of investing in electric cars

  • It’s impossible to predict which stocks will come out on top. Companies in growth mode tend to be a higher risk investment than those with established profitability. They’re likely spending more on expansion and research, and may not yet be earning revenue to show for it. 
  • The EV market is heavily reliant on a small number of raw materials that are hard to source. Supply chain hiccups make that especially challenging. 
  • Many EV stocks are not profitable firms and do not have a proven track record of financial performance.

Are EV stocks a good investment?

They can be. However, it’s a sector still in its infancy with plenty of kinks to work out. 

The majority of the auto industry appears to be transitioning to electric. This will be great for some stocks, but there are likely to be plenty of casualties left by the wayside. 

So, when you’re looking for shares to invest in, make sure you still research EV stocks carefully. Don’t just chuck money at any old company simply because it’s part of the EV movement. Go slow, pump the breakes, and don’t be afraid to shift gears if you uncover new information that changes a stock’s investment case. 

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