The Auto Stock Supply Chain Opportunity Most Investors Are Missing

Most investors think about EVs and immediately picture car companies.

But there's a bigger story happening behind the scenes.

The automotive supply chain is a massive industry. It includes companies making everything from lightbulbs to steel. 

And right now, this entire ecosystem is transforming to serve the growing EV market.

Here's what's actually happening:

Global EV adoption is accelerating. Nearly 14 million new EVs were sold globally in 2023, up 35% year-over-year. In 2024, that number grew to over 15 million, another 25% increase.

The supply chain is scrambling to adapt. Many parts used in gas-powered cars simply don't exist in EVs. Companies are pivoting aggressively to avoid becoming obsolete.

Growth is happening globally, not just in the U.S. China and Europe are leading EV adoption, which means suppliers with international exposure are seeing the biggest gains.

This shift is powering up profits for companies that make EV parts.

Below, we’ll break down why the EV market is transforming now, what investors need to know, and the potential investing opportunities.

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Why Supply Chain EV Stocks Matter More Than You Think

You don't need to bet on which automaker wins the EV race to profit from EV growth.

Supply chain companies sell parts to multiple automakers. When one struggles, others can pick up the slack. When the industry grows, they all benefit.

Think of it this way: During the California Gold Rush, the people selling shovels made more consistent money than the miners looking for gold.

The same logic applies here. While automakers fight for market share, suppliers are selling components to all of them.

The Two Types of Supply Chain Companies

The automotive supply chain works in tiers:

Tier 1 Suppliers sell finished car parts directly to automakers like General Motors or Tesla. They make complete systems - steering assemblies, suspension systems, battery cooling units.

Tier 2 Suppliers make smaller components that go into those bigger parts. Think sensors, connectors, and circuits. They usually sell to Tier 1 suppliers, not directly to car companies.

Both are benefiting from the EV boom, but in different ways.

What Changed: The Aggressive Pivot to EV Parts

To understand how big this shift is, consider what one industry veteran told our analysts.

James Mangrum worked as an executive for major automotive suppliers for over 50 years. He worked for NGK, the world's largest spark plug producer.

Here's what he said about EVs:

"They thought within 10 years, there would barely be any spark plugs in the United States, or they would only be for replacement."

That's the reality these companies face. EVs don't use spark plugs. 

They don't need fuel injection systems. Many parts that made suppliers profitable for decades are becoming obsolete.

When we asked James if suppliers would stop pivoting to EVs with the Trump administration pulling back on EV incentives, he was clear:

"They're not going to stop this electric thing. They've brought it to this stage and pushed it. Now it's going to slow down, until China comes in."

Why Companies Are Making the Switch

Companies with heavy exposure to Europe and Asia saw the writing on the wall years ago. Nearly 60% of some suppliers' sales come from these EV-heavy markets.

They started offering EV-specific parts like:

• Electric motors.
• Battery cooling systems.
• High-voltage connectors.
• Sensor arrays.
• Battery case assemblies.

And the transformation is happening fast.

Some companies went from earning just 2% of their revenue from EV parts in 2019 to over 17% by 2024. Others are targeting 25% EV revenue by 2025 and 45% by 2030.

The Geographic EV Stock Advantage: Why China Matters

China is the global leader in EV adoption.

Chinese automaker BYD produced over 4 million electric and hybrid vehicles in 2024. That's a 41% year-over-year increase.

Warren Buffett famously owned shares in the company since 2008, seeing a 30 times return on his investment, but sold his stake earlier in 2025.

By comparison, Tesla produced 1.7 million vehicles in 2024. That's less than half of BYD's output.

This matters because U.S. suppliers are already working with Chinese EV companies. And those who haven't started yet? According to James, "They will."

Which Suppliers Have China Exposure?

The companies best positioned for growth have established relationships with Chinese automakers. Some are working with:

• BYD (the world's largest EV producer).
• NIO.
• Geely (6th largest EV producer).
• XPeng.
• Li Auto.

These long-term partnerships give suppliers an edge. 

They understand Chinese regulations. They can be manufactured locally. And they're already embedded in the supply chain of the world's fastest-growing EV market.

China represents 30% or more of total revenue for some major suppliers. That's a significant hedge against slower U.S. adoption.

Tier 1 Suppliers: The System Makers

Tier 1 suppliers are the giants of the automotive world. They have market caps in the billions and partnerships with every major automaker.

What makes them attractive right now?

