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First, President Biden came for our gas stoves… Now he wants to ban the cars we drive!
Conservatives like U.S. Sen. John Barrasso (R-Wyoming) had some choice words this week for President Joe Biden’s administration.
They were furious after the U.S. Environmental and Protection Agency () proposed its strictest emissions standards yet. If these rules go into effect, up to 67% of new cars sold in the United States must be electric by 2032.
Even outlets like NPR voiced concern:
“It’s not currently clear if the world can mine enough minerals or build enough batteries quickly enough to satisfy automakers’ existing production plans, let alone accelerated ones.”
But if the EPA’s new requirements survive the numerous lawsuits and commentary period, it will transform the future of American transportation.
Today, the top 10 oil and gas companies are worth $1.32 trillion, or almost 10x more than the top 10 lithium miners and renewable energy firms combined. A future with such strict emissions standards will likely reverse the two figures.
President Biden Wants to Ban Cars, Here are 23 Stocks to Buy
It’s not the first time environmental regulations have enriched some at the expense of others. In the 1980s, new EPA power plant rules suddenly gave low-sulfur coal from the U.S. West a massive cost advantage over its higher-sulfur counterparts in the Illinois Basin. And Elon Musk’s Tesla (NASDAQ:TSLA) owes much of its early financial success to $4.9 billion in government support.
Investors who foresaw these shifts would have gained handsomely. The late, controversial Robert Murray became known as coal’s “last man standing” for his willingness to invest heavily in Utah mines — almost 2,000 miles away from his Appalachian roots. And Tesla earned almost $1.5 billion in government subsidies in 2021 even after the firm had already become profitable.
In the coming decade, investors will see another shift… where oil producers lose out to lower-carbon options.
And the writers at InvestorPlace.com, our free market news and analysis website, have identified 23 companies that will benefit from this enormous shift.
1. Lithium Miners and Processors
EV makers’ first issue will be finding enough lithium to build the batteries required for production. Let’s take a look…
At InvestorPlace.com, Josh Enomoto outlines his seven top lithium picks.
- Livent (NYSE:LTHM): Livent offers an enticing discount to earnings.
- Sociedad Química (NYSE:SQM): Sociedad Quimica is a lithium powerhouse.
- Li-Cycle Holdings (NYSE:LICY): Li-Cycle could play a role in boosting supplies.
- Albemarle (NYSE:ALB): Albemarle is crucial for the global EV rollout.
- Piedmont Lithium (NASDAQ:PLL): Piedmont features a solid balance sheet.
- Lithium Americas (NYSE:LAC): Lithium Americas features strong book growth.
- Standard Lithium (NYSE:SLI): Standard Lithium has massive upside potential.
Readers will quickly notice an underlying theme:
Even established players are having trouble producing enough lithium.
Lithium demand is expected to increase 42-fold by 2050, according to Jose W. Fernandez, the undersecretary for economic growth, energy and the environment at the U.S. State Department. And mines can take years to come online… if they ever do at all. Lithium Americas’ Thacker Pass project in Nevada took over a decade to begin construction. Meanwhile, a $1.5 billion lithium deposit in Maine could sit underground indefinitely because of environmental concerns.
That leaves enormous margins for incumbent players. Sociedad Química y Minera de Chile earns 55 cents for every $1 of sales, making it almost twice as profitable as the top tech firms like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) by that metric. Until the supply-demand imbalance evens out, investors can expect any drop in lithium prices to quickly reverse.
2. Battery Makers
Next in the chain are battery makers, an overlooked segment long dominated by Chinese players.
That could change with the introduction of the 2022 Inflation Reduction Act. To qualify for tax credits, EVs will need batteries where 80% of the market value of critical minerals (read: lithium and cobalt) is sourced domestically or from U.S. free-trade partners.
Tesla’s Model Y wouldn’t qualify because of its Chinese-made battery packs.
At InvestorPlace.com, Ian Cooper writes about the six “forever battery” stocks that will make you a fortune by 2033. It’s a good look into investors’ limited options for pure-play stocks.
- QuantumScape (NASDAQ:QS): Its technology could could EVs a driving range of 400 miles.
- Solid Power (NASDAQ:SLDP): The U.S. Department of Energy recently awarded the company $5 million.
