Carmaking is a hard business
Building cars needs enormous factories and leaves thin profit margins. Electric vehicles have not changed that. As more makers entered the market, prices were cut repeatedly, especially in China, and several young electric carmakers have run short of money.
Rising sales across the industry can sit alongside falling profits for the companies involved.
Follow the battery
The battery is the single most expensive part of an electric car. A small number of companies, most of them in China, South Korea and Japan, make the majority of the world's battery cells.
Battery makers and material suppliers sell to many carmakers at once, so they depend less on any one brand succeeding. They have their own problem: the materials they use swing in price.
Commodity prices cut both ways
Lithium prices rose steeply as demand grew, then fell by more than three quarters between late 2022 and 2024 as new supply arrived. Miners' profits followed in both directions.
Cheaper materials help carmakers and hurt miners. A portfolio holding both is partly hedged against itself.
China and policy
China is the largest electric vehicle market and home to the biggest battery makers. The US and the European Union have both placed tariffs on Chinese-made electric cars.
Demand elsewhere leans on subsidies and emissions rules, which governments have both extended and withdrawn. A policy change can move sales quickly.
The chain behind an electric car
Electric car makers
Companies that mainly or only sell electric vehicles.
For example: Tesla, BYD, Rivian
Traditional carmakers
Long-established makers adding electric models.
For example: Volkswagen, Toyota, General Motors
Battery makers
Produce the battery cells and packs.
For example: CATL, LG Energy Solution, Panasonic
Battery materials
Mine and refine lithium and other metals batteries need.
For example: Albemarle, SQM
Power chips
Make the chips that manage power in the car and its charger.
For example: Infineon, ON Semiconductor
Companies are listed to show what each category means. They are not recommendations, and the list is not complete.
Three ways to invest
There is no single right route. Many people combine them, and plenty decide a broad global fund is all they need.
- 1
Buy individual shares
Pick one or more electric vehicle companies and buy their shares through a broker or investing app.
- Good for
- Simple to understand. You own exactly what you chose.
- Watch out for
- If you only hold a few companies, one bad result can do real damage. Picking winners is hard, even for professionals.
- 2
Buy a ready-made fund
A fund (often an ETF) holds dozens of companies in one purchase. Examples include the Global X Autonomous & Electric Vehicles ETF (DRIV) in the US and the iShares Electric Vehicles and Driving Technology UCITS ETF (ECAR) in the UK and Europe.
- Good for
- Instant spread across many companies, with very little effort.
- Watch out for
- You get what the fund provider chose, including companies you may not want. Themed funds usually charge more than broad trackers, so check the yearly fee and the top ten holdings. Which funds you can buy depends on where you live.
- 3
Build your own portfolio
Choose your own mix of companies and how much of each, then buy them through your broker. This is what Arithmos helps with: describe the mix in a sentence and it builds and tests one for you to consider.
- Good for
- You decide exactly what is in and what is out, and you can see the reason for every company.
- Watch out for
- More to look after than a fund. Buying many separate shares can cost more in dealing fees, and a tested result is a simulation, not a promise.
What $100 would have done
To make this concrete, here is a real portfolio from this area that anyone can open on Arithmos, and what $100 put into it would be worth. It is one example, shown as it is, whether it went up or down.
If you’d put $100.00 into this portfolio of 12 companies…
The risks
- Price competition. Repeated price cuts have squeezed profits across the industry.
- Policy changes. Subsidies and emissions targets can be cut or delayed.
- Commodity swings. Lithium and other battery materials have had extreme price moves.
- Trade tensions. Tariffs and export rules affect who can sell where.
- Company failures. Several young electric carmakers have gone out of business.
Try it yourself
The quickest way to understand a portfolio is to look at one. Here is how to turn this guide into something you can inspect.
- 1
Start from the idea
The button below opens the builder with this guide's idea already typed in. Change any part of it: the number of companies, the countries, the limit per company.
- 2
Read the reason for every company
You get a list of companies, how much of each, and a plain-English reason for each pick. If one looks wrong to you, you can ask for it to be changed.
- 3
Look at the bad years, not just the good ones
The portfolio is replayed against real past prices. Check the biggest fall along the way, and ask yourself whether you could have sat through it.
- 4
Decide for yourself
If you want to act on it, you buy the shares yourself through your own broker. Arithmos never holds your money or places trades.
“Companies across electric vehicles: carmakers, battery makers, lithium producers and power-chip makers. 20 companies worldwide, no single one over 8%.”
Browsing portfolios other people have published is free. See pricing for what building your own includes. A tested result is a simulation using past prices. It is not a forecast and not a recommendation.
Common questions
Is investing in electric vehicles the same as investing in Tesla?
No. Tesla is one carmaker. The industry also includes other car brands, battery makers, material suppliers and chip companies, each with different risks.
Why have some electric vehicle stocks fallen while sales rose?
Because profit depends on price as well as volume. Heavy competition forced price cuts, and several companies were spending more than they earned.
Are lithium miners a good way to invest in electric vehicles?
They are one route, with their own risk: their profits follow the lithium price, which has been extremely volatile.
