11 Best EV Stocks For The Long Term

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Ramish Cheema

Fri, Apr 7, 2023, 6:18 AM 9 min read

The electric vehicle industry is one of the hottest sectors right now, even as demand for electric cars faces a weak macroeconomic environment. Emissions reduction goals in the West combined with plans to phase out internal combustion vehicles gradually have ensured that there will be demand for electric vehicles for the foreseeable future. And where there's demand, there are companies willing to swoop in and offer products.

This interest in electric vehicles has also led to stellar valuations for the sector. For instance, a research report from Allied Market Research lays out that the global electric vehicle market was worth $163 billion in 2020 and by the end of this decade, it will grow significantly to $823 billion through a compounded annual growth rate (CAGR) of 18.2%. However, the research firm adds that while there is significant demand for electric vehicles alongside government incentives, a key hurdle remains in the form of inadequate charging infrastructure. While gasoline cars have the luxury of a fuel pump located at convenient locations, electric vehicles are often hamstrung by the lack of charging points in certain areas, which then limits their utility. Speaking of which, the renowned accounting firm PricewaterhouseCoopers (PwC) believes that the electric vehicle charging market will have to grow by tenfold to meet the current estimated demand of 27 million cars on the road by 2030 in the U.S.

To quote PwC, the growth of electric vehicles in the U.S. will climb through a 'steep hockey stick' trajectory, and from 27 cars in 2030, it will grow to a whopping 90 million by 2040 end. For the charging network market, the firm estimates that chargers in the US will grow to 35 million by 2030 end from four million in 2022, as the EV support industry races to keep up with demand. For comparison, data from the Association for Convenience and Fuel Retailing (NACS) outlines that as of January 2023, there are approximately 120,000 gas stations in America.

This stunning difference between the number of gas stations and electric vehicle charging points comes from the fact that electric cars have a shorter mileage when compared to their gasoline counterparts, as well as the fact that a single charge point is relatively easier to set up when compared to a gas pump since the latter requires more permits, underground storage tanks, and supply agreements with refiners. Additionally, a more accurate comparison between the two can be made if we assume that an average gas station has nine fuel pumps - this then allows us to estimate that the number of fuel pumps in the U.S. is around half a million.

To determine the monetary value of the electric vehicle charging market, PwC clumps it together with hardware, software, and installation providers to create a category called electric vehicle support services. This market as a whole is estimated to be $100 billion by 2040, out of which the biggest slice (65%) will be for the charge point operators. The growth in charge points will be led by facilities in workplaces, with residential units coming in at a second place.

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Despite the current weak macroeconomic environment, demand for electric vehicles is booming, but at the same time, prices continue to be a pain point for consumers. The average price of an electric vehicle was $61,488 in February 2023 according to Kelley Blue Book, higher than the $49,507 for traditional cars. Both these factors were also on the mind of Tesla, Inc. (NASDAQ:TSLA)'s chief executive officer Mr. Elon Musk, who, at the firm's recent earnings conference, outlined:

The most common question we’ve been getting from investors is about demand. Thus far — so I want to put that concern to rest. Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So, I mean, that — it’s not to say whether that will continue twice the rate of production, but the orders are high. And we’ve actually raised the Model Y price a little bit in response to that. So, we don’t — we think demand will be good despite probably a contraction in the automotive market as a whole. So, basically, price really matters. I think there’s just a vast number of people that want to buy a Tesla car, but can’t afford it.

Today, we'll take a look at some electric vehicle stocks popular with analysts, with the top picks being Electrameccanica Vehicles Corp. (NASDAQ:SOLO), Li Auto Inc. (NASDAQ:LI), and Niu Technologies (NASDAQ:NIU).

Our Methodology

We used a stock screener to pick electric vehicle stocks have a Buy or higher analyst rating. They are ranked through their mean rating score, with a score of one awarded to Buy and five to sell. The firms are listed in descending order of mean analyst recommendation score, with a higher score indicating lower sentiment.