- Nissan (OTCMKTS:NSANY): The company wants to have a pilot solid-state battery plant up and running by 2025.
- Ishares Self-Driving EV and Tech ETF (NYSE:IDRV): A diversified ETF that includes related EV industries.
- GX Lithium & Battery Tech ETF (NYSE:LIT): A more focused ETF that also holds QuantumScape
- Bayerische Motoren Werke ADR (OTCMKTS:BMWYY): A license with Solid Power’s research will jumpstart BMW’s EV plans
Of course, you know that Luke Lango has been telling us about “forever batteries” for a while too.
With these so-called solid-state batteries, our phones could run for days on a single charge … smartwatches could charge in seconds … and our EVs could travel thousands of miles without stopping. That’s why some experts call solid-state batteries “forever batteries.” And that’s why, Luke says, forever batteries are the key technology to accelerate the EV revolution to the next level.
3. Charging Stations and Infrastructure
Next, the EPA must manage the lack of public charging stations. A typical vehicle can take up to 25 minutes to reach full on a Level 3 charger — far longer than a typical fill-up at a gas station. That means the number of public charging stations won’t just have to match the 1.2 million gas pumps across America.
It will have to exceed it. And probably by a lot.
At InvestorPlace.com, Muslim Farooque examines his top seven stocks for the future of EV charging infrastructure.
- ChargePoint (NYSE:CHPT): Leader in the EV charging space, with forward revenue estimates at over 70%.
- Blink Charging (NASDAQ:BLNK): Gross margins are in the green, which points to quicker path to profitability.
- Wallbox (NASDAQ:WBX): Growing by triple-digit margins while trading near the penny stock territory.
- EVgo (NASDAQ:EVGO): Coverage across the U.S. is unmatched.
- Proterra (NASDAQ:PTRA): Delivered a 700% bump in DC fast chargers during the third quarter, from the same period last year.
- ABB (NYSE:ABB): Raised a whopping $2.6 billion from its EV charging segment.
- Nio (NYSE:NIO): Charging piles and swapping stations are increasing at a breathtaking pace each quarter.
4. Auto and Auto Parts Makers
Finally, investors can buy EV firms themselves.
Here, readers have a wide choice of legacy companies versus upstarts. On the legacy side, firms like Ford (NYSE:F) are aggressively moving into EV sales. The company is on track to build up to 150,000 electric pickup trucks annually. And car parts firms like BorgWarner (NYSE:BWA) and Magna International (NYSE:MGA) are creating the powertrains that every EV will eventually need.
Meanwhile, InvestorPlace.com’s Chris MacDonald takes a different approach by picking out fast-growing pure-play businesses. Click here to read more about his 3 most promising EV stocks to buy for April 2023.
- BYD (OTCMKTS:BYDDF): The company is gearing up to announce impressive earnings for its fourth quarter and the entire year.
- Nio (NYSE:NIO): Nio is positioning itself as a leader in the premium electric vehicle market in China.
- Lucid (NASDAQ:LCID): The company remains a formidable global electric vehicle market player.
Profits Versus Politics
Fourteen years ago, the Texas government passed the Texas Electric Restructuring Act of 1999, now commonly known as Senate Bill 7.
At the time, the deregulatory package was met with skepticism. Many Texans saw their power bills rise as profit-seeking players replaced state-controlled ones. And the lack of communication between natural gas entities contributed to the massive 2021 blackouts in the state.
Still, the regulations had one surprising benefit: It would turn Texas into America’s top wind energy producer by kilowatts produced.
Today, almost a quarter of all electricity produced in the state comes from wind. And similar regulatory measures have turned other oil-producing states into powerhouses of renewable energy. North Dakota generates 37% of its energy from renewables, while Oklahoma does 44%. (New York state, by comparison, only manages 6.5%.)
In other words, regulations matter.
Today, the regulators at the EPA are once again upending the status quo with their EV plans. Not everyone will be pleased; the iconic “potato-potato” sound of a Harley-Davidson is nonexistent in electric versions. And many, like Rep. John Barrasso, will probably fight to keep their gas guzzlers — and their gas stoves — as long as possible.
But change is coming. And even Robert Murray — once Appalachia’s coal king — knew it’s easier to mine wherever the money goes.
On the date of publication, Tom Yeung did not hold (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.