Investing in electric cars

Everybody wants to invest in the ‘next big thing’. And right now, that ‘big thing’ seems to be electric cars. Here’s how to get exposure to the sector in your investment portfolio.

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Electric car

We are still a few years away from seeing an electric car in every driveway, but things are changing rapidly. Hybrid electric car sales in the UK grew 73% year—on—year in May 2018, while diesel car sales fell by a quarter. In the same month, sales of all electrified vehicles in the UK took a market share of 5.8%.  

Meanwhile, the government has re—affirmed its commitment to the growth of the hybrid and electric car market, by offering ‘plug—in’ grants of up to £8000 to owners of low—emission vehicles, and making them exempt from Road Tax.

Environment minister Michael Gove has pledged to ban the sale of petrol and diesel—fuelled cars by 2040, sparking a surge of investment in electric car manufacturers, charging points, and hybrid technologies. Even Big Oil is getting in on the act. BP has announced a £130 million deal to take over Chargemaster, the UK’s largest electric charging network, and will start offering charging points at its petrol stations as early as next year.

The rise of the electric car and the latest investment opportunity

Just a few years ago, electric cars were confined to the pages of sci—fi novels, but they have quickly entered the mainstream. This is largely down to widespread government support and innovation from big brands such as Toyota (manufacturer of the hugely popular Prius hybrid vehicle which is loved by Uber drivers), Tesla (innovators in electric car technology) and Nissan (which produces one of the only mid—range hybrids — the Leaf).

Tesla upended the automotive industry when it began working on the Tesla Roadster in 2004. Since then, electric and hybrid vehicles have been created by just about every established automotive brand, including Audi, Mercedes—Benz, BMW, Porsche, Range Rover, Mitsubishi, Peugeot, Citroen, Renault, MINI, Volvo, Kia, Hyundai, and Volkswagen.

The electric car revolution is not on its way — it’s already here. However, it has been just ten years since the first road—ready Tesla was sold to US customers, and while the electric car market has been booming since then, there is still plenty of room left for growth.

Electric vehicle manufacturers you need to follow

Investors who are interested in accessing the electric car market are spoilt for choice. While many people think that investing in electric vehicles means investing in Tesla, in reality, just about every major global car manufacturer has its own electric vehicle in the works.

And beyond the cars themselves, electric car technology is also a booming business. For instance — lithium and copper both feature heavily in the creation of high—powered car batteries. A global lithium shortage has more than doubled the price of the metal over the past two years, although some analysts expect an imminent drop in values. Copper prices are also expected to increase nine—fold in the next few years, as demand from electric car manufacturers grows.

Electric car software is also an emerging business, with the likes of graphic card manufacturer NVIDIA reaping the benefits of partnerships with electric car brands.

How to invest in electric cars

There are plenty of ways to invest in electric cars and electric car technology. For many people, the only objective is to invest in Tesla, either by buying stock in the company directly or investing in a fund which has a lot of Tesla exposure.

However, Elon Musk has taken some criticism from his investors over the past year over a series of missed deadlines and under—performing sectors in the company. The widely—hyped Tesla Model S — billed as the most affordable electric car on the market — has suffered from delays in production, and Musk recently admitted that 63,000 orders had been cancelled by frustrated customers.  As a result, Tesla’s stock has experienced volatility in the first few months of 2018.

Beyond Tesla, there are plenty of other car brands which produce electric cars. General Motors (GM) is heavily invested in the electric car revolution, and last year it announced that ‘the future is all electric’.  It is also worth considering stock purchases in Chinese manufacturer BYD Auto — a market leader in electric car production, as well as fellow market—leaders Nissan, Mitsubishi, Volkswagen and BMW.

And electric vehicle investment is not just limited to stocks and shares. Investors can make their money go further by investing via a fund which offers exposure to the world of electric and hybrid cars and the technology that runs them. The Baillie Gifford Global Discovery Fund, Polar Capital Technology Trust and Artemis Global Growth Fund all have exposure to the electric cars and related technologies, while the KraneShares Electric Vehicles & Future Mobility exchange traded fund (ETF) invests exclusively in the electric vehicle sector.

However you chose to invest, it is vital to remember that even though ‘the future is all electric’, there is no such thing as a sure—fire investment. This means that you should research the market, diversify your funds, and if you’re still not sure where to place your money, treat yourself to a couple of test drives and find out for yourself what all the fuss is about.

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