Many consider transportation one of the most effective avenues through which the world can combat climate change. After all, there are an estimated 1.3 billion internal combustion engine vehicles on global roads today. That says that as technology improves to meet evolving needs, the electric vehicle investment thesis is likely to be enhanced in the process.
This could benefit exchange traded funds such as the KraneShares Electric Vehicles and Future Mobility ETF (KARS).
KARS, which follows the Bloomberg Electric Vehicles Index, carries a compelling long-term thesis. Consider the point that global electric vehicle adoption surged more than six-fold from 2019 through this year. The number of electric vehicles on the road will likely increase in exponential fashion when manufacturers can price these offerings on par with (or below) internal combustion engine (ICE) vehicles.
“We believe mass adoption will happen when we hit ICE parity. What that means is when you go to a dealership, you will see the same car in an ICE train versus an electric vehicle train, but the electric vehicle is going to be cheaper, faster, and actually cooler,” said Anthony Sassine, KraneShares senior investment strategist. “And that’s exactly when we’re going to hit mass adoption and witness a hockey stick type growth that could potentially extend into the next decade.”
KARS’ Depth Important
Another point in favor of KARS is its broad approach to electric vehicle investing. Sure, there’s no denying that Tesla (NASDAQ: TSLA) has been a story stock, and investing in names like that, Nio (NYSE: NIO), and BYD, among others, is highly relevant.
Indeed, Tesla is KARS’ largest holding, and that stock and BYD combine for 6.66% of the ETF’s lineup. However, there’s much more to the electric vehicle investment thesis, and KARS taps into that depth.
“If you invest only the Tesla’s in NIOs, you’re missing out on the whole industry that is participating in that transition and also missing out on very important companies that are not accessible by US investors,” added Sassine. “These companies include CATL, which is the globe and China’s largest battery maker and BYD, which is China’s largest EV maker and soon to be the globe’s largest EV seller.”
KARS, which debuted in January 2018 and has nearly $190 million in assets under management, holds about 60 stocks. That’s good for one of the deeper benches among ETFs in this category. That roster includes battery makers, miners, and infrastructure firms in addition to original equipment manufacturers.
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