A surprise profit from Tesla Motors (NASDAQ:TSLA) in the first quarter has turned a lot of electric vehicle skeptics into believers. If a car company focused solely on EVs can make money, there's no telling what the opportunity is for the rest of the industry.
What people may not realize is that success of the EV is a two-sided coin. For Tesla, Ford (NYSE:F), General Motors, Nissan, and others to be successful they need to sell vehicles but there needs to be a network of charging stations to power these newly viable EVs. Without that, EVs will be nothing more than a short-distance commuter vehicle.
The hidden play in EVs
The charging network is where Aerovironment (NASDAQ:AVAV) comes in. The company is one of a few major EV charging suppliers, having made some important partnerships in the industry. Last week, Aerovironment was selected by Ford to provide complete home charging solutions for its EVs. Mitsubishi and Nissan offer similar services for their small lines of EVs, and Aerovironment offers a stand alone charging station for the home as well.
The home market is important but charging stations for public use will play a vital role for EVs. Aerovironment is playing its role by building the West Coast Electric Highway, a network of charging stations that will run from the Canadian to Mexican borders. A charging station can be seen below with a standard plug and a credit card swipe for payment.
For Aerovironment to be successful, there are now two questions outstanding. First, what fast-charging standard will the industry choose? Nissan and NRG Energy (NYSE:NRG) will be adding 500 new charging stations that use the CHAdeMO standard. Meanwhile, Ford, Audi, BMW, GM, and others have endorsed the SAE fast-charging standard. To complicate matters, Tesla uses its own proprietary charger and is building its own network. For Aerovironment, this is a complication in building out infrastructure but one the industry will solve in time.
The second challenge is putting enough EVs on the road to justify massive public charging station installations. So far, Tesla has been the only company to gain major traction, although it may just be the first. Ford could be a major player with three separate EVs available this year and new models from BMW, Audi, and others will build critical mass.
If the industry can decide on a standard and EVs begin to sell, it will be a boon for Aerovironment. It's not a household name in EVs at this point, but partnerships with Ford, Nissan, and Mitsubishi could change that. The company is a hidden way to get exposure to the EV craze without picking a manufacturer to win the battle. As long as there are more EVs hitting the road, Aerovironment wins.
The start of the EV craze
Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends and owns shares of AeroVironment, Ford, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.