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I previously have written about the coming boom in electric vehicles, a boom that becomes increasingly likely as gas prices go higher. In this post I would like to follow up with some news items that investors focusing on this sector may wish to pay attention to. I believe the opportunity being created by electric vehicles will be an outstanding speculative opportunity over the next few years.

So here are a few points I think are worth noting:

1. California to Invest in EV Charging Stations. One of the big obstacles for electric vehicles is charging stations: They are not as abundant as gas stations, and even where they are around, it still takes too long to charge batteries. California appears to be interested in addressing this problem, as the state government will be investing $100 million to build a network of charging stations across the state. The Los Angeles Times reports:

The money will be used to construct at least 200 public fast-charging stations and install wiring for 10,000 plug-in units at 1,000 locations across the state, Gov. Jerry Brown said Friday. He also announced that he had signed an executive order laying out the foundation for 1.5 million zero-emission vehicles to be on California's roads by 2025.

At this point it is especially important to note that this may not make electric cars a success in that it does not guarantee the sale of EVs or that customers will like them and use them abundantly. What it does show is that there is support from a large state government. This in and of itself is likely to create a speculative opportunity for prices to go higher for some time, in my opinion, although whether or not this is a long-term buying opportunity that can last beyond 3-5 years remains to be seen. At some point consumers will have to buy the cars and use them - and automobile manufacturers will need to make an unsubsidized profit - if the industry is to enjoy sustained growth for a decade or more.

2. Illinois and 7-11 Partner for Fast EV Charging Stations. It's not just California, Illinois is getting in on the electric vehicle movement, and has committed to putting $10 million into EV charging stations. 7-11 claims it will be able to charge cars within 30 minutes. Illinois is also offering a $4,000 rebate on electric vehicle purchases. The economist in me cringes at this idea, as these kinds of stimulus and rebates are best left to the market rather than to the political process where lobbying is more likely to trump economics and science. But the speculator in me knows these types of flawed policies can create opportunities for the speculator who gets in early and recognizes signs of a market topping.

3. Corresponding Stocks Outperforming S&P. Stocks related to electric vehicles have been outperforming the S&P 500. Take a look at the chart below to get an idea.

Click to enlarge

The big winners here have been graphite stocks, which I previously noted as being the next possible bubble in the resource sector. Graphite is experiencing a resurgence due to its usage in batteries and emerging energy technologies that are growing in demand as our world transitions away from oil.

The two graphite stocks I'm most interested in, Focus Metals (OTCQX:FCSMF) and Northern Graphite (OTCQX:NGPHF), have been on a tear, rallying strongly even when the market as a whole does not. I do think there is still room to go in graphite, and that anything related to electricity and EV batteries - such as vanadium, uranium (URA), lithium (LIT), copper (CPER) and rare earths (REMX) - is likely to benefit from government stimulus and the rise of the EV market in general.

I do not favor the established car manufacturers, although GM (GM) has outperformed SPY by more than 2.5X year-to-date. I would much prefer to see a new entrant to invest in electric vehicles rather than a traditional car automobile manufacturer. I think the manufacturers rooted in making cars that run on oil will ultimately struggle to fit into the new emerging value network for EVs. Established automobile manufacturers face what is known as the innovator's dilemma.

Lastly it should be noted that Daimler AG, in a joint venture with Berkshire Hathaway (BRK.A), will be introducing its new electric vehicle at the Beijing auto show in April 2011. China is the driver of much of the global economy, and so the continuation of the trend there may be of particular interest for those who wish to take bullish positions in the EV value network.

Source: Now Is The Time To Invest In Electric Vehicles

Additional disclosure: I am long select uranium and rare earth stocks.