Arrival (NASDAQ:ARVL) stock is up 14% for a variety of reasons, including a much-anticipated earnings report from Tesla (NASDAQ:TSLA). Should the company beat expectations, investors in Arrival stand to benefit.

But the bigger catalyst for this stock today is news that the United States Postal Service (USPS) is looking to further electrify its fleet. With a deal to sell electric delivery vans to United Parcel Service (NYSE:UPS) in place, this announcement has obviously stoked interest in Arrival. It seems investors are betting Arrival is a front-runner for at least part of this contract.

Let’s dive into what investors may want to make of this news.

Why Is ARVL Stock Shooting Higher Today?

Today’s announcement isn’t trivial in nature. Indeed, the plan to purchase at least 25,000 electric delivery vehicles is good news for this sector. Whether it’s Arrival or one of its competitors, more demand is a good thing for this segment of the electric vehicle market.

Additionally, the fact that USPS has more than doubled its initial estimate of how many electric delivery vans it needs suggests demand could continue for some time. This is one of the biggest fleets in the U.S. And as its fleet ages, more demand could materialize over time.

Arrival’s business model, which focuses on niche areas of the EV market, has perplexed some investors. That’s because, to a certain degree, this company has limited itself in terms of its total addressable market. That said, profitability in this sector is likely to reign supreme. If Arrival can do what others can’t, and turn a profit while growing its deliveries, this is a stock that can run. At least, that’s what the market is pricing in today.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.