There are multiple U.S cities that are willing to buy $10 billion worth of electric cars and trucks. Though automakers say there isn’t enough demand for the vehicles recent news suggests that city mayors and administrators want to shift to electric vehicles to reduce the adverse impact on the climate.

 

Just as President Trump prepares to review fuel emission standards put forward by Barrack Obama, 30 U.S cities have enquired about the cost and feasibility of producing 114,000 electric vehicles. Los Angeles Mayor Eric Garcetti is coordinating the effort and asked for the details to replace existing police cruisers, street sweepers, and trash haulers in order to create a more environment-friendly city (read: Trump Unveils First Budget Blueprint: ETFs to Gain or Lose).

 

Even though the initiative is in the early stages, such a move can impact markets in a significant way. The mayors who are mostly democrats suggest that the demand for such low emission vehicles is robust. Manufacturers have been invited to provide a formal supply plan. There is a lot of interest in innovation as there have been queries regarding electric fire trucks and heavy pickup trucks, which have yet to be developed.

 

In the current scenario, the following ETFs are in focus:

 

VanEck Vectors Global Alternative Energy ETF

 

This ETF is a bullish bet on alternative energy companies. Investors who believe this particular sector will thrive in the coming years invest in this ETF. This fund bears significant concentration risk as more than 65% is allocated to its top 10 holdings, with Tesla having the highest allocation (12.3%) (read: ETFs in Focus on Tesla’s Mixed Q4 Results).

 

It is a relatively expensive bet as it charges 62 bps in fees per year. The fund manages AUM of $66.3 million. GEX returned 7.07% in the year-to-date time frame and 6.10% in the last one year.

 

Global X Lithium ETF (LIT Quick QuoteLIT - Free Report)

 

This fund offers exposure to investors looking to gain from companies that are exposed to various aspects of the lithium industry. Lithium is a key component in many electric batteries, which are vital to electric cars. The lithium industry is expected to rise given the growing demand for electric cars. This fund bears significant concentration risk as more than 73% is allocated to its top 10 holdings, with Tesla having an allocation of 5.3%.

 

It is a relatively expensive bet as it charges 75 bps in fees per year. The fund manages AUM of $148.3 million. LIT returned 9.9% in the year-to-date time frame and 34.0% in the last year.

 

 

Climate change is real. Electric car sales grew at an annualized rate of 60% last year. Moreover, Tesla predicts that its sales will grow by the same number through 2020. Mayors want to shift to electric vehicles for commercial use and with increased education about the harmful impact of fuel emissions, electric passenger vehicles can also see a surge in demand. This bodes well for the growth of this relatively new industry.

 

 

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