- In the first quarter of 2020, about 68,000 electric vehicles were sold in the U.S. That number rocketed 188% in the second quarter of 2022 to nearly 200,000.
- Wall Street is a giant discounting machine. Investors look to the future, discount that future back by some discount rate, and incorporate those projections into their calculations of a company’s present value.
- We believe investors stand to make a lot of money over the next decade by simply buying and holding high-quality EV stocks.
[Editor’s note: “EV Stocks Will Soar Like Never Before in 2023” was previously published in November 2021. It has since been updated to include the most relevant information available.]
Let me start this issue by stating the obvious: Electric vehicles are going to take over the world.
That’s an inevitability.
Consumer demand is shifting. Most prospective car buyers today want an EV.
Laws are changing to support EV adoption.
Technology is improving so that these cars can last longer and drive farther.
Costs are falling, and affordability is rising.
And supply is migrating — every automaker is pouring all their resources into launching new EVs.
As the old saying goes, all the stars have aligned. The EV Revolution is upon us.
Let’s contextualize the size of this shift. In the first quarter of 2020, about 68,000 electric vehicles were sold in the U.S. That number rocketed 188% in the second quarter of 2022 to nearly 200,000. And according to The New York Times, “electric vehicles’ share of new vehicle sales almost doubled in the first nine months of the year, to 5.6% from 2.9% in the same period in 2021.”
We predict that the EV penetration rate will soar toward 80% by 2040, implying EV volume growth of ~2,000% over the next 20 years.
With so much growth potential over the next two decades, the EV industry offers investors multiple excellent long-term investment opportunities. We believe investors stand to make a lot of money over the next decade by simply buying and holding high-quality EV stocks.
However, we believe most of that money will be made in a single year: 2023.
To understand why, we need to understand how technological megatrends evolve on Wall Street.
Megatrends on The Street
Typically, on Main Street, world-changing technological trends take a long time to actually change peoples’ lives. E-commerce, for example, emerged in the late 1990s. Yet, it didn’t become a household ubiquity until the 2010s. Streaming TV first emerged in the early 2010s. But it wasn’t until late in the decade that households started to cut the cord in bulk.
On Main Street, technological trends take years, sometimes even decades to play out.
But on Wall Street, they tend to happen in a year or less.
Wall Street is a giant discounting machine. Investors look to the future, discount that future back by some discount rate, and incorporate those projections into their calculations of a company’s present value.
To that end, Wall Street doesn’t wait for change to happen – it acts before it happens.
So, as soon as e-commerce emerged in the late 1990s, investors acted on the coming E-Commerce Revolution. They gobbled up Amazon.com (AMZN) stock. In 1998 alone, AMZN soared 967% in a single year!
Lather, rinse, and repeat for the Streaming TV Revolution. As soon as Wall Street saw the writing on the wall that streaming TV would take over the world, investors swarmed into Netflix (NFLX) stock. It rose 297% in 2013 alone!
But since 1998, Amazon stock’s best annual performance (+178% in 2003) doesn’t even come close to its 967% gain in 1998. And since 2013, Netflix stock’s best annual performance (+134% in 2015) is less than half of its 297% gain in 2013.
In other words, these stocks had their best years – by far – in the first innings of their technological revolutions.
The same will be true for EV stocks.
2023 Will Be the Year for EV Stocks
We feel strongly that 2023 will be for EV stocks what 1998 was for Amazon and 2013 was for Netflix.
Earlier this year, the U.S. government passed the historic Inflation Reduction Act, which includes billions of dollars for EV tax incentives and EV charging infrastructure.
Further, starting in 2023, both California (population ~40 million) and New York (population ~20 million) will have laws in place banning the sale of new gas cars in their state by 2035. That means that 25% of Americans now live in a state that plans to ban gas cars by 2035.
And this isn’t an America-centric movement, either. Countries around the world are working to boost the adoption of electric vehicles and other clean tech to fight climate change. The EU is targeting a ~50% EV sales penetration rate by 2030. China is shooting for a 40% EV sales penetration rate by then.
And soon, for the first time ever, the median price of an EV with at least 200 miles of driving range will fall below the median price of a gas-powered car.
Plus, every major automaker – new and old – will launch a suite of new EVs, giving consumers more choice than ever before at the dealership.
And with the cost of gas hitting folks square in the wallet, EV adoption rates have already begun to take off.
All the stars have aligned. Next year will be “The Year EVs Took Over the World.”
It’s also going to be the year that EV stocks soared like never before.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.