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With automation and technological breakthrough emerging rapidly, fast pickup in electric vehicles is in the cards. Solid growth momentum and amazing one-year stock performance shown by Elon Musk’s Tesla (TSLA - Free Report) and other EV players support the fact. In fact, exclusive EV players largely outperformed the internal combustion engine (ICE) companies.
Electric vehicle maker Tesla's shares have surged about 717% in the past year, breezing past the S&P 500’s 15.6% gains (as of Jan 12, 2020). Not only this, Tesla made it to the S&P 500 on Dec 21. It clearly performed better than the other car makers as Ford (F - Free Report) was up 6.8%, Honda Motors (HMC - Free Report) lost about 0.1% and Toyota MotorTM gained about 8%.
In fact, the year 2020 can easily be credited to the EV boom with Chinese electric vehicle giant NIO logging stupendous gains of more than 1620% and other electric vehicle makers like Xpeng (XPEV - Free Report) and Li Automobile (LI - Free Report) gaining about 964% and 716%, respectively, past year. General Motors (GM - Free Report) has still managed to offer 36.7% returns past year as the carmaker is strengthening its EV footprint.
What’s Happening in the Sector?
There has been a global drive on auto manufacturers to cut CO2 emission. The very move to bolster clean energy has led to auto manufacturers’ shift from ICE to EV. Europe and China have apparently been leading the way in CO2 emission, thus promoting EV sales.
Per Deloitte, China will hold 49% of the global EV market by 2030, Europe will account for 27%, and the United States will take about 14% share. Deloitte also forecast that China will achieve a domestic market share of about 48% by 2030, while the United States will have it at 27% and Europe is expected to hold 42% share.
Inside the Key Industry Players & Their Strategies
The United States EV market is almost being supported by Tesla alone with catering to almost half of all EV sales. Tesla now has plans to develop a dramatically long-lasting “million miles” battery. The company also shared plans to further reduce the already low cost of its battery cells and packs to $100 per kilowatt-hour, at which point the price equivalence of electric cars should become similar to combustion engine vehicles, per experts.
Musk predicted that the company is likely to develop a $25,000 full self-driving car within three years. Musk expects vehicle deliveries to rise by 30% to 40% year over year (read: Tesla's 'Battery Day': Pain or Gain for ETFs Over Long Term?).
In the recent past, more than 10 automakers have come up with their EV plans. If these plans materialize, the sector will be able to manufacture and sell about 25 million units (of more than 400 models) by 2025, or 20% of all global cars sold, per Frost & Sullivan. General Motors, Toyota and Volvo all have a target of 1 million EV sales by 2025.
General Motors shares touched their highest levels this month since the company's post-bankruptcy IPO in 2010, after the automaker announced its entry into the electric delivery vehicle business. GM's first BrightDrop commercial vans are expected to be delivered to FedEx later this year.
EV king Tesla has not yet entered the EV delivery business. However,startups such as Rivian, Arrival and Canoo (that are developing electric commercial vehicles for customers ranging from Amazon to Hyundai Motor) will be there to pose competition to General Motors, according to Reuters.
Chinese carmaker NIO is competing for a share of the EV services market, launching a completely new concept: Battery as a Service. With this concept, NIO is eyeing for an edge over rivals such as Tesla by cutting the upfront purchase cost of its vehicles, as quoted on oilprice.com. With the battery-as-a-service model, customers can purchase just the vehicle shell, while they can pay rental fees for the battery.
NIO also launched its first sedan model lately. Notably, sedans and SUVs each make up around 46% of overall sales of China's passenger car market. If these were not enough, Apple (AAPL) said that it is foraying into the electric vehicle segment. The iPhone maker said it will have a brand new battery technology, and plans to deliver its first EV sometime in 2024.
Canadian tech unicorn Facedrive, which began its journey as a ride-hailing company in the booming Canadian market, recently acquired D.C. based Steer from America’s energy giant Exelon. Steer looks to transform the mode of transportation by driving people into EVs, as quoted on oilprice.com.
Then there is Canadian company Electra Meccanica Vehicles Corp which saw its shares gain about 700% past year. Its single-seat electric vehicle offers an affordable price point. Apart from intending to rule the niche EV segment, the company looks to launch an electric sports car for two, the Tofino, and another electric two-seater car.
In short, apart from the United States and China, Canadian electric car and bus makers are holding great promise. Some Canadian companies that are eyeing to revolutionize transportation are electric automaker NFI Group and electric bus manufacturer GreenPower Motor. Electric buses and batteries maker Proterra Inc. is also going public through a merger with special purpose acquisition company ArcLight Clean Transition Corp.
