The EV Boom Will Kickstart The Next Leg Of Growth

According to various projections, the next decade will be marked by the rise of electric vehicles (EVs).

Bloomberg estimates that the number of EVs sold will increase from 1.7 million units in FY2020 to 26 million units in FY2030. Deloitte is more optimistic and estimates EV sales will reach 31.1 million units by FY2030.

One way to benefit from this secular tailwind is by increasing exposure to EV stocks. Another idea is to consider exposure to industries or sub-sectors that stand to benefit from this tailwind. For example, global lithium demand is set to more than double by FY2024, backed by EV growth.

Another way to play the growth story is to consider exposure to electric vehicle charging companies. Growth in the electric vehicle industry is impossible without a proper charging infrastructure. Therefore, if the above estimates for EV adoption hold true, the EV charging industry stands to benefit.

One of the largest organization in charging is ChargePoint Holdings (CHPT), which operates a network of electric vehicle charging stations in the United States. The company was listed through an SPAC business combination and seems like an attractive name in the EV charging business.

Robust Growth Outlook

Given the possibility that the EV industry is at an inflection point, the company has a robust growth outlook.

For fiscal year 2021, with approximately 31,263 charging stations shipped and by FY2026, this one company expects to ship 425,060 charging stations.

Therefore, the next four to five years are likely to be the best years for all the charging station manufacturers in terms of top-line growth. Importantly, these estimates are realistic considering the following factors.

First and foremost, with it likely aggressive growth, in the USA, it is also worth noting that expansion into Europe, and therefore, has a big addressable market. According to the surveys, the cumulative charging infrastructure investment in the U.S. and Europe is projected to come in at $60 billion through FY2030.

Furthermore, all the manufacturers are focused on end-to-end solutions. This includes hardware, software and services. While hardware revenue is one-time, subscription and support revenue are recurring in nature.

As the number of charging stations installed grows, all the company’s recurring revenue will also increase. Over the next five years, growth revenue will be more diversified. Additionally, as subscription revenue swells, cash flow visibility will increase significantly for all involved in the charging wars revolution.