How to invest in the electric vehicle revolution

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Maike Currie is Chief Investment Officer at Fidelity International.

Electric vehicles are a bit like the cooking pot. Some hate them, believing that nothing can replace the traditional engine, while for others they are one of the most tangible ways to become more environmentally friendly and less dependent on fossil fuels.

Either way, consumer skepticism about electric vehicles is waning – the days when people wondered if they would take them to stores, the availability of charging stations and what would happen if the car breaks down is over.

Today, almost everyone weighs the pros and cons, which could mean a golden investment opportunity.

Automotive revolution: some drivers hate electric vehicles, while for others they are one of the most tangible ways to become more environmentally friendly

When most of us think of electric vehicles, we probably think of Tesla. Elon Musk’s disruptive baby has quickly morphed into a controversial stock market giant.

In what seems like almost no time (it’s actually been around a decade), Tesla has become a volume producer, shipping more than 310,000 units in the first quarter of this year alone.

Tesla stock price soared for five years
$ % change
06/01/2017 68
06/01/2018 58 14.7
06/01/2019 36 -37.9
06/01/2020 180 500
06/01/2021 624 346
06/01/2022 740 18.9
Source: Refinitiv from 10.6.17 to 10.6.22. Basis: Share price in USD. Excludes upfront costs.

Just because Tesla generates the most chatter, we shouldn’t be led to think that the rest of the industry has stood still. Other manufacturers have actively positioned themselves to resume racing.

Ford and General Motors have both announced multibillion-dollar additional investments in electric vehicles and batteries this year.

Ford is now “participant” in the transition, having already committed to transforming 50% of its global production into all-electric by 2030.

In the United States, the arrival of an all-electric version of the F150 pickup – the best-selling vehicle in the United States for 45 consecutive years – marks a major milestone.

Manufacturers aren’t the only way to invest

Maike Currie: Consumer skepticism of electric vehicles is diminishing and today almost everyone is weighing the pros and cons

Maike Currie: Consumer skepticism of electric vehicles is diminishing and today almost everyone is weighing the pros and cons

Tesla, Ford and GM are of course all publicly traded in the United States, but there are other ways to gain exposure to the ongoing transportation revolution.

Uber and arch-rival Lyft look poised to capitalize on growing customer demand for clean, green transport as they deliver on promises to transform into zero-emission mobility platforms.

The recent NASDAQ listing of Polestar – the performance EV spin-off of Swedish automaker Volvo – was highly anticipated, not least because of the company’s plans to form a global partnership with car rental specialist Hertz.

Polestar hopes to sell 290,000 cars in 2025, ten times more than last year.

Finally, the pick and shovel approach may be worth considering. NVIDIA – perhaps best known historically as a manufacturer of computer game chips – is now a major supplier of chips to the automotive industry, including in China.

There, it provides chips to NIO and Xpeng for their driver assistance systems – stepping stones on the path to fully autonomous vehicles.

Where can you invest to gain exposure in your portfolio?

special section electric cars

Scottish Mortgage Investment Trust (Ongoing charges: 0.34%)

If you’re looking for exposure to the EV theme via a fund, it might be worth looking at the Scottish Mortgage Investment Trust, which invests in many of the market’s bearish tech stocks that are down 49% in just six months. . .

It trades at a discount to the value of its assets of around 14%. The average for the last three years is less than 1%.

>>> Is it time to pounce on Scottish Mortgage? Learn more here

Rathbone Global Opportunities (Ongoing charges: 0.77%)

Interestingly, the world’s top money manager, James Thomson of the Rathbone Global Opportunities Fund, has no exposure to electric vehicle names.

He points out that this is a highly competitive industry, with every automaker in the world devoting all their R&D (research and development) to it, making it difficult to determine who will be the winners and losers in the long run.

Thomson is also not convinced that Tesla is the ultimate investment, given the company’s manufacturing delays and mishaps.

Instead, it takes the picks and shovels approach, holding Nvidia in its top 10 holdings as well as some exposure to Infineon Technologies, which makes the chips that go into electric cars.

Vanguard FTSE All-World UCITS ETF USD Accumulation (VWRP) (Ongoing charges: 0.22%)

For passive exposure to the theme, at a very competitive price, take a look at the Vanguard FTSE All-world UCITS ETF, which holds both Tesla and NVIDIA, among its top 10 stocks.

Vanguard S&P 500 UCITS ETF (Ongoing charges: 0.07%)

For purely US exposure, home to most of the tech giants driving the electric vehicle revolution, the Vanguard S&P 500 UCITS ETF is another suitable choice, with higher allocations to both names.

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