The automotive industry is a large component of Europe’s economy. The transition to electric vehicles (EVs) will have a profound influence. With growth projected to grow exponentially, this could drive European equities higher.
“Europe and the rest of the world are on a path to one of the greatest automotive transformations in history as vehicle electrification passes a tipping point,” research firm McKinsey noted, adding that its research results revealed that interest in electric vehicles (EVs) is surging among its consumers.
McKinsey noted a year-over-year sales increase of more than 50% from 2020 to 2023, though it has been waning as of late. Nonetheless, the long-term prospects of the EV industry as a whole is on a path of growth, with sales in China leading the way.
Europe’s strict emissions laws will certainly emphasize the use of EVs to reduce its carbon footprint. If the government can continue its support of this electrification movement via subsidies, that could also spur more growth in the EV industry.
In the meantime, traders could ponder how strength in the EV industry could feed into strength for European equities overall.
2 Leveraged Opportunities
With EV growth in Europe, traders have two opportunities. One is broad-based equities exposure to the European Union (EU). The other is the EV industry itself. The rise and fall of one could also affect the other.
For broad European equities exposure, traders can consider using the Direxion Daily FTSE Europe Bull 3X ETF (EURL). The fund seeks daily investment results that are equal to 300% of the daily performance of the FTSE Developed Europe All Cap Index. The index itself is a market capitalization-weighted index. EURL’s design measures the equity market performance of large-, mid-, and small-cap companies. It centers on developed markets in Europe, offering deep diversification.
For EV exposure, consider using the Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares (EVAV). It seeks to achieve 200% of the daily performance of the Indxx US Electric and Autonomous Vehicles Index. The index provides exposure to 25 U.S.-listed companies poised to disrupt the existing transportation market.
EVAV includes companies beyond vehicle manufacturers to paint a more holistic picture of the industry. The index includes charging station manufacturers such as ChargePoint and Blink; companies involved in software development and the manufacturing of various electrical components; and electric vehicle manufacturers such as the Tesla, Lucid, and NIO.
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