Electric vehicle sales are climbing, but for investors, knowing that is only half the battle. To truly capitalize on the long-term electrification of the auto industry, it’s also crucial to understand regional trends. Some exchange traded funds are up to that task, such as the KraneShares Electric Vehicles and Future Mobility Index ETF (NYSE: KARS).
The $200.47 million KARS follows the Bloomberg Electric Vehicles Index.
The field of electric vehicle ETFs is somewhat crowded, given that this is a thematic category, but KARS is one of the most geographically diverse funds in the group. That’s relevant because some manufacturers make significant inroads in markets outside their home domiciles. For example, European buyers of electric vehicles are increasingly receptive to Chinese brands.
“Chinese carmakers are starting to get a firm foothold on the European market, accounting for 5% of all BEVs sold so far this year. Based on current trends, they could be providing Europe with 9% to 18% of its battery electrics (BEV) in 2025, a new Transport & Environment study shows,” reports the publication.
Data also confirm that electric vehicles are soaring in China. Given that China is the world’s second-largest economy and a booming auto market, there are positive implications in that scenario for KARS because the ETF has significant exposure to Chinese equities.
“BEV sales in China soared to nearly 18% of the new car market in the first half of 2022 while the share of EVs in the US grew 50%. In that same period, the share of BEVs in Europe fell by two percentage points with Europeans facing excruciatingly long waiting times for electric models,” adds Transport & Environment.
The exposure offered by KARS to manufacturers marketing their wares in Europe is relevant for another reason. Recent data suggest that 19% of new cars sold in Germany – the Eurozone’s biggest economy – are fully electric, and nearly a third are plug-in hybrids.
In terms of individual model popularity in Germany, the top two electric vehicles are produced by Tesla (NASDAQ: TSLA), which is relevant to KARS investors because that stock accounts for 3.74% of the fund’s weight and is the sixth-largest holding in the portfolio. KARS also has more quality than investors might expect.
The ETF “has maintained an overweight in quality exposure and volatility exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have a solid balance sheet,” according to Morningstar.
For more news, information, and strategy, visit the Climate Insights Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.