My Favorite EV Pick-and-Shovel Play
Electric vehicle owners rarely run their batteries all the way down. But some of them certainly worry about running out of juice, just like internal combustion engine car owners worry about running out of gas.
When EV owners travel long distances, they need multiple places to charge along the way. But unless you’re driving a Tesla (Nasdaq: TSLA), charging locations can be hard to find.
At the end of last year, there were more than 10 million EVs in use globally. That was a 43% jump over 2019’s total.
As a result, the world’s charging networks are trying to keep up. And that has produced some exciting investment opportunities.
We’ll get to them in a minute. First, let’s look at the state of EV charging today.
Tesla owners almost never have to worry about finding a place to charge. The company decided early on to build its Supercharger networks everywhere its cars are sold.
Today it has more than 25,000 fast-charging stalls in Europe, China, North America and Australia. It also keeps adding both new charging locations and more stalls at existing ones.
The problem is only Tesla owners can use the Supercharger network. That may change, as CEO Elon Musk is considering making it available to non-Tesla EVs.
But what about all of the other EVs coming to the market in the meantime? It’s estimated that globally there were 370 EV models to choose from last year. That’s a 40% increase from 2019’s offerings.
And by 2022, EV customers around the world will have more than 500 EV models to choose from.
They will all need places to charge, both at home and when traveling. Charging at home is no problem for homeowners with garages. But 50% of potential EV owners don’t have garages where they could charge. They’d have to rely on public charging stations.
Today there are only 216,000 workplace and public charging spots in the U.S. By 2030, it’s estimated we’ll need 2.4 million of these in order to keep up with the penetration of EVs.
The current administration has $15 billion earmarked for U.S. charging infrastructure. That would pay for about 500,000 additional chargers.
However, it looks like that money will be cut in half in the final bill. That means we’re looking at an additional 250,000 charging stations, which is far short of what’s needed.
My Favorite EV Charging Play
Regardless of what happens with government funding, the EV charging market is rapidly growing. It’s expected to expand between now and 2028 at a compound annual growth rate of 30.26%.
By then, it will be worth $111.9 billion. And an increasing number of charging companies want a piece of that.
My favorite is ChargePoint Holdings (NYSE: CHPT). It operates the largest charging network in North America.
As of the end of July, the company had more than 118,000 activated ports in the U.S. They are all networked together, allowing ChargePoint to view performance and usage.
It makes units for home use, fleets and public charging. Its chargers can handle light-, medium- and heavy-duty electric vehicles. And the company can easily see where it needs to install additional units.
Plus, the beauty of public charging is that it creates a recurring revenue stream for ChargePoint. So the more chargers it installs, the more revenue it generates. Additionally, the company offers annual charging subscriptions to high-use customers.
ChargePoint’s growth is directly proportional to EV penetration. Investors in the company should take a long-term view when purchasing shares.
Remember, the electrification of transportation is still in its nascent stage. And technology will continue to march on.
Disclaimer: David Fessler owns shares of Tesla.
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