Much of the focus of vehicle electrification unsurprisingly has been on the auto manufacturing sector. Large automakers like General Motors, Ford, and Volkswagen are ramping up electric vehicle (EV) offerings, and several start-ups are also working to compete with current industry leader Tesla (TSLA -6.02%).
There are expected to be more than 500 different EV models available globally by next year, according to research organization BloombergNEF. As transportation becomes more electrified, those vehicle batteries need to be recharged, and it's not too early for investors to grab shares in companies associated with the charging network portion of the EV sector.
The need for infrastructure
Though Tesla has been building out a charging network specifically for its cars, the need for more charging infrastructure is apparent. President Joe Biden has said he wants to convert the government vehicle fleet away from fossil fuels, and his administration has a goal to build more than 500,000 EV chargers to help service that fleet. Biden recently met leaders of EV charging companies to gain insights about "how to most effectively accelerate and scale a national network of EV charging stations," according to a White House statement.
Looking beyond just the U.S. reveals the enormous potential. Close to 2 million passenger EVs were sold worldwide in 2020. That number is expected to rise to more than 8 million in 2025, soar to 26 million in 2030, and more than double from there by 2040, according to BloombergNEF's EV outlook. With both private industry and government leaders planning a coordinated effort to increase vehicle electrification, it makes sense for investors to participate.
A basket approach
Different charging-network companies focus on different niches, from fast charging and fleet charging, to residential, shopping center, education, or health network locations. Several are now trading publicly or soon will be, through merger transactions with special purpose acquisition companies (SPACs). Here are some of the public stock options currently available:
- Chargepoint Holdings (CHPT -7.17%)
- Blink Charging (BLNK -7.55%)
- Volta -- through SPAC Tortoise Acquisition II (SNPR)
- EVgo -- through SPAC Climate Change Crisis Real Impact I (CLII)
- EVBox -- through SPAC TPG Pace Beneficial Finance (TPGY 0.10%)
Each company has an area of focus in the sector that it is pursuing. Volta works with advertisers and owners of retail and shopping center locations to place its chargers that double as ad platforms with interactive display screens. EVBox is a 10-year-old company that owns Europe's largest EV charging station network, with a total of over 200,000 charging ports in more than 70 countries worldwide, including those in North America.
EVgo is the leader in DC fast chargers (DCFCs) in the U.S., with a 50% retail market share, according to the company. DCFCs can be used effectively in commercial settings while consumers are shopping and otherwise on the go. With more than 70% market share, ChargePoint is the North American leader in Level 2 charging networks, which use 240-volt power. Blink Charging has been growing its network of charging stations through strategic partnerships with several health networks and municipalities.
With several different approaches and geographic footprints in the sector, investors may want to hold a basket of these companies (at least as the infrastructure builds out) until there is more insight into how successful each business becomes. But if you believe that growth in the electrification of the transportation sector will continue, it makes sense to be invested in the providers of charging infrastructure.