Electrification of the auto industry will take time, and while stock prices have ramped higher, it behooves investors to consider the level of exuberance relative to potential profits. Current stock prices might be anticipating a perfect profit outcome five to 10 years down the road, which is a stretch.
Simultaneously, investors should look at opportunities in segments of the market that stand to benefit from electric vehicles and broad-based electrification. For instance, a tremendous amount of industrial and rare earth metals will be required for electrification.
Supplies of copper, aluminum, nickel, cobalt, and lithium are central components of electrification, from batteries to transmission lines. Two consequences of this growth in metals demand are likely. First, the effects of accelerating drilling and mining will create new environmental challenges. Second, major economies are likely to compete over limited supply. With the United States and China involved, electrification has potential geopolitical ramifications.
As governments around the world pour trillions of dollars into electrification efforts, shrewd investors will also anticipate that titanic battles for market share (think Tesla vs. Volkswagen vs. GM) are likely to develop over the next couple of decades.