Electric vehicles haven’t yet reached price parity with their internal combustion engine counterparts, but that day is coming.
In the meantime, some data points indicate that today’s elevated oil prices, which are resulting in significant pain at the pump, are motivating some car buyers to embrace electric vehicles. That trend could be beneficial for select exchange traded funds, including the IQ Cleaner Transport ETF (CLNR).
CLNR, which tracks the IQ Candriam Cleaner Transport Index, as its name implies, is a broad play on clean transportation companies and firms levered to that theme. Translation: CLNR isn’t a dedicated electric vehicle ETF. However, the fund has credible electric vehicle equity exposure, making it a relevant consideration today.
“Recent headlines have highlighted several strong quarters for electric vehicle (EV) sales, with EVs’ share of new car sales in California surging to 16% in the first quarter of 2022. Automotive analysts estimate national EV sales for last quarter were between 150,000 and 200,000, which puts this year on track to comfortably outpace 2021 sales,” wrote FactSet analyst Nick Jones.
As has been widely noted, from an investment perspective, the electric vehicle industry is a long-term play. Today, these vehicles represent a small percentage of cars and trucks on the road, but past growth trajectories and future, related expectations are undoubtedly compelling.
“Currently, plug-in EVs, including battery-electric and plug-in hybrid varieties, represent only a small percentage of light-duty vehicles on U.S. roads. However, trends in sales and infrastructure suggest that could change,” added Jones. “While annual EV sales grew steadily from 2011-2018, nationwide sales growth has been particularly strong since 2020. Both absolute sales and market share nearly doubled in 2021, with a five-year CAGR of 31%.”
Among the electric vehicle manufacturers in the CLNR portfolio are familiar names such as Elon Musk’s Tesla (NASDAQ:TSLA), BMW, and Nio (NASDAQ:NIO) — China’s electric vehicle giant.
“Uncertainty remains for this outlook, both to the upside and downside. EV sales could plateau if sticker prices, new product offerings, and tax incentives fail to entice new buyers. However, leading car companies aim to maintain EV market share growth,” concluded Jones.
Beyond the aforementioned manufacturers, CLNR has exposure to electric vehicle parts suppliers, including Aptiv and BorgWarner, confirming that the fund has broad reach into the electric vehicle ecosystem. In addition, EV parts suppliers are currently discounted on valuation, according to some analysts.
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