Electric vehicles (EVs) are expected to reshape the automotive industry in the coming years on the back of favorable policy measures by governments worldwide. While the industry’s growth prospects have attracted several new entrants, many of them may not be able to capitalize on the industry’s growth potential in the near term. Hence, we think it is wise to invest in traditional car makers, such as Volkswagen (DE:VOWG_p) (VWAGY), Honda (HMC), and Volvo (VLVLY (OTC:VLVLY)), that are expanding into the EV space. Given their experience in the auto industry, we think they have the capacity to ride the wave better than many pure-play EV companies in the near term. Let’s discuss.Governments worldwide are pursuing policy measures and investing billions of dollars for the electrification of vehicles to reduce carbon emissions. While the electric vehicles (EVs) industry is currently struggling to meet rising demand due in-part to an ongoing semiconductor shortage, it looks well positioned for a solid growth in the long run with continued government and private initiatives to address climate change concerns. Indeed, the global EV market is expected to grow at a 41.5% CAGR over the next six years, according to a report by Million Insights.
Investors’ interest in the autonomous driving and EV space is evidenced by Global X Autonomous & Electric Vehicles ETF’s (DRIV) 29.2% gains over the past six months versus SPDR S&P 500 ETF Trust’s (SPY) 14.8% returns.
Given the industry’s solid growth prospects, many new entrants are vying for a share in the market. But it could be difficult for many if not most of them to compete with established auto industry players in this respect. So, we believe it could be wise to bet now on traditional automakers Volkswagen AG (OTC:VWAGY), Honda Motor Co., Ltd. (HMC), and AB Volvo (VLVLY). They have entered the EV space and are expected to perform better than many pure-play EV companies in the near term.