How to Invest in Electric Cars By Avoiding Tesla – Introduction
What comes to your mind when you think of electric cars? You guessed it right. Tesla. Tesla is one of the largest manufacturers of electric cars. It has a market capitalization of more than $56 billion. That is $2 billion less than the market capitalization of General Motors and $10 billion more than that of Ford Motors. In 2016, Tesla sold less than 20,000 cars while GM and Ford sold more than 20 million cars. This means that Tesla is one of the most overvalued companies in the world. Therefore, for a long-term investment, it would be unwise to invest in an overvalued company. Remember the key rule of investing is to buy companies that are undervalued.
- Invest in traditional car companies
The main reason why Tesla is a highly attractive company is because of hype. The same hype is common with companies like Apple. It makes very high-quality cars. Also, it has invested heavily in the car charging stations. However, other companies that have a reputation of making good cars have entered the scene. For example, Japanese auto giant, Nissan has the top selling electric car called Leaf. Leaf has sold hundreds of thousands of cars more than Tesla. In addition, companies like BMW, Toyota, Volkswagen, and Daimlar are in the process of creating electric cars. These companies have the scale and the resources to create high quality cars at a cost lower than that of Tesla. As shown below, the stock price of these companies has been falling in the recent past. Compare their growth with that of Tesla.
Remember, many European and Asian countries have issued dates when they will cease accepting electric cars.
- Invest in electric car parts suppliers
Another way of investing in the future of electric cars is to invest in companies that supply parts to these companies. A company like Tesla has hundreds of suppliers. For example, Tesla does not mine lithium which is important in making batteries. The success to electric cars is their batteries. The company that will manufacture a car with the longest range will be the most successful one. Therefore, you can look at companies like Albemarle Corporation which is the largest supplier of lithium in the United States. You can also look at companies like FMC Corp. You can also look to companies that manufacture carbon fiber, a material that is continuing to be popular by the day. In this, you can invest in companies like 3M and BayComp.
- Invest in Graphics and AI companies
The era of electric vehicles will also be associated with autonomous cars. In fact, Tesla’s autopilot feature is one of the most popular. Therefore, if you can invest in companies that manufacture graphic cards and artificial intelligence solutions, you can capitalize in the field that is one of the fastest growing. For example, companies like NVIDIA and Micron Technologies can form an important basis of your portfolio. The same is true with companies like Blackberry that deal with security. This is because in an era of software powered cars, owners will need to be assured of their security. Therefore, you can invest in companies like Blackberry that specialize in securing these systems.
- Invest in Google
Google is currently investing in an autonomous car called Waymo. The company has invested billions of dollars. However, the company’s valuation is primarily associated with its search services. Therefore, as a trader, you can invest in Google, a reasonably valued tech company that has the potential to dominate this field.