The Best Play on EV Growth Doesn’t Sell Electric Cars

Electric Vehicle (EV) growth is hard to ignore; and with all the major automakers expanding their EV fleets, there’s a huge opportunity for investment in a company that helps support all of them.

electric vehicles and outlets

My wife and I recently embarked on a road trip to see a number of attractions that we hadn’t previously (Mount Rushmore for instance) as well as to visit the only three states I’ve never been to before: North Dakota, South Dakota and Montana. After stopping in Billings, Montana yesterday following a couple of days in South Dakota, we now have only North Dakota, on the way home to Massachusetts, to complete the list.

And we’re doing this in my eight-year-old Tesla Model S, charging as needed, both at Tesla Superchargers, generally found just off the highway, or at chargers in hotels.

So far, everything has worked as planned, with one exception.

A couple of nights ago, at our hotel in Rapid City, South Dakota, the bedside phone woke us up out of a sound sleep at 11:15. On the other end was the night desk person, saying someone wanted us to unplug our car, so they could plug theirs in!

We declined, first because ours was still charging (it needed four more hours), and second because we wanted to sleep and were annoyed at being needlessly awakened—and a discussion with the day manager the next day confirmed that that employee needed more training.

(What the unknown person who wanted to charge should have done was leave a note on my car, asking me to text them when we unplugged. The learning of charger etiquette is a work in progress.)

In any case, it was a clear illustration of a major problem/opportunity facing the electric vehicle industry. We need a lot more chargers!

The EV Play That Doesn’t Sell Cars
Tesla has 2,915 Supercharger locations globally, with more than 25,000 individual chargers. But they only serve Teslas—so far. Volkswagen’s Electrify America, as punishment for cheating on a vehicle emissions test, has built 635 charging stations so far and aims to have 800 stations with about 3,500 individual chargers by the end of 2021.

But the real leader in the race to serve all electric vehicle drivers is ChargePoint (CHPT), which has 118,000 chargers globally. Most of these are in the U.S., but the company is expanding through Europe via acquisitions.

ChargePoint controls roughly 70% of the public charging market share in North America. This lead is a huge advantage because of network effects as the company already has partnerships with more than roughly 60% of the Fortune 50 companies, as well as automakers like BMW and Mercedes.

Earlier this week, ChargePoint reported excellent results for the quarter ended July 31. Revenue was $56.1 million, up 61% from the year before, with growth coming from commercial, fleet and residential sectors. Even better, the company raised full-year guidance 15% to $225-$235 million.

Now, the company is not profitable yet, and that’s fine with me; at this point, growth to lock in market share is more important than earnings. And the two other publicly traded companies in the industry agree. Blink Charging (BLNK) and EVgo (EVGO) are both still losing money as they focus on growth.

And growth is certain for the industry, as experts project more than 125 million electric cars will be on the road by 2030, requiring more than 13 million charging stations.

The Biden administration wants to put $7.5 billion into the industry, and while the final number may well be smaller, it will still help. My recommendation for the sector is ChargePoint stock, which saw its shares gap up on big trading volume Thursday morning after that excellent quarterly report. Volatility is guaranteed so this is not a stock for beginners, but the long-term prospects are great!

Do you own any electric vehicle stocks – or an electric vehicle itself? If the answer is yes to either, tell us about your experiences in the comments below.

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