Infrastructure Matters for Future EV Adoption | ETF Trends

This year, there’s no shortage of EV market observers noting that an inflection point for the industry is afoot. Data supports those claims, as sales of electric vehicles have experienced exponential growth over the past several years.

Still, electric vehicles represent a small percentage of overall global automotive sales. Add to that, drivers’ concerns about these cars remain the same. Namely, battery range and availability of charging stations to make longer trips less worrisome. As those scenarios improve, assets such as the KraneShares Electric Vehicles and Future Mobility ETF (KARS) stand to benefit.

The breadth of the KraneShares exchange traded fund levers it to scenarios such as improved charging infrastructure — an issue that is critical to both the fortunes of the original equipment manufacturers and components suppliers dotting the KARS roster.

Today, EV charging financing is derived from corporations, governments, and utilities. Likely owing to the current climate of high interest rates, there’s just $24 billion in stated EV charging funding commitments. That’s a clear signal more needs to be done and that there’s room for growth.

More EV Charging Is Catalyst for KARS

While KARS isn’t heavily exposed to EV charging equities, data confirms how and why the ETF would benefit as more of this infrastructure is built out, particularly in the U.S.

“Ultimately, more market-driven solutions, particularly within the fleet segment, will be required to hit the $91B goal,” according to TD Cowen research. “Our estimate of 1.7MM public chargers would require an acceleration in installations from the 2022 pace. If this does manifest, we think the industry would be a healthy one with several winners. The U.S. is currently on pace to reach President Biden’s 500K port goal. If the number of ports falls [short, the] charging hardware and services, TAM would be less, and increases the risk that EV adoption cools.”

Further adding to the potential long-term allure of KARS is the point that, as noted above, current EV charging financing commitments in the U.S. are relatively low. As that figure increases, more consumers could be compelled to embrace EVs.

“We see $91B in investment required for publicly available U.S. EV charging hardware and installations for passenger vehicles with another $14B required for commercial vehicles through 2030,” concluded TD Cowen. “Our estimates are supported by a U.S. EV fleet of 43.5MM (passenger + commercial) by 2030, growing at a +37% CAGR from 3.4MM EVs in 2022. Ultimately, this results in 20.8MM passenger vehicle charging ports installed by 2030. Of those charging ports, 83% (17.3MM) will be installed at home.”

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