Optimism Grows for EV Manufacturing Relief | ETF Trends

While EV manufacturing expenses have been a consistent roadblock for automakers, new research claims hope is on the horizon.

Research firm Gartner recently predicted that, by 2027, battery electric vehicles will be cheaper on average to produce than comparable cars with internal combustion engines. Gartner theorizes the price drop will come as original equipment manufacturers (OEMs) adopt new manufacturing methods that decrease the overall cost of production.

“New OEM incumbents want to heavily redefine the status quo in automotive,” said Pedro Pacheco, vice president of research at Gartner. “They brought new innovations that simplify production costs such as centralized vehicle architecture or the introduction of gigacastings that help reduce manufacturing cost and assembly time, which legacy automakers had no choice [but]to adopt to survive.” 

The EV optimism follows more recent Gartner research that estimates electric car shipments will increase 19% in 2024 over last year’s numbers, to a total of 18.4 million. The research also predicts that, by 2030, EV platforms will comprise over half the models that automakers market.

While the start of 2024 hasn’t been ideal for electric vehicle investing, the research from Gartner seems to indicate that the best is yet to come. Investors seeking to capitalize on potential growth in the EV market could find great appeal in the KraneShares Electric Vehicles & Future Mobility Index ETF (KARS).

KARS possesses a net expense ratio of 0.72%. The fund is benchmarked to the Bloomberg Electric Vehicles Index, providing exposure to companies that produce electric vehicles or their components. The index includes companies engaged in markets in China, the United States, and South Korea.

Pure-Play EV Bets

Regarding OEM allocations, the investments within KARS concentrate more heavily on electric-focused producers such as Li Auto and Tesla. Due to the nature of their vehicle lineups, these automakers engage in the construction of internal combustion engine construction far less, if at all. This adjusted focus could possibly liberate the OEMs to focus efforts on streamlining the EV battery construction process.

EV investing has taken a few lumps, but KARS has shown some resilience. Despite beginning the year in the red, the fund is currently up 6.19% over the last month.

KraneShares currently has at least 30 ETFs listed in the United States, with $6.9 billion in total assets under management. Their largest ETF, the KraneShares CSI China Internet ETF (KWEB), has $5.3 billion in AUM.

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