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Despite volatility in the headlines, the electric vehicle (EV) industry has been on a consistent uptrend over the past several years. Today, 7.8% of vehicles sold in the U.S. are electric. That's up from just 3.3% at the start of 2022. There have been dips along the way -- including a fairly precipitous drop in the first quarter of 2021 -- but the overall trajectory is undeniably positive, with most long-term forecasts calling for steadily higher demand for EVs over the next decade and beyond.
While the industry as a whole remains healthy from a sales perspective, the fate of individual EV stocks is another matter. Some EV stocks now have a valuation of more than $1 trillion, with patient investors accumulating huge long-term gains. Other EV makers, however, are now on the brink of bankruptcy.
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Bet on this deep-pocketed EV leader
When it comes to electric car stocks, none can match the scale of Tesla (NASDAQ: TSLA). And in terms of financial firepower, Tesla is king. And that's a huge advantage when it comes to competing in the long-term growth market. This advantage could cement Tesla stock as the EV stock for years to come.
From Fisker to Lordstown Motors, countless electric car start-ups have gone bankrupt over the years. You can argue that these companies failed because they were too early. Or maybe they botched their first vehicle launch. Or it's possible that their specific battery technology just wasn't a great fit for what the future demanded. All of these things may be true for any one company. But the biggest reason that scores of EV makers have gone under in recent decades is because they ran out of money.
Tesla was no exception to the rule. According to Musk, the company has been only "months away" from bankruptcy on several different occasions. And it makes sense that money is such an important factor when it comes to being a successful automaker. Designing, building, marketing, and delivering a car or a truck of any kind requires billions in capital. If a mistake is made, it could easily cost hundreds of millions of dollars. Plus, it can take years, or even a decade, to get a vehicle from the idea stage to production. Start-ups are rarely afforded such high levels of capital and runway.
Now valued at $1.5 trillion, with shares trading at 17 times sales, there's no doubt that Tesla stock is expensive. But if you want to bet on EVs taking over the world, it makes sense to start with the company best positioned to supply that takeover. Even if $200 can't buy a whole share of Tesla, the ability to own fractional shares makes it a top bet.