What happened
Shares of electric vehicle charging station company Volta (VLTA +0.00%) rallied on Wednesday, trading up 6.3% as of 3:15 p.m. ET. While several prominent tech stocks bounced back somewhat from Tuesday's bloodbath, which was driven by an August inflation report that came in hotter than expected, Volta has actually exceeded the price where it closed Monday. That bigger-than-expected move likely was driven both by some positive commentary from President Joe Biden and news from a leading automaker at the Detroit Auto Show.
NYSE: VLTA
Key Data Points
So what
On the day of the Detroit Auto Show, Ford Motor Company (F +1.96%) announced it was asking nearly 3,000 dealers to invest in upgrades -- primarily, charging stations -- in order to qualify as one of its electric vehicle certified dealers. The more those dealers decide to invest in going all-in on EVs, the more Ford will reward them with higher priority and higher numbers of EVs to sell.
It's not exactly news that major automakers are getting more fully behind electric vehicles. Earlier this year, Ford said it would invest up to $50 billion in EVs through 2026, and will split its EV business and its internal combustion business into distinct units by next year so that investors can assess them separately.
President Biden also spoke at the Detroit Auto Show, touting the $370 billion in climate and clean energy investments that the Inflation Reduction Act features -- including billions of dollars in funding to support the adoption of EVs -- as well as the EV charging investment provisions within the Bipartisan Infrastructure Bill, which passed last year. He took the opportunity to announce the approval of the first tranche of infrastructure money for EV charging stations, with $900 million being deployed to build them across 35 states.
The upbeat news for EVs today likely lit a fire under all EV charging companies, and Volta likely rose the most because it's among the smallest of the publicly traded charging companies, with a market cap of just $392 million. While there are several different businesses models out there, Volta's is perhaps most geared toward advertising on the screens attached to its chargers at retail-oriented stations, and less about selling chargers to third parties.
That makes me think it may not be a direct beneficiary of Ford's dealer investment in charging stations. However, the more consumers purchase electric vehicles, and the more the government helps these small companies invest in their build-out, the more consumers will use electric chargers in general. That's what all of these companies are counting on, as they are all operating at fairly sizable losses today while they invest in growth ahead of wider EV adoption.
Now what
EV charging stocks may look tempting to investors, especially with so much new federal support for the industry. However, it's worth remembering that just because an industry is going to grow a lot, that doesn't mean every company in it will benefit over the long term. It's a bit early to tell which EV charging companies have the right models or technological moats, or if they will all become commoditized. And given that the EV charging companies are all losing money at an unsustainable rate today, they remain high-upside but very high-risk bets.
