What happened
Stocks were mostly lower early Tuesday after the latest inflation report showed consumer prices remain stubbornly high, even as the Federal Reserve has maintained its campaign of raising interest rates to slow growth. But some electric vehicle (EV) names were still gaining ground in the market session.
ChargePoint Holdings (CHPT 2.69%) was up 3.8% on the day as of 2:30 p.m. ET. Battery maker QuantumScape (QS -3.61%) and utility EV maker Canoo (GOEV -3.14%) were also higher by 4.5% and 0.3%, respectively, at that time.
So what
The gains came amid another sign that the EV market will be growing for many years to come, which is exactly what successful investments in these names will require. Today, The Wall Street Journal reported on a vote by the European Union (EU) approving a new law that effectively bans the sale of gasoline- and diesel-powered cars in the region starting in 2035.
Image source: Getty Images.
Now what
The newly passed legislation cements the growth of alternative energy vehicles in what is already the world's second-largest market for EVs, behind China. The law consists of a two-part plan. New cars and vans will need to significantly reduce carbon emissions by 2030 and qualify as zero-emission vehicles by 2035.
While that doesn't ensure the future of transportation in Europe will consist solely of EVs, it does signal a long runway for the EV market there. The requirement allows for vehicles that run on carbon-neutral fuels to also be sold after the 2035 deadline.
But EVs are already leading the transition in the region, representing 20% of all new cars sold there last year, according to the Journal report. That bodes well for the future of EV-sector companies that are brand agnostic, like ChargePoint and QuantumScape. Those companies both already have significant ties to the region as well.
ChargePoint's 210,000 charging ports are split between North America and 16 European markets. The majority of ChargePoint's revenue still comes from North America, but it is also focused on expanding in Europe.
QuantumScape is still at least two years away from commercializing its solid-state EV battery technology. But it has a strong partner in Volkswagen. The European automotive giant was an early investor in QuantumScape and has board representation with the EV battery start-up. The companies are also joint venture partners. Volkswagen will be one of the first original equipment manufacturers (OEMs) to utilize products from QuantumScape's initial production line.
Like QuantumScape, Canoo has yet to begin generating revenue. Its path to success is also reliant on the EV market continuing to gain traction. The new law passed by the EU has virtually assured that is going to happen, at least in Europe. That has investors in these speculative stocks feeling better about their prospects today.
