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Encouraging Data For Electric Vehicle ETFs

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Encouraging Data For Electric Vehicle ETFs
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There are several electric vehicle exchange traded funds available to U.S. investors, all of which have come to market this year. While none of these funds are particularly large, some research points continue to confirm the validity of the electric vehicle investment theme.

In a report out Wednesday, the International Energy Agency said the number of electric vehicles on the road worldwide could triple to 13 million by the end of the current decade.

What Happened

The KraneShares Electric Vehicles & Future Mobility ETF (NYSE: KARS) debuted in January as the first electric vehicle ETF in the U.S. KARS follows the Solactive Electric Vehicles and Future Mobility Index and has amassed $31.2 million in assets under management since its debut, a decent amount given its age and narrow focus.

Top 10 holdings in KARS include NVIDIA Corp. (NASDAQ: NVDA), Alphabet Inc. (NASDAQ: GOOGL) and Tesla Inc. (NASDAQ: TSLA), but the fund also features significant exposure to Chinese companies, including many that trade on mainland China, also known as A-shares. KARS' China tilt is notable.

“Over 1 million electric cars were sold in 2017 — a new record — with more than half of global sales in China,” according to IEA.

China is the fourth-largest electric vehicle market in the world and the largest outside of Northern Europe.

Why It's Important

For producers of electric vehicles such as Tesla, the good news is that prices of lithium-powered batteries are declining.

"Significant cost reductions and improved performance is occurring in batteries, mostly thanks to increased production and investment with the rapid spread of consumer electronics,” according to IEA.

The Global X Autonomous & Electric Vehicles ETF (NASDAQ: DRIV), which debuted in mid-April, features exposure to over a dozen automotive manufacturers, including Tesla. KARS follows the Solactive Autonomous & Electric Vehicles Index. With the benefit of some above-average seed capital, KARS already has $46.7 million in assets under management.

What's Next

Electric vehicle producers have their work cut out if they are to produce enough vehicles to match IEA's ambitious targets.

“The number of electric cars on the road reaches 125 million by 2030 under the IEA’s New Policies Scenario. With rising ambitions to meet climate goals and other sustainability targets, as in the EV30@30 Scenario, the number of electric cars on the road could be as high as 220 million in 2030,” according to IEA.

KARS is up 2 percent over the past month.

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