Tesla gave electric vehicle (EV) companies and their shareholders a fresh boost today when it was confirmed that Elon Musk’s electric car-maker had qualified to join the S&P 500 index of leading US stocks just before Christmas. Shares in the company leapt 12% on the news, and Tesla shares have now risen fivefold in the space of just 12 months. Joining the index takes them into a whole new investment ballpark as this will automatically put Tesla stock in the portfolios of countless index-tracking funds.
This is good news not only for Musk and his shareholders, but for the EV manufacturing sector as a whole. Much like Microsoft and Apple in the high-tech sector, Musk and Tesla have done more than anybody to turn the dream of the electric car into a reality and as such Tesla can justifiably claim to be its weathervane.
Even without Tesla’s elevation to the S&P 500, just about every attempt at estimating the potential size of the market gives EV (and battery) manufacturers reason to be cheerful. According to a report from MarketsAndMarkets, unit sales are likely to grow at a CAGR of just over 21% for the rest of the decade, with mid-priced vehicles and small urban cars leading the charge.The Asia Pacific market is expected to witness the fastest growth, followed by Europe and North America.
While high manufacturing costs have so far hampered their widespread adoption, the report predicts that, as the popularity of electric cars increases over the next decade, a drop in battery prices and reduced R&D costs should see the overall cost of purchasing electric hatchbacks, crossovers, or SUVs reach levels of equivalent ICE (internal combustion engine) vehicles. However until the charging infrastructure is standardized battery range will remain an issue. The development of vehicle-to-grid EV charging stations, along with charging stations powered by renewable energy are two possible solutions, the report suggests.