For years, scrappy little Tesla (NASDAQ: TSLA) was the sole electric vehicle stock out there… with analysts constantly predicting its demise. Today, it is the largest auto company within the world by market cap, and an entirely new generation of scrappy little companies is trying to urge in on the action. But is there really room for the EV market to grow this much? Or is it just a distinct segment industry that’s never getting to expand?
Here’s what you’ll expect the electrical vehicle landscape to seem like in five years, and the way you’ll shape your portfolio to take advantage.
Variety, the spice of life
Five years ago, EV buyers within the U.S. had three options:
A Tesla Model X crossover SUV, with an $80,000 base tag
A Tesla Model S luxury sedan, with a $76,000 base tag
A Nissan (OTC: NSAN.Y) Leaf compact hatchback, with a $30,000 base MSRP
Even at $30,000, the Leaf was expensive by compact standards. The Teslas were just plain expensive. And if you wanted a full-size electric SUV or minivan, or a reasonable electric crossover or sedan? You were out of luck.
Today, there are 13 battery-electric vehicles (BEV) models available within the U.S., and 25 plug-in hybrid models (PHEV), not including model variants. Meanwhile, dozens of latest models are within the works. for instance, a minimum of three companies has announced plans to manufacture electric pickup trucks by 2021. Two of them — Tesla and Nikola (NASDAQ: NKLA) — also are performing on electric semi-trucks. Others have introduced or announced electric minivans, SUVs, sports cars, and everything in between, either purchasable within the U.S. or in other countries with the likelihood of eventual U.S. migration. Base pricing for several of those vehicles — especially the PHEVs — is within the $30,000-$40,000 range.
It seems clear that in five years, a buyer curious about an electrical vehicle will have many varieties to settle on from. That points to an expanding market, which should be a positive sign for sector investors.
With every major car manufacturer currently offering or performing on a minimum of one model of an electrical vehicle, competition is nearly bound to heat up. New entrants into the space like Nikola will shake up the landscape even more. While this suggests we’re likely to ascertain more advertising for electric models, it also means there’ll be some big inquiries to answer regarding technology.
Some are going to be complex questions, like which battery types and systems offer the longest range. Others are going to be very simple, like whether charging stations are going to be universally standardized. this may probably be sorted out by the market, leading certain options to dominate the landscape.
Companies like Tesla that hold numerous EV patents may have the sting here. Expect to ascertain a good number of lawsuits, too, as these companies accuse each other of infringement.
Winners and losers
With numerous EVs coming to plug, each with different branding and different technology, there is almost bound to be some companies that begin on top, and a few that come up short. the difficulty is, we actually haven’t any way of knowing immediately which companies are getting to be which.
An existing auto company like Ford (NYSE: F) might see big success with its upcoming battery-electric Mustang Mach E crossover SUV. But what if it flops? Will Ford attempt to market more aggressively, fix problems and are available out with an updated design, or hand over on electric crossovers altogether?
Some of the up-and-coming EV pickup makers, including Nikola and Lordstown Motors, haven’t manufactured a vehicle before. Design flaws, manufacturing challenges, or technological failures could wreck their finances and reputations before their vehicles even get off the bottom.
The moral here is: If you would like to take a position in electric vehicles over the future, don’t put all of your eggs in one basket. Investing in multiple players is perhaps the simplest thanks to going.
No sure things
The electric vehicle landscape is changing rapidly, and while it shows tons of promise, there are not any guarantees for investors. We’re highly likely to ascertain more variety in models and tech, leading to big successes (and probably a couple of spectacular failures). However, new developments could take the whole industry to an unexpected place, to the benefit or detriment of established and new companies alike.
Even success story Tesla could falter if one among its new models must be recalled fails to catch on or proves to be less popular than a competitor. Tesla’s branding is robust enough that I do not think it’s likely, but we’re entering a replacement era of competition during this space, and that is getting to bring an increased risk for EV investors.
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