Needless to say, the enthusiasm in the EV space has prompted ETF issuers to come up with EV and battery-related funds. In the past two years, there was a surge in the launches of these ETFs, with which investors can tap this accelerating industry.
ETFs in Focus
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)
The underlying Solactive Autonomous & Electric Vehicles Index tracks the price movements in shares of companies which are active in the electric vehicles and autonomous driving segments. Tesla (4.9%), Plug Power (4.21%) and Nio (2.94%) are the top three stocks. United States takes the top spot in the 75-stock fund with about 59.3% exposure. The $401.1 million-fund charges 68 bps in fees.
The underlying S&P Kensho Smart Transportation Index is comprised of U.S.-listed equity securities of companies domiciled across developed and emerging markets worldwide which are included in the Smart Transportation sector.Plug Power (4.47%), AgEagle Aerial Systems (3.77%) and Blink Charging (3.21%) round out the top three positions. The $144.1 million-fund charges 45 bps in fees.
The underlying NYSE FactSet Global Autonomous Driving and Electric Vehicle Index comprises of developed and emerging market companies that may benefit from growth and innovation in and around electric vehicles, battery technologies and autonomous driving technologies. Tesla (5.16%), Samsung (4.47%) and Intel (3.96%) are the top three stocks of the fund. United States makes up about 50.1% of the fund, followed by South Korea (10.9%) and Germany (9.9%). The $194.8 million-fund charges 47 bps in fees.
Simplify Volt RoboCar Disruption and Tech ETF (VCAR - Free Report)
This ETF is active and does not track a benchmark. The expense ratio of the fund is 1.09%. The $333.7 million-fund invests about 33.5% in QQQ, followed by 25.5% in QQQJ and 15.77% in Tesla.
KraneShares Electric Vehicles And Future Mobility ETF (KARS - Free Report)
The underlying Solactive Electric Vehicles and Future Mobility Index tracks the equity market performance of companies engaged in the production of electric vehicles or their components or engaged in other initiatives that may change the future of mobility. Nio (4.26%), Souther Copper (3.52%) and Infineon Technologies (3.42%) are the top three holdings of the fund. The $121.7-million fund charges 72 bps in fees.
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Guide to Electric Vehicle ETFs
With automation and technological breakthrough emerging rapidly, fast pickup in electric vehicles is in the cards. Solid growth momentum and amazing one-year stock performance shown by Elon Musk’s Tesla (TSLA - Free Report) and other EV players support the fact. In fact, exclusive EV players largely outperformed the internal combustion engine (ICE) companies.
Electric vehicle maker Tesla's shares have surged about 717% in the past year, breezing past the S&P 500’s 15.6% gains (as of Jan 12, 2020). Not only this, Tesla made it to the S&P 500 on Dec 21. It clearly performed better than the other car makers as Ford (F - Free Report) was up 6.8%, Honda Motors (HMC - Free Report) lost about 0.1% and Toyota Motor TM gained about 8%.
In fact, the year 2020 can easily be credited to the EV boom with Chinese electric vehicle giant NIO logging stupendous gains of more than 1620% and other electric vehicle makers like Xpeng (XPEV - Free Report) and Li Automobile (LI - Free Report) gaining about 964% and 716%, respectively, past year. General Motors (GM - Free Report) has still managed to offer 36.7% returns past year as the carmaker is strengthening its EV footprint.
What’s Happening in the Sector?
There has been a global drive on auto manufacturers to cut CO2 emission. The very move to bolster clean energy has led to auto manufacturers’ shift from ICE to EV. Europe and China have apparently been leading the way in CO2 emission, thus promoting EV sales.
Per Deloitte, China will hold 49% of the global EV market by 2030, Europe will account for 27%, and the United States will take about 14% share. Deloitte also forecast that China will achieve a domestic market share of about 48% by 2030, while the United States will have it at 27% and Europe is expected to hold 42% share.
Inside the Key Industry Players & Their Strategies
The United States EV market is almost being supported by Tesla alone with catering to almost half of all EV sales. Tesla now has plans to develop a dramatically long-lasting “million miles” battery. The company also shared plans to further reduce the already low cost of its battery cells and packs to $100 per kilowatt-hour, at which point the price equivalence of electric cars should become similar to combustion engine vehicles, per experts.
Musk predicted that the company is likely to develop a $25,000 full self-driving car within three years. Musk expects vehicle deliveries to rise by 30% to 40% year over year (read: Tesla's 'Battery Day': Pain or Gain for ETFs Over Long Term?).
