The electric vehicle [EV] industry continues to grow with much publicity surrounding the launch of new models from electric car makers. Is all the hype justified and what does the future hold for the electric vehicle industry?

There were more than 2 million electric cars on the world’s roads at the end of 2016. Popularity of electric vehicles continues to grow with the UK motor trade claiming sales were up by 23% last year. The TESLA Model 3, an “entry level” model, which will go into production later this year, has already received nearly 400,000 pre-orders with a starting price of US$35,000.

In an attempt to deal with the biggest obstacle to buying electric, the short distance between charges, the UK Government announced a new Bill to require motorway services and petrol stations to install electric charging points. It also announced its intention to spend £390 million by 2020-2021 to support ultra-low emission vehicles, renewable fuels and driverless vehicles. It will also force motor vehicle insurers to cover automated vehicles.

Most motor manufacturers either are or will shortly begin producing electric vehicles and all are investing heavily in battery research and development. While the future looks bright for EVs, they still represent a relatively small percentage of overall vehicle sales which investors should bear in mind when considering investing in the sector.

Ben Barringer, Quilter Cheviot Technology Research Analyst has examined this sector and he reports that the opportunities to invest in electric vehicles are opening up and include traditional auto and component manufacturers and companies. The limitations that many associate with EVs such as range, refueling/recharging and affordability are slowly being resolved. However, with lots of new entrants to the sector, investors need to be able to identify those who will drive innovation, stay the distance and do so profitably. He also feels it is worth widening your scope to consider investing in businesses associated with the manufacture of both hardware components and software for the EV sector.

Even, if you don’t intend to invest in the sector, why not book a test drive.