Market Overview

Nio And Tesla Hit The Accelerator For Nifty, High-Flying Electric Vehicle ETF

Nio And Tesla Hit The Accelerator For Nifty, High-Flying Electric Vehicle ETF

An obvious lesson many investors learned in 2020 is that electric vehicle stocks and the related exchange-traded funds are the future of automotive investing and are scorching hot.

What Happened: There are plenty of ETFs that are credible EV plays – some are even dedicated to the concept – but one of the hidden gems in the group is the SPDR S&P Kensho Smart Mobility ETF (NYSE: HAIL).

HAIL, which tracks the S&P Kensho Smart Transportation Index, has nearly $103 million in assets under management and has tripled in value since late March.

The ETF is a unique spin on EV investing as components in its underlying index are “companies whose products and services are driving innovation behind smart transportation, which includes the areas of autonomous and connected vehicle technology, drones and drone technologies used for commercial and civilian applications, and advanced transportation tracking and transport optimization systems,” according to State Street.

Why It's Important: Though HAIL is an equal-weight ETF, it does allocate almost 5% of its combined weight to Nio (NYSE: NIO) and Tesla (NASDAQ: TSLA), a trait that is enough to pique some investors' interest.

Beyond that, HAIL offers ample leverage to the incoming Biden Administration's more accommodating stance on the environment and renewable energy.

“Biden’s administration may reraise the standard and develop rigorous new vehicle emission standards to drive innovation and the adoption of clean vehicle technology,” according to State Street research.

The president-elect also wants to deploy 500,000 charging stations across the U.S. over the next decade. That's a long-ranging endeavor, but one that could boost HAIL because the ETF features charging station equity exposure.

What's Next: Biden also wants to increase federal government purchases of EVs. Obviously, Uncle Sam is a major automobile buyer, but his fleet currently consists of just 1% EVs. Material increases to that percentage could be a boon for HAIL as would ongoing tax credits for EV buyers.

“Furthermore, Democratic legislators have discussed increasing the EV tax credit quota from 1.9 million cars to 7.5 million cars – adding $39 billion to the cost of the credit -- as well as expanding EV charging stations nationwide, which, if enacted, will make EVs more cost-competitive and accessible to consumers,” according to State Street.

With EVs forecast to reach price parity traditional vehicles over the next several years, HAIL should benefit from disruptive secular growth tailwinds.


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