The electrical vehicle, or EV, market has grown substantially lately and it’s supposed to continue its rise over the next decade and beyond. As government regulations limiting carbon emissions increase, automakers happen to be forced to shift their attention to electric cars.
Many organisations are vying to obtain a piece of the EV market, in the automakers themselves to those that supply parts and components found in EVs. The potential for growth helps make the EV industry irresistible to investors, but success is much from guaranteed.
Buying electric vehicles: Exactly what does industry look like?
The electric vehicle market has grown significantly over the past decade. This year, only 120,000 electric vehicles were sold globally, based on the International Energy Agency. In 2021, global EV sales reached 6.6 million vehicles. Recent growth has largely been driven by China, which taken into account 3.3 million EV sales in 2021, greater than were purchased in the whole planet in 2020.
Committing to electric vehicles
Top 5 EV companies:
Tesla (TSLA)
Ford (F)
Automobile (GM)
Volkswagen (VWAGY)
Nissan (NSANY)
All five of such companies offer electric vehicles, with Tesla is the clear market leader. Tesla held a 64 percent share of the market of EV sales throughout the third quarter of 2022, based on Prizes. Its Model 3 and Y vehicles combine to are the cause of nearly 60 percent of EV sales from the U.S.
Tesla differs from the others for the reason that it is targeted on electric vehicles exclusively, whereas other automakers including Ford and Gm still produce gas-powered vehicles. These legacy manufacturers wish to modernise their creation of EV vehicles within the coming years to get to know regulatory requirements and capitalize on growing requirement for EVs.
Other EV manufacturers include Rivian Automotive (RIVN), NIO (NIO), Li Auto (LI) and Nikola (NKLA).
Whilst the potential for future growth is of interest to investors, the EV market is not without risks. High-growth industries often attract tons of competition that can hurt the returns investors ultimately earn. Share prices may also be overpriced in exciting new industries, causing investors to overpay for growth that could or might not materialize. Make sure to view the companies you’re committing to before making a purchase, or consider choosing a diversified portfolio available through an electric vehicle ETF.
Another way to purchase the EV companies are to focus on businesses that give you a few different EV makers, therefore you don’t need to predict which manufacturer would be the ultimate champion. Companies for example BorgWarner and Aptiv supply different components employed in EVs, while BYD produces rechargeable batteries as well as making EVs themselves. Albemarle, however, is a specialty chemicals company which causes lithium compounds employed in lithium batteries, that are utilized in EVs, among other products. These firms should see their sales linked with EVs grow because overall level of demand for EVs will continue to increase.
Just as with the pure EV makers, suppliers to EV companies can get bid up to prices which make it difficult for investors to earn attractive returns. Growth doesn’t always materialize you’d like investors hope high could be bumps in the road. Shortages that cause high costs for components today can shift to periods of oversupply and falling prices.
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