There’s more to its story, but the ARK Industrial Innovation ETF (NYSEArca: ARKQ) is often highlighted for having one of the largest weights to Tesla (NASDAQ: TSLA) among all exchange traded funds.
That’s a trait working in favor of ARKQ this year and one that could prove persistent as Tesla fends off new competitive threats in the electric vehicle (EV) space.
ARKQ captures the converging industrial and technology sectors, capitalizing from autonomous vehicles, robotics, 3D printing, and energy storage technologies. That wide mandate helps lever ARK to more than just self-driving cars, an important trait at a time of rapid robotics advancements.
ARKQ Ideal Avenue for Tesla Exposure Via an ETF
One reason ARKQ’s Tesla allocation is meaningful is that Elon Musk’s company consistently proves adaptable and is winning the EV battle in terms of $/charging rate, or miles of range added per minute of charging.
“Our research aims to forecast the price and performance of EVs during the next five to ten years. To date, we have used Wright’s Law to forecast battery cost declines,” according to ARK Research. “Because the battery is its largest cost component, typically 20%, we can forecast the long-term decline in EV sticker prices. Forecasting other EV specifications is less straightforward, particularly metrics like range, efficiency (range/kWh), time to accelerate from 0-60mph, and battery pack size. Complicating the analysis further are battery cell chemistries with different $/kWh costs and performance tradeoffs.”
Currently, electric vehicles represent a small percentage of new automobiles sold around the world, but that percentage is expected to increase in a big way over the next several years. Increasing battery life and power is essential to converting more drivers to electric vehicles. That speaks to the long-term efficacy of the ARKQ thesis.
Due to the increased concerns over environmental issues, global governments are supporting the development of electric vehicles worldwide. Consequently, the high voltage battery market will continue to enjoy increased interest and investments as electric vehicles are expected to drive the growth.
ARKQ enables investors to access high growth potential through companies critical to the development of autonomous and electric vehicles – a potentially transformative economic innovation. It also boasts a broad reach into the EV ecosystem.
“Incorporating all specifications and equilibrating the comparison is a metric called ‘charging rate, or miles of range added per minute. As measured by $/charging rate, most EVs today have yet to match the Tesla Model 3 circa 2018. Our analysis indicates that none come close to the 2020 Model 3,” according to ARK.
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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.