Electric Vehicles Have Shifted into High Gear, and One EV Stock Is Well-Positioned to Capitalize

After idling for decades, electric vehicles (EVs) are finally ready to charge ahead. Changes in the regulatory landscape, decreasing costs, and a substantially wider range of buying options have transformed the industry and created a powerful secular growth trend. One little known electronics supplier, Aptiv PLC, is particularly well-positioned to take advantage of the opportunity.

Believe it or not, at the start of the 1900s, 38% of cars in the U.S. were electric. Their heyday was short lived, however, as gas-powered vehicles proved to be more practical – they were cheaper, easier to refuel, and traveled farther.

These same three issues (price, charging, range) have dogged the EV industry ever since, but thanks to a confluence of structural economic changes, and the rapid embrace of Tesla by consumers, electric cars finally appear poised to make their long-awaited resurgence.

EV History: The Chicken or the Egg?

To understand the challenges facing the EV industry, it is helpful to consider the chicken and egg problem. Anytime a disruptive new product enters an established market, manufacturers are hesitant to mass produce the item as they are unsure of demand. With limited supply, sales are muted, which reinforces the status quo.

Electric vehicles are a textbook example of this phenomenon, particularly because they also require an extensive infrastructure investment (i.e., charging stations). Historically the EV industry has grappled with multiple challenges that have slowed its evolution:

  • Auto manufacturers have been hesitant to ramp up production due to uncertain demand. And that hesitancy has been warranted, as consumers have been slow to adopt EVs due to concerns about limited range and lack of charging stations.
  • EVs are expensive, which has restricted the market opportunity to high-end buyers. Batteries are the most costly components of EVs, but without sufficient revenues to fund research, battery costs have declined slowly.