U.S. sets ambitious goals for the electric vehicle transition. How to invest for it

Published Thu, Aug 5 202110:20 AM EDTUpdated Thu, Aug 5 202111:03 AM EDT

The White House will announce Thursday a host of initiatives aimed at jumpstarting electric vehicle sales, and the necessary spending involved will unlock opportunities for investors across the automotive supply chain. The president's executive order will call for electric vehicles to account for 50% of new car sales by 2030. The U.S. will also announce new long-term fuel efficiency and emissions standards. "Despite pioneering the technology, the U.S. is behind in the race to manufacture these vehicles and the batteries that go in them," the plan's fact sheet said. "Today, the U.S. market share of electric vehicle sales is only one-third that of the Chinese electric vehicle market." The plan outlines specific areas of spending to aid the transition, including installing a national network of electric vehicle charging stations, beefing up domestic manufacturing and investing in technologies to maintain a competitive edge. The opportunity is not lost on Wall Street. "The move towards zero-emission personal mobility triggers a radical transformation of the largest value chain, it has major implications for consumers, companies and investors," Bernstein wrote in a recent note to clients. Automakers Automakers themselves are one way to invest around a jump in electric vehicle sales. Tesla is perhaps the poster child of the movement in the U.S., given it has been solely focused on battery-electric vehicles since its founding. But traditional automakers have also made meaningful pushes into the space. During the second quarter, GM raised its targeted spending on electric and autonomous vehicles through 2025 to $35 billion, for an increase of 30%. Ford , meanwhile, said in May that it expects 40% of its global sales to be electric vehicles by the end of this decade. International automakers are moving in a similar direction. In July, Germany's Daimler said its Mercedes-Benz division would be all electric by the end of the decade. Volkswagen , meanwhile, is aiming for half of its sales to be battery-electric vehicles by 2030. By 2040, the company plans for the number to be closer to 100%. There are also China-based companies Nio and XPeng . For those willing to take on more risk, there's also a number of electric vehicle companies that have entered the public market over the last year via special purpose acquisition companies. Since March 2020, 55 SPAC deals in the clean tech space have been announced, according to data from Raymond James. Fisker went public last fall, while Lucid Motors began trading in July. Charging infrastructure More electric vehicles on the road means charging infrastructure will need to be built out. One of the barriers of widespread adoption thus far has been drivers' fears that there won't be a place to refuel. There are a number of companies working on supporting the ecosystem around electric vehicles, including ChargePoint Holdings . The company is a vertically integrated pure-play EV charging name, selling charging hardware to customers, which it turns into recurring revenue through a cloud-based software support system. ChargePoint has operations in North America and Europe, and it provides services for residential and commercial customers. The company went public through a SPAC in a deal that closed in February. There's also Beam Global , which deploys solar-powered EV products, as well as Blink Charging , which owns, operates and supplies charging stations. Battery companies There are also companies that work in the complex arena of making the batteries for the vehicles. This includes everything from the companies that source the raw materials to those that assemble the batteries themselves. Livent Corporation and Albemarle are two lithium producers, while names like LG Chem , Samsung and Panasonic are battery producers. There's also more speculative new market entrants including QuantumScape . There are a number of exchange-traded funds specifically focused on lithium batteries. The offerings include the Amplify Lithium & Battery Technology fund, which trades under the ticker BATT, as well as the Global X Lithium & Battery Tech fund, which trades under LIT. "LIT invests in companies throughout the lithium cycle, including mining, refinement and battery production, cutting across traditional sector and geographic definitions," notes the fund's prospectus. Lithium-ion batteries are found in products ranging from phones to computers to home energy storage systems, so these funds offer investors exposure beyond just vehicles. Exchange-traded funds For investors who want exposure to the electric vehicle trend broadly without having to target specific areas, there are exchange-traded funds that take a holistic view of the supply chain. The iShares Self-Driving EV & Tech ETF is one such example. The top holdings are AMD, Tesla, Apple and Nvidia. The fund tracks an index comprised of companies that "may benefit from growth and innovation in and around electric vehicles, battery technologies and autonomous driving technologies." Shares of the fund, which had roughly $400 million in assets as of the end of June, are up 17% this year, and 63% over the last year. Another option for investors is the Global X Autonomous & Electric Vehicles ETF, which trades under the ticker DRIV . The fund has around $1 billion in assets under management. Its shares are up 20% for 2021 and 77% over the past year.

An electric vehicle charging point in Stoke-on-Trent, England.

Nathan Stirk | Getty Images News | Getty Images

The president's executive order will call for electric vehicles to account for 50% of new car sales by 2030. The U.S. will also announce new long-term fuel efficiency and emissions standards.