We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should You Fear Slowing Momentum of EVs? ETFs in Focus
Read MoreHide Full Article
Recently, the electric vehicle (EV) market has experienced a deceleration in its previously rapid growth. Notable developments contributing to this lackluster trend include Ford (F - Free Report) delaying its $12 billion investment in electric vehicle production, General Motors (GM - Free Report) retracting its target to manufacture 400,000 electric vehicles by mid-2024, and Volkswagen Group's decision to scrap plans for constructing a new $2 billion EV factory in Germany.
The challenges faced by the EV market in late 2023 are multifaceted, involving consumer perceptions, infrastructure development, economic factors, and policy changes. Let’s delve deeper into it.
Scarcity of Charging Network
The underdeveloped charging infrastructure, particularly in the United States, where planning is required for long trips, contrasts sharply with the ubiquitous availability of gas stations, deterring potential EV buyers, as quoted on Forbes.
Saturation Among Early Adopters
Initial EV adopters were mainly higher-income individuals, enthusiasts, and environmentally conscious consumers. Broader adoption across other demographics is progressing more slowly. Automakers need to develop more entry-level models to reach a wider demographis, the Forbe's article noted.
Global Market Challenges
Factors such as the end of China's EV subsidies, Europe's energy crisis and inflation have posed risks to EV sales momentum. China, the largest EV market, saw a drop in subsidies, affecting demand. The pandemic resurgence in China also negatively impacted EV sales and battery production. In the West, economic challenges, including the possibility of a recession in the U.S., have further complicated the situation, per S&P Global.
EVs Are Pricey
Although prices have fallen, but they're still high compared with non-EVs. The average selling price for an EV in September was $50,683, according to Cox, down 22% from a year ago — mainly due to Tesla price cuts, as quoted on Axios.
High-Interest Rates
The higher initial cost of EVs, combined with higher rates amid steep Fed rate hikes in the past one-and-a-half year, has dampened overall vehicle sales, including EVs. Interest rates are high in Europe too. Although rates are not higher in China, the country’s economy has been slowing.
Should You Buy the Slowing Momentum?
Despite afore-mentioned challenges, the global EV market continues to grow. In 2022, sales exceeded 10 million, with electric cars accounting for 14% of all new car sales, up from around 9% in 2021. The overall expectation is about a 35% year-on-year increase in sales by the end of 2023, according to IEA.
EV sales gained 50% in the third quarter compared to the same period in 2022. Cox predicts EVs will make up about 8%-9% of U.S. auto sales for 2023. However, Q3 sales slowed from 71% year-over-year sales surge seen in Q3 of 2022. Also, unlike some big names mentioned above, Toyota remains in expansion mode and announced plans to invest another $8 billion at its North Carolina battery plant.
ETFs in Focus
Against this backdrop, investors with a strong stomach for risks may bet on EV ETFs with a long-term view. These ETFs have gained momentum past week. With U.S. interest rates likely to be declining next year, we may see an uptick in EV sales.
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report) – Up 12.2% YTD; Up 6.49% Past Week (as of Nov 7, 2023)
KraneShares Electric Vehicles & Future Mobility Index ETF (KARS - Free Report) – Down 9.4% YTD; Up 5.2% Past Week
iShares Self-driving EV & Tech ETF (IDRV - Free Report) – Up 0.8% YTD; Up 6.8% Past Week
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) – Up 25.2% YTD; Up 6.8% Past Week
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Should You Fear Slowing Momentum of EVs? ETFs in Focus
Recently, the electric vehicle (EV) market has experienced a deceleration in its previously rapid growth. Notable developments contributing to this lackluster trend include Ford (F - Free Report) delaying its $12 billion investment in electric vehicle production, General Motors (GM - Free Report) retracting its target to manufacture 400,000 electric vehicles by mid-2024, and Volkswagen Group's decision to scrap plans for constructing a new $2 billion EV factory in Germany.
The challenges faced by the EV market in late 2023 are multifaceted, involving consumer perceptions, infrastructure development, economic factors, and policy changes. Let’s delve deeper into it.
Scarcity of Charging Network
The underdeveloped charging infrastructure, particularly in the United States, where planning is required for long trips, contrasts sharply with the ubiquitous availability of gas stations, deterring potential EV buyers, as quoted on Forbes.
Saturation Among Early Adopters
Initial EV adopters were mainly higher-income individuals, enthusiasts, and environmentally conscious consumers. Broader adoption across other demographics is progressing more slowly. Automakers need to develop more entry-level models to reach a wider demographis, the Forbe's article noted.
Global Market Challenges
Factors such as the end of China's EV subsidies, Europe's energy crisis and inflation have posed risks to EV sales momentum. China, the largest EV market, saw a drop in subsidies, affecting demand. The pandemic resurgence in China also negatively impacted EV sales and battery production. In the West, economic challenges, including the possibility of a recession in the U.S., have further complicated the situation, per S&P Global.
EVs Are Pricey
Although prices have fallen, but they're still high compared with non-EVs. The average selling price for an EV in September was $50,683, according to Cox, down 22% from a year ago — mainly due to Tesla price cuts, as quoted on Axios.
High-Interest Rates
The higher initial cost of EVs, combined with higher rates amid steep Fed rate hikes in the past one-and-a-half year, has dampened overall vehicle sales, including EVs. Interest rates are high in Europe too. Although rates are not higher in China, the country’s economy has been slowing.
Should You Buy the Slowing Momentum?
Despite afore-mentioned challenges, the global EV market continues to grow. In 2022, sales exceeded 10 million, with electric cars accounting for 14% of all new car sales, up from around 9% in 2021. The overall expectation is about a 35% year-on-year increase in sales by the end of 2023, according to IEA.
EV sales gained 50% in the third quarter compared to the same period in 2022. Cox predicts EVs will make up about 8%-9% of U.S. auto sales for 2023. However, Q3 sales slowed from 71% year-over-year sales surge seen in Q3 of 2022. Also, unlike some big names mentioned above, Toyota remains in expansion mode and announced plans to invest another $8 billion at its North Carolina battery plant.
ETFs in Focus
Against this backdrop, investors with a strong stomach for risks may bet on EV ETFs with a long-term view. These ETFs have gained momentum past week. With U.S. interest rates likely to be declining next year, we may see an uptick in EV sales.
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report) – Up 12.2% YTD; Up 6.49% Past Week (as of Nov 7, 2023)
KraneShares Electric Vehicles & Future Mobility Index ETF (KARS - Free Report) – Down 9.4% YTD; Up 5.2% Past Week
iShares Self-driving EV & Tech ETF (IDRV - Free Report) – Up 0.8% YTD; Up 6.8% Past Week
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) – Up 25.2% YTD; Up 6.8% Past Week
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)