At any wedding reception, you’ve ever been to you’ve probably heard “The Electric Slide” and been dragged out onto the dance floor. The automotive industry is undergoing its electric slide as the future is increasingly becoming electrified and moving away from the internal combustion engine. There are several ways to play the sector, including auto manufacturers which include legacy automakers such as Ford (NYSE: F) and General Motors (NYSE: GM) transforming into EV makers and companies such as Tesla (NASDAQ: TSLA) which has been an electric vehicle manufacturer since its inception. There is also a way to play it which doesn’t depend on betting on the right manufacturer, which includes finding companies that operate charging networks and make vehicle components.
On the vehicle charging front, companies in the sector include ChargePoint Holdings (NYSE: CHPT), Blink Charging (NASDAQ: BLNK), and EVGo (NASDAQ: EVGO). ChargePoint is a $3.5 billion market cap company that operates the largest charging station network in the United States and has about 70% of the public level 2 charging market so far. Blink Charging is a smaller company in the space, with a $761 million market cap that provides both physical and cloud-based charging solutions. The company operates a network of charging stations, but also provides solutions that let property owners and managers offer vehicle charging. Blink also sells residential and commercial charging equipment that lets individuals and businesses install charging equipment at homes and commercial sites. EVGo is another charging station operator in the United States. The $2.4 billion market cap company specializes in fast-charging stations that are installed in commercial areas such as shopping centers as well as providing fleet charging solutions to enterprise customers.
Battery manufacturers are another picks and shovels type way to play the space, as the lithium-ion battery is the power source that makes electric vehicles viable. Companies in the battery part of the electric vehicle sector are QuantumScape (NYSE: QS), Romeo Power (NYSE: RMO), and Solid Power, Inc. (NASDAQ: SLDP). QuantumScape is a $5.3 billion market cap maker of lithium-ion batteries. The development stage company was born and spun out of Volkswagen AG and focuses on batteries that run longer and charge faster than the early generation lithium-ion batteries and is scheduled to begin delivering prototype batteries to EV makers in 2022. Romeo Power is a much smaller company with a market cap of $149 million but has exciting growth prospects if it can expand its customer base. The company designs and builds batteries and battery management products for electric cars as well as electric RVs, trucks, and watercraft. Solid Power has a market cap of $1.4 billion and focuses on developing solid-state batteries and solid electrolyte materials for EV makers. A solid-state is widely viewed as the next phase in EV power as the technology creates batteries that are more stable at higher temperatures.
Right now Tesla is the big dog of electric vehicle manufacturers and just about every legacy manufacturer from Ford to Toyota to GM to Volvo has announced ambitions to transition from internal combustion to electric power. No matter which manufacturers become the long-term market leaders, all EVs will need charging capability and batteries. Focusing on companies in those niches of the EV sector can help investors ride the future wave of EV development successfully.
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