Established relationships. When you've been supplying parts to GM or Volkswagen for decades, it's easier to sell them your new EV components too.

Diversification. Many are building both combustion engine parts and EV parts. This makes them resilient to market shifts.

Scale advantages. They have the facilities, workforce, and capital to pivot quickly.

The Transformation in Action

Take one example of how this pivot looks:

A major supplier with a history going back to 1880 started offering EV parts in 2015. At first, EV revenue was tiny - around $200 million, or 2% of total revenue.

By 2022, EV revenue hit $1.5 billion (12% of total revenue). By 2024, it reached $2.4 billion (17% of total revenue).

That's the kind of transformation happening across the industry.

Some suppliers are even going beyond parts. They're assembling complete EVs for other companies, including:

• The Jaguar I-PACE.
• The Fisker Ocean.
• Prototype luxury EVs.

This allows them to bridge the gap between development and manufacturing, especially for EV startups that need production capacity.

Tier 2 Suppliers: The Component Specialists

While Tier 1 suppliers make headlines, Tier 2 component specialists are having their moment too.

These companies make the smaller parts that go into bigger EV systems. Things like:

• Sensors for battery management.
• Connectors for high-voltage wiring..
• Components for charging ports.
• Circuits for electric motors.

The advantage? They sell to multiple customers - both Tier 1 suppliers AND automakers directly.

Why Component Makers Are Positioned for Growth

One sensor manufacturer told analysts that EV parts currently make up about 25% of their revenue. But with current global EV adoption rates, they expect that to reach 40% by 2028.

Another company making connectors and sensors has major contracts with nearly every EV manufacturer, including Chinese giants like BYD. 

About 22% of their total revenue comes from the automotive industry, and an estimated 40% of that is from EV parts.

The real advantage for component specialists? Diversification.

While many EV suppliers have seen slower growth from economic downturns in Europe and Asia, component makers with exposure to other industries (like aerospace or data centers) have been able to maintain profitability.

This puts them in a perfect position when the EV market accelerates again.

Our analysts broke down specific stocks and investing opportunities in our full Market Briefs Pro report on thai shift.

Click here to get access to the report now.

How to Evaluate EV Supply Chain Stocks

Not all auto stocks benefiting from EVs are created equal.

If you're researching this opportunity, here's what to look for:

1. Geographic Exposure

• Strong China presence = Access to the world's largest EV market.
• Europe exposure = Established relationships in the second-largest EV region.
• U.S. diversification = Protection if international markets slow.

2. Revenue Mix

• What percentage of revenue comes from EV parts today?
• What's their target for 2-3 years from now?
• Are they aggressively pivoting or hesitantly dabbling?

3. Customer Diversity

• Do they sell to multiple automakers or depend on one?
• Do they have contracts with Chinese EV companies?
• Are they working with EV startups or just legacy brands?

4. Product Portfolio Balance

• Can they still profit from combustion engines while building EV revenue?
• Are they making components OR complete systems?
• Do they have exposure to multiple vehicle types (cars, trucks, commercial)?

5. Tier Positioning

• Tier 1 suppliers = More stable, lower growth potential.
• Tier 2 suppliers = More volatile, higher growth potential.
• Diversified = Best of both worlds.

Understanding EV Stock Growth Potential

When investors ask "What EV company has the best growth potential?", they're usually thinking about automakers.

But here's a better question: Which companies benefit regardless of which automaker wins?

That's the supply chain opportunity.

What Signals Strong Growth Potential

Based on the transformations happening now, companies with high growth potential share these characteristics:

Aggressive EV revenue targets. Some suppliers are aiming for 45% of revenue from EV parts by 2030. That's not cautious - that's commitment.

Established Chinese partnerships. With China producing twice as many EVs as the next competitor, relationships with BYD, NIO, and Geely matter.

Proven pivot success. Companies that went from 2% EV revenue to 17% in five years have demonstrated they can execute.

Multiple product lines. Suppliers making both battery cooling systems AND electric motors have more ways to win.

Assembly capabilities. Companies that can build complete EVs for partners have an edge as EV startups need manufacturing capacity.

Comparing Traditional Auto Stocks vs. EV Supply Chain Stocks

The key difference: Supply chain stocks benefit from the entire industry growing, not just one company winning.

Investment Options: EV Stock ETFs for Passive Exposure

For investors who want exposure to this shift without picking individual stocks, there are ETF options focused on the EV supply chain.

