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Is it profitable to invest in the development of electric cars?

Electric Car

Global automakers are gradually abandoning the internal combustion engine and retraining production on electric vehicles and hybrids. Are electric cars a short-term hype or a long-term trend? Is it appropriate to buy the best electric vehicle stocks right now?

The main reasons for switching to electric cars

Resistance to global warming

Last year, the European Union adopted a series of regulations to limit the amount of harmful emissions into the atmosphere and at the same time the US government replaced its entire fleet with electric vehicles.Furthermore, the EU intends to prohibit the sale of new automobiles with diesel and gasoline engines beginning in 2035. In Asia, irreversible changes are also occurring, with the PRC expecting to transition 20% of the vehicle sector to environmentally friendly engines by 2025 and raise the number of accessible electric cars from 2 to 8 million.

Support of “green” trends

The “European Green Course” was introduced not long ago. Its purpose is to make Europe the first continent to achieve carbon neutrality by 2050. There are also warm loans, bonuses for electric vehicles, “green tariffs,” and other state environmental programmes across the world.

The growth of energy prices

Prices for traditional energy supplies have risen dramatically in the recent year. For example, in March 2022, the price of Brent Crude Oil hit a ten-year high of $127.98 a barrel. This was affected not just by the progressive removal of anti-covid laws, but also by Russia’s conflict against Ukraine, as the top importers of Russian oil began to reduce their consumption.

Why electric cars 一 it is financially beneficial

In March 2022, global sales of electric vehicles climbed by 60% to 851,000 units. Furthermore, pure electric automobiles, excluding hybrids, accounted for 11% of worldwide sales for the first time.

Electricity prices are now growing more slowly than gasoline prices. The global demand for electric vehicles has surged 15 times in the last month. The primary reason is that driving an electric automobile is approximately 50 times less expensive than operating an internal combustion engine. The fact that there is no need to stand in long lines to recharge an electric automobile owing to the country’s scarcity of gasoline also plays a major role.

Prospects of the electric car market

The above-mentioned factors force the giants of the automotive industry to reorient production to electric “rails”. The stock market is very sensitive to innovations, so the value of shares of automobile companies that are developing in the “green” direction have significant prerequisites for growth.

Tesla Model Y and Tesla Model 3 occupy the first places among the world’s most popular electric cars. Therefore, Tesla (NASDAQ: TSLA), which at one time became a pioneer in the electric car market, remains the most successful brand on the market. The company was able to break even in 2020. Currently, it aims to become the first mass producer of electric cars in history and produce up to 20 million of them per year.

Electric cars are already a real future

The potential of converting to electric vehicles fueled industry growth. Even firms that specialize in other areas, such as Apple and Sony, are involved in their manufacture.

Apple has long planned to build its own electric automobiles and hence aims to purchase Canoo, which might be a major step towards this objective. Furthermore, Bloomberg claimed that the business recruited Desi Uikasevich, the head of the Ford Global Automotive Safety Engineering Office, who has 31 years of expertise in the automotive sector.

Apple and Hyundai/KIA were anticipated to sign a partnership deal in February 2021, under which the former would invest $3.5 billion to start manufacture of its electric vehicles at KIA’s Georgia facility. However, the Korean company and the American IT behemoth could not reach an agreement on the construction of the Apple Car.

Unlike Apple, Samsung chose against developing its own electric vehicle. This choice was taken with the knowledge that it would impair the company’s business. If Samsung enters the automobile sector, it will become a direct rival to the firms to whom it presently sells electric vehicle components.

Advantages of buying shares in “green” car companies

Today, there are favorable conditions for the growth of the value of shares of companies developing electric cars. There is a good opportunity for long-term investment in such companies.

You can invest in the following firms, depending on your willingness to accept risks and your investing strategy:

  • Tesla will appeal to risk investors that focus their investments on the short term (TSLA). The firm is now the market leader, with positive financial indicator developments. However, it should not be forgotten that securities are overpriced, owing primarily to Elon Musk’s personality. Furthermore, it is unclear if the firm will be able to maintain its market position when new competitors enter the market.
  • Moderate investors, who value investment reliability over potential excess profits, will choose Toyota, for example. A reliable corporation with strong financial indications that leads the market for hydrogen vehicles. It meets all of the criteria for boosting its worth in the medium term.
  • Renault will appeal to investors who, like Warren Buffett, are not afraid to hold promising assets in their portfolio for decades while patiently waiting for the company to expand (RNO). Long term, the firm has a chance to dominate the European hydrogen automobile industry. Furthermore, Renault is now the most undervalued of the aforementioned firms.

At the moment, understanding the general upward trend in this market is not enough. Every company that falls into your field of vision deserves a detailed analysis. Her involvement in a promising industry is far from the main characteristic. Many related factors play an important role, which once again confirms that investing in shares is a complex process, the success of which is based on deep analysis and feeling of the market. And it is worth remembering that the competition is fierce and unpredictable, therefore, before investing, it is necessary to conduct a deep analysis of the market and the chosen company.

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