High Oil Prices Are Driving an EV Boom. Who's the Next Winner After Tesla?

Key Points

Tesla just confirmed the EV boom being driven by the spike in oil prices.

If oil prices remain elevated, alternative energy companies will benefit.

GE Vernova and Union Pacific look well-positioned as well.

• 10 stocks we like better than GE Vernova ›

Oil prices spiked when the U.S. attacked Iran and have been elevated since then as the Strait of Hormuz has remained closed.

The effects of $4/gallon gasoline in the U.S, higher diesel prices, and even higher fuel prices in Europe, Asia, and other parts of the world are shifting demand patterns.

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Among the winners have been alternative energy companies that can help consumers and businesses save money. One of the biggest ones is Tesla (NASDAQ: TSLA), and we got an update from the EV maker Wednesday night.

The market initially cheered the results, sending the stock up higher before it fell on CEO Elon Musk's forecast of a "very significant" capex increase this year.

However, the EV business delivered strong results. Automotive revenue was up 16% to $16.2 billion, lapping a quarter in which Tesla experienced a backlash due to Musk's work with the Trump administration under DOGE.

Among the factors driving the strong EV sales were higher oil prices, as the company noted a surge in Europe, with deliveries up more than 150% quarter-over-quarter in countries like France and Germany. The Asian market was strong as well, with Japan and South Korea returning to growth. The company also reported its highest Q1 order backlog in more than two years.

CFO Vaibhav Taneja said, "The recent increase in gas prices has had a positive impact on the order rate," but also the improvement began before the increase in gas prices.

What is clear is that Tesla isn't the only EV company benefiting. Electric car sales jumped 51% in continental Europe, and EV sales also soared in Asia, with registrations more than doubling in South Korea in March.

2 other alternative energy stocks winning from high oil prices

The leading EV maker is one company that's benefiting from the jump in oil prices, but there are others that look well-positioned to capitalize on elevated prices.

GE Vernova (NYSE: GEV), for example, has been a standout winner since the former GE broke up two years ago, but the energy infrastructure company is well-situated for higher oil prices as alternative and renewable energy make up a significant part of its business. Its wind power segment generates rougly 30% of its revenue. Additionally, its strength in gas turbines is an attractive alternative to oil-based electricity generation in the current environment.

Railroad giant Union Pacific (NYSE: UNP) is also well positioned to benefit from high oil prices, as railroads are a more cost-effective mode of shipping than trucking, especially when prices are elevated. Union Pacific already operates in a duopoly in the western half of the U.S. with BNSF and generates huge operating margins.

The stock jumped on its first-quarter earnings report as it reported an adjusted operating margin of 40.1%, and it has the pricing power to continue to deliver strong results in an inflationary environment.

The ability to raise prices without losing customers is a key advantage during a time of geopolitical uncertainty. While Union Pacific isn't a high-growth stock, it makes up for it with a wide economic moat and reliable dividend income.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Vernova and Tesla. The Motley Fool recommends Union Pacific. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.