To the great relief of many investors who were suffering from the recent rout of electric vehicle (EV) and associated stocks, the market pushed the accelerator on such companies Tuesday. An influential report gave them hope that the sector as a whole would lift itself out of the doldrums with stronger sales.
Many of the industry's best-known stocks saw substantial lifts in price on the day. High-end EV maker Lucid Group (LCID 0.18%) gained almost 6%, and pickup/SUV specialist Rivian (RIVN 2.44%) enjoyed a nearly 3% increase. QuantumScape (QS 2.15%), a company working to build a better EV battery as we speak, also had a good day on the stock market; its shares advanced by just under 4%.
Good news for EVs, not-so-good news for energy companies
Helping to boost sentiment in the EV industry was that report, a forecast of EV sales issued on Tuesday by the International Energy Agency (IEA). This is an intra-governmental organization comprised of 49 companies that collectively form the bulk of the planet's energy production.
In the document, the IEA forecast that total global EV sales will land at 17 million this year, up notably from the 2023 figure of 14 million. One in five vehicles sold will be electric.
Despite worries among investors that EV sales growth is slowing at worrying rates, the IEA pointed out that this figure rose by 25% year over year in the first quarter. While that's roughly the same rate as in the first quarter of 2023, it's from a far larger base, indicating that demand is robust.
The IEA isn't exactly crowing about this. After all, one of the great drivers of oil production historically has been the internal combustion automobile. With increasing take-up of EVs, the IEA believes, oil demand for road transportation purposes will likely peak around 2025.
This isn't encouraging news for the petroleum industry, particularly considering that the IEA analysis is predicting that the trend will lead to around six million barrels per day (bpd) of oil dropping from demand by 2030. That number rises to 11 million bpd by 2035. The latter number is more than 10% of current overall demand for oil.
Don't be so eager for EVs
While this is surely encouraging, I'd caution that it's far from a done deal that EVs will be the dominant green vehicles of the future; other technologies (hydrogen, for example) are being developed too and may eclipse them. Second, the EV space is getting increasingly more crowded, and more manufacturers are chasing a customer base that isn't growing fast enough -- hence the recent rounds of price cuts that don't seem to be ending soon.
I don't think investors should automatically rush to buy their favorite EV or next-generation battery stock on the basis of the report. Even for EV true believers, not all of these companies have equal potential or are even viable. Care is warranted here.