Some funds hold both Tier 1 suppliers and component specialists, giving you diversified exposure to companies benefiting from EV growth.

These ETFs typically include:

• Major suppliers with aggressive EV revenue targets.
• Component manufacturers with Chinese partnerships.
• Companies assembling EVs for other brands.
• Diversified parts makers with EV and traditional auto exposure.

The advantage of ETFs: You don't have to pick which supplier wins. You benefit from the overall shift.

The Risks You Need to Understand About EV Stocks

Political and Policy Risk

The Trump administration has announced plans to cut EV incentives. New automotive tariffs affect all vehicles in the U.S.

The White House is also attempting to repeal California's ability to set its own emission standards. 

Since California is the largest EV market in the U.S., this could slow domestic adoption.

Here's the thing: California's strict regulations have historically set the standard for everyone. 

Cars need to be produced at scale, so manufacturers build to meet the strictest requirements rather than creating separate models for different states.

Changes here could impact the pace of U.S. EV growth.

Regional Economic Challenges

Europe has been in an economic downturn. 

German automaker Volkswagen (a major EV company) has been hit particularly hard. 

When European automakers struggle financially, it becomes more difficult for them to invest in newer EVs and limits their supplier spending.

China has faced currency deflation and unstable markets over the past few years. A new round of U.S. tariffs could deepen these struggles.

When consumers in any region face economic pressure, they avoid major purchases like cars. This affects automakers AND their suppliers.

The Reality Check

Despite these challenges, EV adoption rates are still increasing globally.

As James Mangrum told us: "I think people just need to be patient. Don't push - if you push it, people resist…but even I am gonna get around to looking at EVs."

The shift is happening. It's just not happening overnight.

What EV Stocks Mean for Your Portfolio

The EV supply chain represents a different way to invest in the electric vehicle revolution.

Instead of betting on which automaker wins, you're investing in the companies that benefit as the entire industry grows.

Key takeaways:

• Global EV sales are growing (14M to 15M+ from 2023-2024).
• Supply chain companies are aggressively pivoting to EV parts.
• Geographic diversification matters - China leads in adoption.
• Both Tier 1 and Tier 2 suppliers are seeing revenue growth from EVs.
• Industry veterans believe this shift is permanent despite policy headwinds.

Who this opportunity might fit:

• Investors who want EV exposure without automaker risk.
• Those looking for diversification beyond U.S. markets.
• People who believe in long-term EV adoption despite short-term volatility.
• Investors comfortable with industrial sector investments.

Who should be cautious:

• Those needing short-term returns (this is a multi-year shift).
• Investors uncomfortable with political/tariff risk.
• People wanting pure-play EV exposure (these companies still make gas car parts).

Frequently Asked Questions

What is the best EV stock to invest in?

Rather than picking one "best" stock, consider the supply chain approach. 

Companies that supply parts to multiple EV makers benefit from industry growth without betting on a single automaker's success. 

Look for suppliers with strong China exposure, aggressive EV revenue targets, and diversified customer bases.

What EV company has the best growth potential?

Growth potential in the EV sector isn't limited to automakers. 

Supply chain companies with established Chinese partnerships, proven revenue pivots (2% to 17%+ EV revenue), and contracts with multiple automakers are positioned to grow as global EV adoption accelerates.

Are EV stocks still a good investment?

EV supply chain stocks offer a different risk profile than automaker stocks. 

While U.S. policy creates headwinds, global adoption continues growing. The question isn't whether EVs are growing - they are. 

The question is whether you want exposure to that growth through automakers or the suppliers who benefit regardless of which brand wins.

Which suppliers are benefiting most from EV growth?

Suppliers with these characteristics are seeing the strongest growth: 60%+ international revenue (especially China), EV parts growing from single-digit to double-digit percentage of revenue, contracts with Chinese EV makers like BYD, and ability to manufacture both traditional and EV components.

The Bottom Line: A Different Way to Invest in EVs

The EV revolution isn't just about the cars. It's about the entire ecosystem that makes those cars possible.

While automakers fight for market share and headlines, supply chain companies are quietly building revenue from multiple customers across multiple continents.

The opportunity: Consider investing in the companies selling to everyone rather than betting on who wins the race.

This shift has already started, but there's still time for investors who understand where the real money is moving.

Those who act strategically may be able to charge up their portfolios as this global trend accelerates.

Before you go: Our market analysts did in-depth research on the specific stocks that could benefit from this market shift.

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