Countries and companies increasingly are pledging their commitment to electric vehicles (EVs), and with a very willing consumer base of buyers for the cars, sport utility vehicles and vans that will run on electricity, the prospects for the companies involved in the charging station ramp-up are very bright. In fact, charging station growth in the United States is expected to increase 30% per year until 2030.
In a new Jefferies report, analysts led by David Kelley make the case that the EV infrastructure build-out is the key for an electric future, and by no means will that future be cheap. The report noted this when discussing the costs involved:
Upfront cost of charging hardware runs on average $3,000 per Level 2 charger and $25,000 to up to $125,000 depending on DC Fast Charge kilowatt rating. Yet, costs related to electrical grid updates, electrical installation, upgrades and charging network subscription fees can quickly compound investment while grid load limits opportunity to achieve economies of scale. We estimate capital expenditures per station of $7,500 and a range of $62,000 to +$300,000 for Level 2 & DC Fast chargers. Allotted $15 billion via the US Infrastructure plan (targeted 500,000 chargers) plus corporate, auto industry, & charging provider coordination will prove key to ramp.
Eight companies are mentioned as potential beneficiaries, and all make sense for investors looking to the future and wanting to have a stake in what could prove to be an epoch event. The analysts break out the companies in five different silos featuring those they feel are poised to benefit the most. Not all the stocks are rated Buy at Jefferies though, and it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Original Equipment Manufacturers
The obvious starting point is electric vehicle pioneer Tesla Inc. (NASDAQ: TSLA). It designs, develops, manufactures, leases and sells electric vehicles, and energy-generation and storage systems in the United States, China and elsewhere. Its Automotive segment offers electric vehicles, as well as sells automotive regulatory credits. The Energy Generation and Storage segment engages in the design, manufacture, installation, sale and leasing of solar energy generation and energy storage products, as well as related services, to residential, commercial and industrial customers and utilities.
Jefferies said this about the EV giant:
For the past decade, Tesla has led the way in building charging infrastructure, which was particularly critical to position EVs as a true alternative to ICE vehicles in terms of range and long-distance driving. Opening the Tesla network to other brands has been a recurring topic, in the US and more recently in Germany.
Jefferies has a Hold rating and a $775 price target. The Wall Street consensus target is $652.12, but the shares closed Wednesday at $679.70 apiece.
German auto giant Volkswagen is leading the charge across Europe in the EV space. It manufactures and sells automobiles primarily in Europe, North America, South America and the Asia-Pacific.
Its Passenger Cars and Light Commercial Vehicles segment develops vehicles and engines, including light commercial vehicles. It produces and sells passenger cars and related parts. The Commercial Vehicles segment develops, produces and sells trucks and buses, and it offers parts and related services. The Power Engineering segment offers large-bore diesel engines, turbomachinery, special gear units and propulsion components. The Financial Services segment provides dealer and customer financing, leasing, banking and insurance, fleet management and mobility services.
The analysts noted this about Volkswagen:
As an outcome of the 2015 diesel settlement, VW committed to a +$2bn investment in charging infrastructure and operates Electrify America as a network of charging points built across highways and metro areas. With 2,200 fast charging points across more than 550 locations (February 2021), Electrify America is aiming for a total of 800 charging stations by the end of 2021 with approximately 3,500 charging points. VW has committed to fully own and operate the network for a period of 10 years, after which VW may, in our view, consider alternatives.
Jefferies has a Buy rating on the over-the-counter-traded shares and a €295 price target.