The Tesla effect: Can you get rich from electric cars?

Much is being made of the plug-in revolution – but can you make money from electric vehicles?

By Richard Taylor

2 June 2016

There’s no doubt about it – the electric car market is heating up.

Although electric vehicles (EVs) currently make up less than 1% of cars on the road, global sales rose 60% last year. And that’s just the start of a trend that has both automotive enthusiasts and investors excited.

As government subsidies encourage demand and prices continue to tumble, it’s estimated that by 2040, 35% of new cars will be electric. In China alone, the government has invested $15 billion in the industry, with the goal of putting five million EVs on the road by 2020.

The market is also being driven by the rise of innovative companies like Tesla, which has enjoyed a stratospheric rise in less than a decade and caused a huge splash with its latest Model 3 – even though the company has not yet turned a profit. Older, more established carmakers such as GM (with the Chevrolet Volt) and Nissan (with the Leaf) have also jumped on the EV bandwagon.

And, further down the supply chain, component makers are creating entire divisions dedicated to EV production, helping to lower the costs of vital parts like batteries. This presents another avenue for those interested in making money.

However, EV-related stocks have, until now, been volatile. So, investments are not for the faint-hearted. The reason? Electric charging infrastructure has been limited and demand has not taken off as expected. More recently, lower oil (and therefore fuel) prices have also dampened demand.

And further down the road, other emerging energy technologies such as hydrogen fuel cells pose a potentially greater threat to the long-term prospects of EVs.

Richard Taylor reports on the potential opportunities that lie ahead – as well as the roadblocks that could cause investment to stall.

This story was produced under the BBC's guidelines for financial journalism. A full version of those guidelines can be found at bbc.co.uk/guidelines.