Electric vehicle (EV) stocks are all the rage at the moment. Over the past two years, a whole range of companies have hit the market producing, or planning to produce, EVs. However, Tesla (NASDAQ: TSLA) shares are undoubtedly the most established opportunity in the sector. I believe they are by far the best way to invest in the EV trend.
First-mover advantage
Over the past couple of years, Tesla has grabbed market share in the global EV market, thanks to its first-mover advantage. The company has also been spurred on by its flamboyant CEO, Elon Musk.
Musk’s reputation has helped the company go from strength to strength. His other businesses, such as SpaceX, have generated a huge amount of media attention, and so have his well-publicised antics. This has only helped increase Tesla’s media profile. In many ways, the CEO has been able to create a massive wave of free advertising for Tesla.
As such, not only does the company have the first-mover advantage in the global EV market, but it also has a marketing advantage. This has opened the door to additional financing for the corporation, allowing it to pursue its ambitious expansion plans.
Other companies in the sector lack these benefits. Many are also unprofitable and have nowhere near the production capacity available to Tesla. The group has plans to produce 20m vehicles a year by 2030, up from around 1m today. Clearly, that is a big challenge.
However, with the company’s market capitalisation currently sitting just above $1trn, it certainly seems to me as if the market is willing to support the group on its way to this ambition.
The outlook for Tesla shares
Those are the reasons why I think the company is the best EV stock to buy today. It is already the largest and most recognised EV producer, and it has the investor backing required to drive further expansion over the next decade. The demand is there. But Tesla will need to work flat out to meet the challenge.
And that is why I would be happy to buy shares in the company for my portfolio today, although I will keep an eye on a few key risks, which could hold back growth.
These include the supply chain crunch. Tesla has already warned that its production could suffer due to the global semiconductor shortage. The group will also have to deal with increasing competition as we advance. Especially from the most prominent players in the space, namely competitors like Volkswagen. Musk’s company currently has the edge over these businesses, but that may not last for long.
If these risk factors start to significantly impact the group and its growth, then I will revisit my view of the business. However, for the time being, I think Tesla shares have tremendous potential.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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