Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons EV Stocks Are Making Headlines

By Chris Neiger - Mar 17, 2021 at 7:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Electric vehicle companies are some of the hottest investment ideas right now -- here's why.

  • Electric vehicle (EV) stocks are attracting investors' attention after Tesla's (TSLA -0.06%) stock skyrocketed 740% in 2020.
  • The influx of special purpose acquisition companies (SPACs) into the market has also fueled EV stocks like Churchill Capital Corp IV (CCIV) and Lucid Motors.
  • Investors should understand that that the EV market is still very volatile.

It seems that recently, electric vehicle companies have been making headlines constantly, and there are few reasons why these companies are increasingly popular with investors. Among the most important is Tesla's meteoric stock price rise last year.

In the video below, we'll take a look at how Tesla's rise has been helping to boost other EV stocks, how SPACs are influencing the electric vehicle space, and why investors should expect some big share price swings from these companies.

Narrator: Electric vehicle stocks have caught the attention of investors over the past year, causing share prices for the biggest EV makers to skyrocket.

But why are EV stocks so popular? Let's take a closer look.

Reason No. 1 is that Tesla's stock has a big halo effect. Tesla's stock price surged 740% in 2020. The rise was fueled, at least in part, by Tesla's vehicle production -- which reached 500,000 last year.

Tesla's share price jump last year pushed up the company's market cap to $820 billion back in January.

And Tesla's meteoric rise has helped the share price of other, smaller EV makers like Lucid Motors to jump too. Which brings us to our second reason why EV stocks are making headlines: Some EV stocks are riding the SPAC wave.

Special purpose acquisition companies, or SPACs, are publicly traded companies that are created specifically to merge with private companies. And they've gained the attention of EV investors lately.

SPAC mergers have grossed nearly $59 billion in proceeds in just the first two months of 2021 -- compared to only $3.9 billion just six years ago.

Shares of SPAC Churchill Capital IV skyrocketed nearly 500% in just three months as investors anticipated that the company would merge with the electric automaker Lucid Motors.

Lucid is working on an EV sedan that can go 517 miles on a single charge -- further than Tesla's Model S maximum range of 402 miles -- and it says it will produce 90,000 vehicles by the end of 2024.

When you combine a potential Tesla rival with the red-hot SPAC market, it's clear to see why Lucid Motors has gained the attention of some investors.

And finally, one of the biggest reasons why EV stocks are constantly in the headlines is that they're very volatile.

EV stocks have had some wild share swings recently, pushing Tesla into negative territory year-to-date.

Some of the drop is due to rising interest rates, which have stoked investor fears that inflation will follow, and encouraged some investors to leave high-growth companies in favor of more stable companies.

But even with the recent EV stock volatility, it's likely that this sector of the market will continue grabbing investors' attention. EV sales will make up more than 30% of all global vehicle sales by 2030, according to Morgan Stanley.

And with the electric vehicle market still in its infancy, it's likely that more EV stock headlines are to come.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$709.42 (-0.06%) $0.39
Churchill Capital Corp IV Stock Quote
Churchill Capital Corp IV
CCIV

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.