Over the coming decade, the shift from combustion engines to electric vehicles (EVs) could be the greatest change the industry has seen in over a century. With such a dramatic shift, investors like me are taking note. I’m looking for the leading EV stocks that could benefit either directly or indirectly.
In November 2020, the UK government announced its plans to phase out the sale of new petrol and diesel cars by 2030. The acceleration of de-carbonisation plans came with £1.8bn of funding for infrastructure projects and grants.
Leading EV stocks
Many global car manufacturers have started plans to shift production from petrol and diesel vehicles to fully electric models. Some companies, including Tesla and Nio, are dedicated EV manufacturers. The future is uncertain and the EV market leaders in the next decade could change. However, these two could have a first-mover advantage, in my opinion.
A company that I monitor regularly and that is one of my largest holdings is Scottish Mortgage Investment Trust (LSE: SMT). This UK-listed fund managed by James Anderson and Tom Slater at Baillie Gifford holds both of these two EV stocks as its top five holdings.
Despite its name, this investment trust has nothing to do with mortgages. It’s focused on long-term investments in some exciting new businesses that have deep competitive advantages. The managers believe that rapid progress in several industries is creating large opportunities.
The trust increased by 110% last year and grew by over 400% over five years. I would like to see its strong performance continue and will continue to hold it for the long term. But I’m aware that short-term performance can fluctuate.
Powering electric vehicles
Electric vehicle manufacturers aren’t the only EV stocks that I could look at.
One company that I’m looking at might come as a surprise to some. It’s FTSE 100-listed energy giant, Royal Dutch Shell (LSE: RDSB). Traditionally focused on crude oil and natural gas, it’s not typically regarding as an EV stock at all. However, it was one of the pioneers for green forecourts in the UK that offer electric charging and hydrogen cell refueling.
This week it said that it was buying the UK’s largest on-street electric vehicle charging network, Ubitricity. Ubitricity’s car-charging network includes more than 2,700 charging points in the UK, which is 13% of the existing total market share. I reckon on-street car charging will be important for locations where home charging is particularly difficult. Ubitricity’s solutions that fit car chargers to existing lampposts or bollards could be a convenient and cost-effective way for local authorities to expand on-street charging.
In my opinion, Royal Dutch Shell could be one of the most interesting UK-listed EV stocks I’m looking at. It has a price-to-earnings (P/E ratio) of 11.9 and offers a dividend yield of 3.9%. There are no certainties. But it could benefit from a possible economic recovery this year and growing demand for electric vehicle charging.