Recently, reports have surfaced that demand for electric vehicles (EVs) is slowing. This could potentially dampen the notion that 2023 is one of the industry’s seminal moments.
Some experts believe the headlines exaggerate the current state of affairs in the EV market and that global demand for these vehicles remains strong. Should that thesis prove accurate, the KraneShares Electric Vehicles and Future Mobility ETF (KARS) is among the exchange traded funds that stand to benefit. The recent spate of gloomy EV headlines has weighed on KARS. But the other side of that coin is that the negative could belie opportunity with the ETF.
Importantly, data doesn’t yet suggest that EV demand is faltering. If anything, 2023 remains poised to be the year in which EVs notch records as a percentage of global automobile sales.
“Sales of passenger EVs are on pace to hit 14 million this year, up 36% from 2022. In the US, where most of the concerns about demand have been raised, sales are growing even faster and will be up 50% this year. Sales might be short of what some manufacturers were hoping for. But they’e been in line with BNEF’s forecast from the beginning of the year. Most industries would be very happy with this kind of growth rate,” reported Colin McKerracher for Bloomberg.
KARS Has Catalysts
Regarding the recent slew of negative EV headlines, it’s important to see the forest through the trees. This is particularly so for investors considering assets such as KARS. For now, there’s no evidence of a material slowdown in EV demand. But there are signs the industry is maturing.
Some of that maturation process is painful. That’s because some automotive manufacturers are finding it difficult to turn profits on EVs. Others are even considering abandoning that pursuit. That could be a near-term drag on EV stocks and ETFs. It also indicates the industry is separating the contenders from the pretenders. Over time, that could be beneficial to KARS.
“Pure-play EV makers such as Tesla, BYD and Li Auto will capture 7% of the global vehicle market this year, up from just 1% in 2020. Many legacy automakers have launched products that are not competitive on price, range or features and will have to go back to the drawing board,” according to Bloomberg.
Tesla (TSLA) and Li Auto (LI) are the top two holdings in KARS. They combine for 9.49% of the ETF’s roster. BYD commands a weight of 2.59% in the fund.
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