Among U.S.-based original equipment manufacturers (OEMs), Tesla (NASDAQ: TSLA) has a sizable, significantly profitable lead over the “big three” in the electric vehicle space, but on a global basis, the industry is evolving and close to a major inflection point.
That carries with it important implications for individual stocks and exchange traded funds such as the KraneShares Electric Vehicles and Future Mobility ETF (KARS). The fund is at the right place at the right time because as BloombergNEF data indicates, the 14 million electric vehicles are expected to be sold this year, representing a massive increase from just 600,000 a mere seven years ago.
The BloombergNEF data also confirms that in 23 countries, electric vehicles will represent at least 5% of automobiles sold. Some nations, including Australia, will see that figure approach or exceed 10%. Further highlighting the EV industry’s exponential growth potential, in August in China, nearly four of every 10 new vehicles sold were electric.
Electric Vehicles ETF KARS Revving Up
Integral to the EV growth thesis is the point that battery prices are coming down — a relevant point to investors considering KARS because the ETF has exposure to multiple EV battery producers. As battery prices decline, OEMs can pass the savings on to consumers, potentially driving broader EV adoption while creating a virtuous cycle in the process.
“So the main thing we were saying then was that battery prices had already come down about 60% over five years, from 2010 to 2015. And we were predicting that trajectory was going to continue, and then that was going to bring electrified transport into this sort of economically viable category in many, many different segments of transport,” said Colin McKerracher, head of Advanced Transport at BloombergNEF.
Further highlighting the long term of KARS is the point that, as McKerracher notes, the current percentage of fully electric vehicles on the road today, globally speaking, is just 2%. That implies a significant runway for growth for EV OEMs, several of which are KARS member firms.
KARS’ China exposure is also pertinent to investors because not only is that the largest EV market in the world, there’s room for growth amid favorable policy courtesy of Beijing.
“The first one has been government policy support. So the government has been very clear from quite early on that it sees new energy vehicles, which is their term for fuel-cell, battery electric and plug-in hybrid, as the future. And they’ve supported different stages of policy to do that,” concluded McKerracher.
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