It should be no surprise that electric car stocks continue to dominate the stock market. However, you might be surprised to know that CEOs from some of these red-hot companies gathered together Monday to discuss up-and-coming trends. What did they say? And what does that mean for the sector?
There is sometimes no better way to learn what is unfolding in an industry than to hear it from the individuals leading the way. Importantly, that sort of opportunity is exactly what IPO Edge facilitated on Monday. Stock market analysts joined executives from Lordstown Motors (NASDAQ:RIDE), Blink Charging (NASDAQ:BLNK), QuantumScape (NYSE:KCAC) and a host of other companies to dive into the details.
Going beyond the basics, these industry leaders were able to share what their companies are focusing on in 2021 and beyond. For investors, this provided an awesome chance to adjust their watch lists.
Remember, this year has been the year of electric car stocks, and things are still heating up. The summer brought a wave of initial public offerings and big headlines. Just yesterday, the world learned that Tesla (NASDAQ:TSLA) will soon be joining the S&P 500. Talk about a catalyst for the market niche!
Although this is exciting, it can also make it hard for investors to sort through the noise. If you are struggling — or you just want to learn the latest trends — the IPO Edge event is your ticket.
Here are some of the top takeaways from the event, and what they mean for electric car stocks.
Changing Politics Will Boost Electric Car Stocks
Perhaps one of the biggest factors boosting the EV market right now comes from Washington. Leading up to the election, all eyes were on former Vice President Joe Biden. Now that he is the projected victor, it should be full speed ahead for electric car stocks and other clean energy initiatives. Why? Biden has promised to invest $2 trillion in such initiatives, including installing more than 500,000 new EV charging stations on U.S. highways.
However, there is an even more specific political catalyst these EV companies are watching. Another participant at the IPO Edge event was Tyson Eckerle, the deputy director of zero-emission vehicle market development for the state of California. By 2035, California wants all in-state vehicle sales to be zero-emission. Although this presents a challenge to automakers, it also presents a huge opportunity.
According to the EV executives, this sort of regulatory change is exactly what they are looking for. In fact, Lordstown Motors CEO Steve Burns shared that because of the 2035 goal, Lordstown is making its entrance into the California market. Importantly, prior to Monday, all operations for the up-and-coming EV company centered around its home state of Ohio. Not only is this a potential boost for RIDE stock, it is indicative of what is to come.
Right now, there is a lot of attention on the White House and the Senate run-off races in Georgia. However, with California leading the way in electric vehicles, state officials expect a rush of attention. Not only is Tesla a big player in the state, but a handful of traditional automakers and emerging companies will seize an opportunity there. New regulations will mean new customers and more demand for electric vehicles.
SPACs, SPACs, SPACs
Perhaps unsurprisingly, special purpose acquisition companies were another huge topic of discussion during the IPO Edge event. Lordstown Motors just completed its reverse merger with a SPAC, and several other participants are waiting to complete theirs. For instance, QuantumScape is waiting to come public via Kensington Capital (NYSE:KCAC). XL Fleet is waiting to close a merger with Pivotal Investment Corporation II (NYSE:PIC). And Canoo is working on its reverse merger with Hennessey Capital Acquisition (NASDAQ:HCAC).
Clearly, electric vehicle companies and SPACs go together quite well. But why is that? And what exactly does it mean for investors? According to event participants, a huge part of that answer is the novel coronavirus pandemic.
SPACs offer an alternative to the traditional IPO route, and while they have been particularly popular in 2020, they are not new. However, the level of retail interest in these SPACs is new.
At the start of the pandemic, a sort of Robinhood effect set in. Millennial investors turned to commission-free trading platforms as a way to pass time and buy the coronavirus dip. Special purpose acquisition companies gave them an opportunity to participate in hot new offerings. Importantly, these SPACs also gave electric vehicle companies a chance to come public earlier than expected and communicate with potential shareholders in a different way.
As Canoo CFO Paul Balciunas put it, during a traditional IPO, potential shareholders are diving through formal U.S. Securities and Exchange Commission filings. During the SPAC merger process, the company getting acquired has a chance to communicate in its own voice. Balciunas thinks this gives investors an upper hand as they get to learn more of the specifics about how a company sees itself and its future.
So what should you expect? Get ready for a future filled with EV SPACs.
