Electric vehicles are now among the hottest segments of the stock market. Tesla (TSLA -2.03%) leads the way, but NIO Inc (NIO -7.85%), Nikola Corporation (NKLA -2.33%), Blink Charging (BLNK -3.50%), and Workhorse (WKHS -3.90%) are all contenders for the market's attention right now. Plus, there are a number of high-profile private companies that could go public soon and nearly every major automaker has made a push into EVs. 

By most accounts, these stocks look expensive. Price to sales ratios look more like those of tech stocks than manufacturing companies -- but there's also reason to think these growth stocks are worth paying for if you're willing to wait for the EV industry to mature. 

NIO vehicle driving down the road.

Image source: NIO.

What's driving electric vehicles over the next decade

There are some things that will likely be tailwinds for the EV industry over the next decade. These should help all EV stocks, albeit in different ways. 

1. EV sales are growing faster than traditional car sales

According to the International Energy Agency, 4.79 million electric vehicles were sold in 2019, up from 3.27 million in 2018, and just 0.72 million in 2015. This includes both full electric and hybrid electric vehicles, but shows just how fast the industry is growing.

What's incredible is how much room EVs still have to run. Just 2.6% of global car sales were EVs last year, and just 1% of all cars on the road are electric. Given the potential and growth rate, electric vehicles have a lot of opportunities ahead. This should be a rising tide that lifts the whole industry

2. EVs are much cheaper to own than ICE vehicles

Right now, the upfront cost to buy an electric vehicle is higher than that of buying an internal combustion engine (ICE) vehicle. But that doesn't mean EVs can't be cheaper long-term. 

We'll look at fuel costs below, but before that, one thing to consider is how much less maintenance EVs require. AAA estimated that EVs will reduce maintenance costs by about 17%, while other estimates exceed 25%. With fewer moving parts, what's clear is that EVs will be less costly to maintain than ICE vehicles long-term. 

3. Electric cars win a drag race any day

Now, let's talk about why people want to own electric vehicles. Let's be honest: Reducing emissions and saving the world is a sales pitch for some, but isn't going to keep EVs growing forever. What will is that EVs are cooler and quicker vehicles than ICE counterparts. 

The Tesla Model 3 is a great example. It has a 3.2 second 0-60 time, which is much faster than the BMW M4's time of 4.1 seconds, despite the M4 costing nearly twice as much as a Model 3. 

EVs have a natural advantage because electric motors have more torque than ICE rivals, which gives them a huge advantage in a drag race with almost any EV model. That makes for a fun drive, and should help with sales of EVs for skeptical buyers.

4. Range is becoming less of an issue every day

Just a few years ago, it wasn't uncommon to see a new electric vehicle announced with less than 100 miles of range. That's technically enough to complete the daily commute for most Americans, but hardly makes an EV a practical vehicle.

Today, most EVs have a range of over 200 miles, and Tesla is leading the pack with multiple offerings of over 300 miles of range. At the same time, EV chargers are becoming faster and more common, easing range anxiety even further. 

5. Finding electricity is easier than finding gasoline

According to the Department of Energy, there are currently 26,586 charging stations in the U.S. with 85,353 charging outlets, compared to about 111,100 gasoline stations. But the number of EV stations has about doubled in the past three years as companies like Blink Charging (BLNK -3.50%) have increased their networks. 

The difference between gasoline and electricity is that there's access to electricity on almost every block. Any home could have a charger, thousands of businesses are adding them, and commercial networks are getting bigger as well. There may be more gasoline charging stations today, but finding a charger is getting easier by the day, and that's helping reduce the range anxiety of owning an EV. 

6. Fuel is cheap

Today's national average cost of gasoline is $2.23 per gallon, and at that price a vehicle that gets 25 miles per gallon will cost $0.09 per mile for fuel. At the average rate of 13.2 cents per kWh, an EV with a 75 kWh battery and 322 miles of range will cost $0.03 per mile for fuel. 

Not only is electricity about one-third the cost per mile, if you have solar on your roof or buy solar or wind energy from your utility you can have 100% clean energy, with cost savings as the kicker. 

7. Battery costs are coming down rapidly

The single biggest cost that goes into an electric vehicle is the battery. So the rapid increase in battery capacity globally and the reduction in prices should be helpful to EVs' competitiveness.

Bloomberg New Energy Finance reports that the cost of batteries has fallen from $1,100 per kW-hr in 2010 to $156 in 2019. And they expect costs to fall below $100 per kW-hr by 2023. For a 100 kW-hr battery, the savings between 2019 and 2023 would add up to $5,600, and make EVs even more competitive long-term. 

8. EV stocks are more valuable than you might think

Despite being just 1% of all vehicles on the road, EV stocks are more valuable than those of all traditional automakers put together. In fact, Tesla alone is more valuable than Toyota, GM, and Ford put together. 

TSLA Market Cap Chart

TSLA Market Cap data by YCharts

The valuations electric vehicle companies have received may end up being justified, but right now they look very expensive, and may come down to earth if they don't hit lofty expectations. 

Should you jump on the EV bandwagon? 

There are a lot of electric vehicle companies to choose from today, but they're all high fliers by any measure. One company investors should keep their eye on is Blink Charging. The company is building the charging infrastructure needed to fuel electric vehicles, and that could be a lucrative space long-term. 

NIO is also a company I'm keeping an eye on. It's a Chinese EV manufacturer, which gives it a large and eager market, and is growing like a weed. It delivered just 3,533 vehicles in July, but that was up 322.1% versus a year ago, and so far in 2020 deliveries are up 111.3% to 17,702 vehicles. If that growth rate keeps up it could be the market leader in just a few years. 

Tesla, Nikola, and Workhorse are the three other stocks I've mentioned here, but a combination of sky-high valuations and low sales (in the cases of Nikola and Workhorse) should make investors worry about these stocks. Eventually, these companies all have to start making money and that's when investors may be disappointed at how much money there is to be made in the electric vehicle market.