For years, Tesla (NASDAQ:TSLA) has been the dominant maker of electric vehicles, capturing significant market share in the U.S. as well as some other markets. However, the electric vehicle market is expanding in rapid fashion, confirming there’s room for multiple competitors. More manufacturers and, of course, broader electrical vehicle adoption could function as catalysts for exchange traded funds such as the KraneShares Electric Vehicles and Future Mobility ETF (NYSE: KARS).
KARS, which follows the Bloomberg Electric Vehicles Index, offers investors the depth necessary to capitalize on a fast-growing, rapidly evolving industry.
“Although U.S. electric vehicle registrations remain dominated by Tesla, the brand is showing the expected signs of shedding market share as more entrants arrive. Much of Tesla’s share loss is to EVs available in a more accessible MSRP range – below $50,000, where Tesla does not yet truly compete,” noted S&P Global Mobility.
Indeed, Tesla has brand recognition associated with luxury, on par with Mercedes and BMW. That’s relevant to investors considering KARS because Elon Musk’s company is the ETF’s ninth-largest holding at a weight of nearly 3%.
However, the KraneShares ETF is also home to several other manufacturers, some of which are operating in the sub-$50,000 niche, indicating that the ETF has the flexibility to capture a variety of segments of EV buyers.
“S&P Global Mobility predicts the number of battery-electric nameplates will grow from 48 at present to 159 by the end of 2025, at a pace faster than Tesla will be able to add factories. Tesla’s CEO Elon Musk confirmed (again) during a recent earnings call that the company is working on a vehicle priced lower than the Model 3, though market launch timing is unclear,” according to the research firm.
KARS is also home to several of the dominant names among Chinese electric vehicle manufacturers — a relevant point because that country is quickly growing its electric vehicle market and puts a premium on buying domestic brands.
Bottom line: Owing to its breadth and exposure to companies integral to the EV supply chain regardless of consumer brand preferences, KARS is uniquely positioned to capture positive long-term trends in this space.
“Tesla’s EV-only strategy gives it a retention advantage – as few EV owners have returned to ICE powertrains. But as new EVs arrive, loyalty will be tested. Currently, the Model Y has a 60.5% -brand loyalty and had nearly 74% of buyers come from outside the brand (the conquest rate) – tops in the industry. Who is Tesla conquesting from? Toyota, Honda, BMW and Mercedes-Benz. Toyota and Honda are only beginning to get into the EV market, though have yet to enter the fray in earnest,” concluded S&P.
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.