In the recent past, more than 10 automakers have come up with their EV plans. If these plans materialize, the sector will be able to manufacture and sell about 25 million units (of more than 400 models) by 2025, or 20% of all global cars sold, per Frost & Sullivan. General Motors, Toyota and Volvo all have a target of 1 million EV sales by 2025.
General Motors shares touched their highest levels this month since the company's post-bankruptcy IPO in 2010, after the automaker announced its entry into the electric delivery vehicle business. GM's first BrightDrop commercial vans are expected to be delivered to FedEx later this year.
EV king Tesla has not yet entered the EV delivery business. However,startups such as Rivian, Arrival and Canoo (that are developing electric commercial vehicles for customers ranging from Amazon to Hyundai Motor) will be there to pose competition to General Motors, according to Reuters.
Chinese carmaker NIO is competing for a share of the EV services market, launching a completely new concept: Battery as a Service. With this concept, NIO is eyeing for an edge over rivals such as Tesla by cutting the upfront purchase cost of its vehicles, as quoted on oilprice.com. With the battery-as-a-service model, customers can purchase just the vehicle shell, while they can pay rental fees for the battery.
NIO also launched its first sedan model lately. Notably, sedans and SUVs each make up around 46% of overall sales of China's passenger car market. If these were not enough, Apple (AAPL) said that it is foraying into the electric vehicle segment. The iPhone maker said it will have a brand new battery technology, and plans to deliver its first EV sometime in 2024.
Canadian tech unicorn Facedrive, which began its journey as a ride-hailing company in the booming Canadian market, recently acquired D.C. based Steer from America’s energy giant Exelon. Steer looks to transform the mode of transportation by driving people into EVs, as quoted on oilprice.com.
Then there is Canadian company Electra Meccanica Vehicles Corp which saw its shares gain about 700% past year. Its single-seat electric vehicle offers an affordable price point. Apart from intending to rule the niche EV segment, the company looks to launch an electric sports car for two, the Tofino, and another electric two-seater car.
In short, apart from the United States and China, Canadian electric car and bus makers are holding great promise. Some Canadian companies that are eyeing to revolutionize transportation are electric automaker NFI Group and electric bus manufacturer GreenPower Motor. Electric buses and batteries maker Proterra Inc. is also going public through a merger with special purpose acquisition company ArcLight Clean Transition Corp.
Needless to say, the enthusiasm in the EV space has prompted ETF issuers to come up with EV and battery-related funds. In the past two years, there was a surge in the launches of these ETFs, with which investors can tap this accelerating industry.
ETFs in Focus
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)
The underlying Solactive Autonomous & Electric Vehicles Index tracks the price movements in shares of companies which are active in the electric vehicles and autonomous driving segments. Tesla (4.9%), Plug Power (4.21%) and Nio (2.94%) are the top three stocks. United States takes the top spot in the 75-stock fund with about 59.3% exposure. The $401.1 million-fund charges 68 bps in fees.
SPDR S&P Kensho Smart Mobility ETF (HAIL - Free Report)
The underlying S&P Kensho Smart Transportation Index is comprised of U.S.-listed equity securities of companies domiciled across developed and emerging markets worldwide which are included in the Smart Transportation sector.Plug Power (4.47%), AgEagle Aerial Systems (3.77%) and Blink Charging (3.21%) round out the top three positions. The $144.1 million-fund charges 45 bps in fees.
iShares Self-Driving EV and Tech ETF (IDRV - Free Report)
The underlying NYSE FactSet Global Autonomous Driving and Electric Vehicle Index comprises of developed and emerging market companies that may benefit from growth and innovation in and around electric vehicles, battery technologies and autonomous driving technologies. Tesla (5.16%), Samsung (4.47%) and Intel (3.96%) are the top three stocks of the fund. United States makes up about 50.1% of the fund, followed by South Korea (10.9%) and Germany (9.9%). The $194.8 million-fund charges 47 bps in fees.
Simplify Volt RoboCar Disruption and Tech ETF (VCAR - Free Report)
This ETF is active and does not track a benchmark. The expense ratio of the fund is 1.09%. The $333.7 million-fund invests about 33.5% in QQQ, followed by 25.5% in QQQJ and 15.77% in Tesla.
KraneShares Electric Vehicles And Future Mobility ETF (KARS - Free Report)
The underlying Solactive Electric Vehicles and Future Mobility Index tracks the equity market performance of companies engaged in the production of electric vehicles or their components or engaged in other initiatives that may change the future of mobility. Nio (4.26%), Souther Copper (3.52%) and Infineon Technologies (3.42%) are the top three holdings of the fund. The $121.7-million fund charges 72 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free>>