How to invest in electric vehicles

Karl 9th Feb 2023 No Comments

Reading Time: 6 minutes

In February 2024, 17.7% of all car registrations in the UK were electric vehicles, and a predicted 18% of all car sales will be electric by the end of 2024.

In 2016 just 1 in 100 new car sales were all electric, so we’re seeing a huge change of gear for the industry.

And it’s not just the UK that’s witnessing an electric boom. Worldwide EV sales are expected to reach 17 million units globally by the end of 2024. During 2023, 13.7 million electric vehicles were registered globally.

So, given we’re in the midst of an accelerating market, how can investors get in on the action? And, what are the risks? Keep on reading for all the details or click on a link to head straight to a section…

• Factors driving the electric vehicle market
• How to invest in electric vehicles
• The risks of EV investing

factors driving the ELECTRIC VEHICLE market

According to Zap Map, there are now over 1 million fully-electric EVs and 645,000 plug-in hybrids on UK roads. That’s a decent slice of the global EV pie.

So what’s causing this drive towards electric vehicles?

Well… it isn’t just one factor, but several. Let’s take a closer look…

1. The upcoming ban on petrol and diesel cars

The UK Government has committed to ban the sale of new petrol and diesel vehicles by 2030. In the EU, the date is set for a slightly less ambitious 2035.

Of course, this doesn’t mean polluting vehicles will be off our roads by then. It does, however, mean that in a few years’ time it will no longer be possible to walk into a car showroom and drive away in an old-fashioned combustion engine.

While the ban won’t apply to the second-hand market, savvy car buyers of today are already recognising how the steady removal of petrol and diesel cars will impact future resale values.

2. Better EV offerings

Between 2001 and 2012, one of the most well-known all electric vehicles was the ‘G-Wiz’. While the car may have been popular among a number of eco-conscious celebrities, it was often ridiculed for its looks. The car even made a bit of a name for itself on popular motoring show, Top Gear.

Put simply, a hideous appearance, a top speed of just 50 mph, and a maximum range of 75 miles, meant that the G-Wiz car wasn’t in any way cool.

Fast-forward a decade or so, however, and haven’t times changed?

Electric car manufacturer Tesla is making some of the most sought-after vehicles out there. Tesla’s are known for their space-age looks and splendid performance.  The Tesla Model S Plaid is reported to have a top speed of over 200mph. Meanwhile, Tesla’s popular Model S boasts an estimated range of 400+ miles!

Of course, there are other car manufacturers giving Tesla a run for its money with their own EV offerings. Polestar, Hyundai, Mercedes, and Volkswagen to name just a few.

Of course, it’s likely we’ll see more manufacturers joining the race soon!

3. Improved infrastructure

While we’re some way off seeing electric vehicle chargers on every street corner, things in the UK have improved big time over the past few years.

According to Government figures, there were 37,055 public EV charging devices across the UK in January 2023. That’s a 34% increase compared to the same period in 2022.

The average speed of charging devices is also heading upwards. ‘Ultra-rapid’ charger installations increased by 10% during the final quarter of 2022.

The availability of chargers will, of course, improve over the coming years. This will undoubtedly help to further boost the attractiveness of EVs.

4. Soaring fuel prices

Petrol and diesel prices reached an all-time high during the summer of 2022, partly due to the war in Ukraine.

While prices have calmed a bit since, the high cost of fuel has no doubt persuaded some buyers to turn to electric.

Of course, electricity isn’t entirely cheap now either! However, it’s fair to say there’s an expectation that in the long-term, electricity will be a cheaper way to power a car compared to petrol or diesel.

5. Greater environmental awareness

Transport accounts for roughly 30% of global carbon emissions. Of this figure, roughly 70% comes from road vehicles.

Given the increased awareness surrounding green issues, many drivers are now waking up to the fact that petrol and diesel vehicles are bad for the environment.

Whatever your opinion on the environmental bandwagon, one of the biggest selling points about EVs is that electricity is one of the cleanest ways to power a vehicle. As such, we shouldn’t forget that this is a major factor that is helping to boost EV sales.

How to invest in ELECTRIC vehicles

If you want to invest in the EV market there are essentially two ways to go about it.

You can either buy a specialist exchange-traded fund, or buy shares in businesses involved in the manufacturing of EVs.

EXCHANGE-TRADED FUNDs

Exchange traded-funds (ETFs) offer an easy way to invest in a wide range of shares. Some ETFs are sector focused, meaning they invest in one particular sector or industry.

The following ETFs give exposure to the EV market.

1. Global X Autonomous & Electric Vehicles ETF – includes companies involved in the autonomous vehicles market.
2. iShares Self-Driving EV and Tech ETF – includes a host of car manufacturers including some involved in the autonomous vehicles market.
3. KraneShares Electric Vehicles and Future Mobility – gives exposure to companies that produce smart cars, plus firms involved in energy storage such as hydrogen fuel.

INVESTING DIRECTLY IN EV MANUFACTURERS

If you don’t wish to go down the EV route, then you’ve also the option of buying shares directly in EV manufacturers.

We can’t list all of the manufacturers here, but here’s a quick look at three of the biggest EV car markers…

1. Tesla. Tesla is arguably the global leader of EV technology. Its share price is a roller coaster at the best of times. In 2022, the car manufacturer saw its share price plummet by a colossal 64%. Yet during the opening month of 2023 Tesla’s stock witnessed a huge turnaround, with its share price climbing 75%. However, so far in 2024, the price of Tesla has dropped by 30.4%.

2. BYD. BYD is the biggest seller of EVs and has managed to beat Tesla two years in a row. BYD sold 1.85 million plug-in EVs in 2022, triple the number it sold in 2021. While the Chinese firm is a giant in the EV world, you’ll be forgiven if you haven’t heard of the company. BYD did not start selling cars in the UK until 2023. BYD entered 2024 with a solid momentum after receiving a 60% year-over-year growth rate at the end of 2023.

3. NIO. Another Chinsese EV manufacturer. Like BYD, NIO doesn’t currently sell its cars in the UK, though it plans to do so this year. NIO share prices are predicted to increase steadily throughout the year however, the share price is down 45% so far in 2024.

If you want to learn more about investing, take a look at our article that explains how to buy shares.

The risks of investing in electric vehicles

If you’ve a hunch the EV sector has further to grow, there’s nothing inherently wrong with putting your money where your mouth is.

Whether you buy an EV exchange-traded fund, purchase shares in an electric car manufacturer, or invest in a company that’s indirectly involved in the sector, these are all valid ways to go about it.

However, when it comes to investing in the EV market, there are risks you should know about.

The first to bear in mind is the fact that the EV sector can be heavily depend on external factors. For example, lithium-ion batteries account for a large part of the EV manufacturing process. This means if there’s ever a supply issue with these batteries, it has the potential to have a huge, knock-on impact for EV prices.

Also, as we’ve seen with Tesla’s share price, the value of EV makers can be highly volatile. It’s one of the reasons why Tesla shares are often popular among day traders.

Of course holding highly volatile shares can be risky, especially if they account for a significant portion of your allocation. To minimise this risk, it can be a good idea to diversify your portfolio.

As with any type of investing, you capital is at risk. To learn more about investing, do sign up to our fortnightly MoneyMagpie Investing Newsletter. It’s free and you can unsubscribe at any time.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice.