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Your April EV Market Update

Your April EV Market Update

The electric vehicle (EV) market is developing quickly.

With the changing energy markets and the U.S. government’s response to that, there’s a lot happening right now.

So, today, I want to give you a quick update on the EV markets.

I also have an exchange-traded fund for you that’s a great way to get exposure to EVs’ growth.

 

Hey everyone. Steve Fernandez here with this week’s edition of Market Insights.

I want to talk to you about electric vehicles (EVs) and give you a little market update on the EV market.

It’s developing quickly. With the global environment, what’s changing in the energy markets and the U.S. government’s response to that, there are a lot of developments happening right now.

So, before we get into the video, if you’re a returning viewer or you’re new to the channel, please subscribe. You’ll get our content every Friday, and you don’t want to miss those upcoming videos.

 

Let’s Look At EV Data

Today, I first want to look at the most recent EV data.

I’m not going to talk too much about it, but EV sales in January 2022, the most recent data we have, came in 87% higher than in 2021.

EV Car Sales

And that came during a month when overall vehicle sales were weak. They were down 3.8%.

So, on one hand, you have EV sales surging. On the other, you have overall auto sales kind of tapering off.

That’s not a surprise because we’re seeing inflation, we’re seeing higher prices, and consumers are feeling a little tighter in the wallet. So, I’m not surprised that the overall market was a bit weaker there.

I expect that EV demand is going to continue to strengthen. And that’s really because the pain points that consumers have are being tackled head on.

 

EV Charging Is Expanding

First of all, the main pain point is EV charging. The U.S. government has committed to that verbally, and it’s taking action by adding public charging infrastructure to the U.S. power grid.

The government is now in the process of rolling out that $7.5 billion allocated in the infrastructure bill for EV charging, and it began that in February.

So, we should start seeing the benefits of that spending come out in the coming years.

And with 48% of respondents saying that was a pain point that was holding them back from buying an EV, we can expect that a lot of people that can afford EVs will probably start to consider them as a viable option, especially because the other pain point — cost — is being taken care of as well.

And that’s not necessarily through government action. It’s more because the price of gas is very high.

I say “very high” lightly because we don’t know how high it can get. I think we’re kind of at that point where we don’t have that much more upside in gas prices.

But, again, it’s very supply driven. And we know there’s a supply problem globally right now.

So, at the average U.S. price of $4.20 per gallon, I saw some data that EVs are three to six times cheaper to drive per mile.

In terms of energy costs, you can see in this chart that the electric Ford F-150 — which hasn’t really hit the market yet; this is just an estimate — the Rivian and the Tesla Model 3, they’re all substantially cheaper than driving around comparable vehicles that are gas powered.

Cost per mile

(Source: Elecktrek.)

It’s pretty dramatic when you think about that cost differential a little over a year ago. I believe the total cost of ownership was only a little bit higher for internal combustion engines, but not by much, maybe 5% to 10%.

It’s something I’ll be keeping an eye on for sure.

 

Government Funding Research For EV Metals

And what’s most important, and the reason I’m making this video today, is the Biden administration’s move this week to invoke the Defense Production Act.

It’s more of a national emergency-type action. We’ve seen it in the past. We saw it in the Cold War. We saw it when we were rolling out vaccines.

It basically gives the government a lot of control over domestic industries. And in this case, the Biden administration wants to exert control over the electric vehicle metal industry.

Think lithium, nickel, cobalt. These are metals that are used to produce EV batteries.

We want a secure supply on U.S. soil so we can reduce our reliance on other countries. Kind of like we’re seeing now with the world’s reliance on Russia and other foreign powers for oil, we don’t want that for EVs as well.

So, it’s a huge move. It’s going to benefit the U.S. battery metals and U.S. EV metal companies the most because the government is now willing to provide funding for research and provide funding to expand production capacity.

Basically, it’s going to subsidize the expansion of their production facilities and their production capacity, which is pretty huge because if production is too low and demand remains high, prices will be high.

If production improves and is able to keep up with demand, prices will kind of be kept in check.

So, this should help, first of all, reduce our reliance on other countries. But second of all, it will keep the prices of raw materials that go into EVs down. And that should really drive EV demand even more.

In the near term, I think that EV metal companies, and commodity companies have the most to gain. I’ve been saying this for several months now.

If you look at what was already happening in that market, you can see that the EV Metals Index was already outperforming the Auto Manufacturers Index. And I expect that to continue.

EV Metals

So, if you want to get some exposure to EV metals, you can buy the Amplify Lithium Battery & Technology ETF (NYSE: BATT).

I’ve recommended it in several videos before. And the reason I choose this over the Global X Lithium & Battery Tech ETF (NYSE: LIT) is that it has lower exposure to China and more exposure to the U.S. market.

And that’s what we want right now. We want exposure to the U.S. market. There are big strides being taken to produce on our home soil.

So, why not be an American and buy something with U.S. exposure more than anything?

That’s going to do it for this video. I hope you like the content. Please subscribe if you haven’t already subscribed. We’ll talk to you next week.

Regards,

a black and white drawing of a hand with a long pointy point

Steve Fernandez

Research Analyst, Strategic Fortunes

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