Electric Car Stocks and Consumer Interests
Just as the SPAC process gives investors a different look at a soon-to-be-public company, many of these lesser-known electric vehicle companies are trying to relate to consumers in new ways.
Why? Well, electric vehicles themselves are quite disruptive. Tesla overturned the traditional automotive industry, recently becoming the most valuable carmaker by market capitalization. It has upended the likes of Ford (NYSE:F) and General Motors (NYSE:GM), as well as energy names like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX).
Along with this, many EV companies want to change the way carmakers do business. They want to connect with consumers in new ways and deliver what they actually want.
For instance, Canoo says that its entire business model is about rethinking what drivers need and want. Its cars look different — more like a spaceship on wheels. Additionally, its business model is all about subscribing to Canoo rather than owning a vehicle. As Balciunas put it, Canoo realized that younger drivers were not that interested in owning a vehicle, and especially not internal combustion vehicles. Through a subscription model that is environmentally focused, Canoo delivers.
Another example of this comes from Blink Charging CEO Michael Farkas. Blink Charging is one of the industry leaders in public charging infrastructure, and it too is working to meet consumers where they are. According to Farkas, one plan in place implements charging stations at popular roadside destinations like McDonald’s (NYSE:MCD). That way, consumers can use the restroom, fuel themselves up and charge their vehicles all at once. Boosting convenience in this way should boost adoption.
What does this mean for investors? Take a look at the market. Figure out what consumers want. The best electric car stocks to buy will be those that most closely align with consumer behavior and preferences.
What to Watch in Batteries
As investor interest in electric car stocks grows, so does interest in battery tech. So what should investors be watching in the world of batteries? Are there any particular advancements that stand out to electric vehicle executives?
One common theme that came up was inductive, or wireless, charging. Unlike the current model wherein battery electric vehicles are plugged into charging stations, wireless charging relies on electromagnetic induction to transfer power. According to some experts, the advantages of wireless charging include improved battery durability, longer driving ranges and increased convenience. Unsurprisingly then, many of the executives on the call are already thinking about wireless charging.
Lordstown Motors says it hopes to roll out inductive charging features in future iterations of its Endurance pickup truck fleets. Blink has already filed a patent for a concrete bumpers that would wirelessly charge EVs. And QuantumScape is hoping to make batteries that charge even faster to better leverage inductive charging advancements. For investors, this means inductive charging better be your new buzzword to watch.
What about battery swapping? Many EV bulls are familiar with the concept thanks to Nio (NYSE:NIO) and its battery-as-a-service model. Although the program appears to be popular in the Chinese market, it is not so hot in the U.S. Why? As QuantumScape CEO Jagdeep Singh put it, battery swapping requires an EV company to have a lot of capital to build out its battery inventory.
What does that mean for investors? Nio and its Chinese peers will likely continue pursuing battery swapping. For now though, expect the U.S. and China to continue battery advancements without much intersection.
New Opportunities for Electrification
Have you noticed that, with the exception of the Endurance pickup truck, much of the conversation focused on consumer vehicles? That is because Tesla first disrupted the consumer market, and many other companies are following.
However, Romeo Power CEO Lionel Selwood highlighted why his company is one investors should be watching closely. Importantly, Romeo Power provides battery packs for commercial EV companies. Its ultimate goal is to provide high-energy batteries and bring electrification to more industries. As it preps to come public via RMG Acquisition (NYSE:RMG), Romeo Power looks rather hot.
That is because Selwood says Romeo Power is already targeting several niches beyond consumer vehicles. He hopes to work with marine, agriculture, mining and aviation companies to electrify their vehicles. Doing so would be good for the environment, and would expand the reach and potential of Romeo Power. In fact, these plans are appealing to Mark Saraiva, the managing director and head of the transportation group at Cowen. Why? Saraiva thinks this expanded focus should translate into a larger total addressable market (TAM) for Romeo. The larger the TAM, the more potential.
For investors, the takeaway here is clear. RMG stock is one to watch, as are any other companies going beyond the consumer space.
The Bottom Line on Electric Car Stocks
Treat the IPO Edge event as a bit of a roadmap for the future. Next time you are considering an up-and-coming electric car stock, consider these takeaways. If it aligns with consumer interests, benefits from changing politics and has a hand in battery advancements, it could very well be a top-notch buy.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.