Arguably no other sector better represents the profound changes that we’ll see during the Roaring 2020s than electric vehicles (EVs). For more than a century, the combustion engine has defined personal transportation. But its obvious limitations — dirty emissions and complex architecture leading to multiple fail points — will play a huge role in companies like Romeo Power (NYSE:RMO) delivering much-needed change. Therefore, patient investors should consider adding RMO stock to their portfolio.
First, Romeo Power takes the guesswork out of picking winners and losers in this market. Because EVs are the future, and due to their comparative ease of manufacturing, multiple competitors have jumped on the bandwagon. Just by the law of averages, it’s not reasonable to expect all of them to succeed. And that makes RMO stock quite intriguing.
Rather than competing in an increasingly saturated market, Romeo builds next-generation EV batteries — necessary components for future EV integration. Essentially, you’re selling tickets to the big game instead of wagering on which team will win. For risk-averse investors, RMO stock is a much more palatable option.
Second, while automotive industry experts predict a ramp-up in EV sales and integration, meeting those targets will depend on battery manufacturers like Romeo. At this point, it’s not enough to merely get a car moving with electrical power. Instead, the platform must start competing with combustion cars on the lower end of the price spectrum.
So far, this has been a difficult task for EV companies and their suppliers. Currently, the cheapest EV (that’s not a gimmick) is very expensive if you don’t include the tax incentive. However, Romeo’s promising battery power efficiencies may change this paradigm, which would be a huge catalyst for RMO stock.
Additionally, prospective buyers should check out these three reasons for optimism.
1) RMO Stock to Rise on Energy Density
Although EV technology has improved dramatically over the last several years, one factor continues to stymie broader acceptance of the new platform: range anxiety.
Of course, EV proponents have argued up a storm why range anxiety is really not an issue. Further, once drivers get used to the new format, it becomes less of a problem. However, it’s one thing debating in online forums. It’s quite another to put your hard-earned money down.
Similarly, despite the progress of EVs, combustion cars are still relevant. Infrastructure supporting them are plentiful, and improved mileage makes them a compelling choice for budget-sensitive buyers.
These two sticking points can be summed up in two words — energy density.
Scream all you want, but fossil fuels have a tremendous advantage in the energy density department. A gallon of gasoline can power a fuel-efficient car for 30 miles or more. The equivalent density of an EV battery won’t generate nearly as much usability.
Gradually, though, Romeo Power’s EV batteries — which claim a 25% energy density advantage over the competition — could tip the scale holistically toward electric cars. With more dense power packs, EVs will have greater range, making anxiety on the topic an afterthought. As well, this will be huge for RMO stock.
2) Thermal Management Is an Overlooked Attribute
Naturally, when investors and consumers judge EV batteries, they’re looking at range first and performance close behind. Get these two attributes to reach their highest potential in the electric platform and you’re talking an immediate value advantage over most combustion cars.
However, thermal management is a concept that many overlook. I believe this has to do with the combustion-based automotive culture. Obviously, combustion cars are utilized everywhere in the U.S., from the frigid temperatures in the northeast to the blazing hot and humid environment of the sun belt.
But EVs and specifically their batteries have optimum operating temperatures. In that sense, it’s not that much different than any other platform. However, temperatures on the extreme ends of the spectrum can impact EV operational performance and battery longevity.
That’s going to be a problem for automakers if they wish to sell their electric products outside of temperate climates such as southern California. Fortunately, Romeo Power is a leader in innovative thermal management solutions. To make a long story short, the company incorporates systems to keep its battery always running at the optimum temperature.
This should go a long way in making EVs accessible for not only every American but for global citizens. Thus, the potential for RMO stock is massive.
3) Romeo Power Puts Safety First
EV batteries have come a long way in terms of safety. Many years ago, it wasn’t uncommon to read stories about batteries spontaneously combusting. Of course, this wasn’t just an EV issue but an electronic device dilemma as well.
Lately, these stories are the exception, not the rule. Nevertheless, they still pop up, depending on the manufacturer. When they do, the media tends to sensationalize it, which is problematic for the broader EV industry.
Again, it’s not so much about reality — statistically speaking, EV battery fires are rare. But when they happen, they create a disproportionately negative impact for the entire EV supply chain.
Understanding this, Romeo Power puts its batteries through rigorous testing, making sure that they perform safely and reliably in real-world conditions. It just makes sense from a business perspective, as consumers don’t remember the good stuff as much as they do the bad stuff.
In this manner, I view Romeo as a force-multiplier for the EV industry. Over time, this could pay off substantially for RMO stock.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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