The green energy wave is here. Tesla is officially joining the S&P index and the Biden team is signaling its commitment to going green. Meanwhile, Tesla’s market cap has surged from $70 billion a year ago to roughly $640 billion today. That’s some serious growth. Shares have jumped roughly 700% in that time period, and–as such, it could make sense to take a deep breath and consider alternatives to Tesla that are less richly valued.
If you missed the buying opportunity in Tesla over the last year (including my recommendation to consider Tesla last August in my podcast)…fear not! There’s still a lot of money to potentially be made in the sector that is servicing Tesla and other electronic vehicle makers.
Investing in the EV Space
Indeed, investors would be wise to consider looking at “tie-in” opportunities–companies that are in the same space as Tesla and, are therefore, critical to its survival.
For starters, this might include companies that make lithium — the battery source that powers the “EV” vehicles. Elon Musk has already announced his plans to build enough capacity (lithium battery-wise) to make 30 million EVs by the end of the decade. And, given the expectation of a supportive administration, the EV space will wind up being more than just Tesla. As such… consider the possible need for lithium.
Meanwhile, with that many electric vehicles expected to be on the roads, we’ll need a lot of charging stations. And, this is where government could be helpful–just as it was in Brazil.
The Brazilian Way to Energy Independence
I remember reporting from Brazil in 2006 just as the country became energy independent. It was a pretty big deal at the time. They were years ahead of us… indeed, it wasn’t until just recently that the U.S. was successful in achieving the same feat. In 2006–with its economy booming–Brazil was an exciting example of what could be achieved.
The country relied on government to help influence the change from oil to ethanol. As a result of the energy crisis in the 70s, and lacking oil resources at that time of its own, Brazil’s government decided to explore alternative sources. Sugarcane was abundant and Brazil’s energy department soon learned that it could efficiently and cheaply create ethanol from sugarcane. As a result of their studies and innovation, the Brazilians were able to create a source of energy that was cheaper and more efficient that oil. BUT–how could they get people to use it? After all, as great as it was, if people could gas up with ethanol at their local gas station…then, why bother?
That’s when the government stepped in. The Brazilian federal government required every gas station to have at least one ethanol pump.
And, suddenly? Ethanol was a hit. Given the availability of the fuel, its cheap price, its efficiency, and its clean energy attributes (compared to oil) it wasn’t long before the nation saw consumers switch to ethanol.
For EVs To Succeed, the US Must Encourage Charging Stations
Ultimately, the same may happen here. In the long run, it could be cheaper to opt for chargers and to not buy gas…but, consumers would need to be ensured that when they’re making a long haul trip, they’re not going to get stuck on the side of the road while enroute from New York to Maine! This is where the charging stations come in. If charging stations can become the norm–nationwide and not just in affluent places like Greenwich, CT and Malibu, CA–THEN, we might actually begin to see a shift.
As an investor, if you believe fundamentally in Tesla but are increasingly worried about its valuation, I would encourage you to look at the ancillary businesses surrounding the company. Because, if the EV industry is successful (and, I believe it will be) then, we’re all going to need a lot of lithium and plenty of charging stations.