The electric vehicle market is heating up, providing investors with opportunity.
According to Deloitte, 2022 will mark the “tipping point” for electric vehicles. By then the cost of ownership of a battery electric vehicle will be the same as an internal combustion engine, removing that barrier to adoption. The market research firm predicts EV sales will reach 4 million this year and then increase to 12 million vehicles sold in 2025. By 2030, 21 million EVs will be on the roadways.
That provides plenty of growth for the EV market players and investors in their stocks. Even better, there’s a number of ways to get exposure to the EV market. But whether you’re investing in a chip company providing the brains of EVs or the battery supplier, owning the leaders is the EV market is key.
To do that, consider Tesla (TSLA -0.05%), Nvidia (NVDA -3.00%), and Albemarle (ALB -0.97%) .
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Tesla’s poised for growth
Tesla’s stock is surging, making it an expensive investment, but one that should continue to appreciate as it churns out more EVs. With the vehicle maker poised to launch a crossover in early 2020 https://www.cnbc.com/2019/12/03/tesla-could-deliver-model-y-in-q1-2020-deutsche-bank.html and with manufacturing in China operating ahead of schedule, Wall Street is getting more bullish on the stock. They argue selling shares of Tesla due to its valuation misses the point that Tesla is in leadership positions in a market that is becoming more welcoming.
Tesla is also diversifying with its battery business which is predicted to be a big driver of future growth. Jefferies thinks the storage/generation and battery business will be worth $90 billion by 2025 and $235 billion by 2030.
It’s not all smooth sailing for Tesla. It could face a slowdown in demand in some geographies now that incentives have expired. There’s also a risk the launch of its Model Y crossover could cannibalize sales of its Model 3. But with demand for EVs growing and with Tesla’s brand recognition increasing, investors can use any weakness to purchase shares of this EV market leader.
Nvidia riding the EV growth trend
Vehicles are getting way more complicated, requiring processing power and software to complete all the functions. It takes a bevy of chips and software to summon an EV like Tesla vehicles are able to do. The more advanced vehicles become the more semiconductors will be required.
That hasn’t been lost on graphics chipmaker Nvidia, which has been pouring money and talent into producing chips for electric vehicles and connected cars among other areas. Since first setting its sights on the vehicle market in 2015, Tesla has a variety of customers including Ford, Toyota, and Baidu.
Gaming is still driving the growth at Nvidia by the company is focusing on long-term growth drivers, betting AI will make the biggest impact.
Just like Tesla, Nvidia ‘s stock isn’t cheap. Shares are up 12% since the start of 2020, already surpassing Wall Street’s average price target. But the most bullish of analysts think Nvidia’s stock can hit $315, marking 16% upside.
Albemarle is a leader in lithium batteries
The lithium battery market may have taken a hit in 2019, as the industry dealt with a slowdown in China that resulted in a glut of inventory. But the rising demand for electric vehicles has ushered in the bulls who bet it will be enough to work off excess inventory and provide growth for the years to come. If that proves true, Albemarle will be a big beneficiary of the trend given its the world’s largest producer of lithium, with extraction sites in Europe, North America, and Latin America.
The stock has been getting a lift in recent weeks thanks to Tesla’s strong showing and good news out of Panasonic, which operates a battery joint venture with Tesla. It posted a profit for the fourth quarter, marking the first time for the joint venture. Investors took that to mean that battery factories around the globe will become profitable including ones owned by Albemarle. It doesn’t hurt that during the lithium battery downturn of 2018 and 2019 the company’s adjusted EBITDA margins for the lithium segment held up. Year-to-date shares are 19% higher.
While Aldermarle plays in an industry known for inventory woes and with China reeling from the coronavirus outbreak, the company still stands to benefit from the growing market acceptance for EV vehicles.
