How to Invest in Electric Cars

Investors interested in electric cars have a variety of options. Automakers such as Tesla Motors focus only on manufacturing electric vehicles and may be directly invested in by purchasing stock. Companies within the automotive sector that manufacture vehicle parts or supply raw materials used in producing electric cars are another means of gaining portfolio exposure to electric cars. Another slightly less risky option is to invest in exchange-traded funds (ETFs) with holdings in securities related to electric vehicle production or electric vehicle parts.

Key Takeaways

  • The two key ways to invest in electric vehicles are to buy the stock of automakers that focus on making EVs, such as Tesla, or buy an exchange-traded fund that invests primarily in companies tied to EVs.
  • Investors can also get exposure to EVs by investing in certain automakers that are looking to expand into the market, such as Toyota and General Motors.
  • Meanwhile, investors can also find opportunities by looking at companies that offer parts and supplies for EVs, such as Plug Power or Polypore International.

Direct Investment Options

Some major automakers, such as Toyota, are investing heavily in electric vehicles and allow investors to choose both traditional and electric vehicles for their investments. Chevrolet and Nissan have also made notable electric car models available in the U.S. market. Investors should carefully consider available investment opportunities and evaluate the potential risk-return tradeoff offered by electric vehicles and the automotive industry.

In addition to Tesla (TSLA), investors may also look to companies like Li Auto Inc. (LI), Nio Inc. (NIO), Nikola Corp. (NKLA), and Canoo Inc. (GOEV), which focus solely on manufacturing electric vehicles. 

Many manufacturers also develop auto parts for traditional and electric vehicles. Polypore International (PPO) produces both lead-acid batteries and lithium-ion batteries, supporting conventional and electric vehicles. This stock offers investors the opportunity to invest generally in the production of vehicle batteries. As electric vehicle and conventional vehicle usage grow, more batteries will be needed, and this company will likely benefit from increased global car demand.

Another battery company, Plug Power (PLUG), manufactures hydrogen fuel cell batteries used in electric vehicles and many other types of electronic equipment. These batteries may replace lead-acid batteries in forklifts. Plug Power batteries are also used outside of the automotive industry, giving the company a large market.

Sociedad Quimica y Minera de Chile (SQM) is a major supplier of lithium, an element used in many batteries powering electric vehicles and other clean technologies. Investment in companies such as Polypore International, Plug Power, and SQM offers portfolio exposure to electric vehicles while also maintaining diverse holdings outside the automotive industry.

The Infrastructure Investment and Jobs Act of 2021 will provide support for the electric vehicle industry—$7.5 billion of the bill total $550 billion in funding will be allocated to invest in a network of EV charging stations across the U.S.

Electric Vehicles Exchange-Traded Funds

ETFs that track EVs are another possible opportunity for investors. These funds allow investors to purchase shares in funds that track electric vehicle industry development. Investments are spread across multiple companies, reducing investment risk and offering returns similar to the average returns of the entire sector.

ETFs track gains and losses of stock indexes and are traded directly on the stock market in a means similar to stock trading. Just as in traditional stock trading, stop-loss limits may be placed, and dividends are paid to brokerage accounts.

Significant ETFs that include electric vehicle stock and supplier stock include QCLN and LIT. The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) has Tesla among its holdings and includes other companies with green technology offerings. Global X Lithium (LIT) tracks lithium suppliers and battery companies. This fund's most significant holdings include Albemarle Corp., Yunnan Energy-A Ltd., and Ganfeng Lithium Co. Ltd-A.

Article Sources
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  1. Polypore International. "Business Overview."

  2. Plug Power. "5 Things You Should Know About Fuel Cells."

  3. Sociedad Quimica y Minera de Chile. "About SQM, Corporate Information: We Are SQM."

  4. The White House. “Updated Fact Sheet: Bipartisan Infrastructure Investment and Jobs Act.”

  5. First Trust. "First Trust NASDAQ® Clean Edge® Green Energy Index Fund (QCLN)."

  6. Global X. "LIT Lithium and Battery ETF."