As the electric vehicle industry experiences a boom with greater demand and focus on the burgeoning segment of the automobile industry, investors are jumping on the potential growth opportunity through rare earth metals and a lithium-related ETF.
Investors eager to capture the rise of electric vehicles have more than doubled the price of lithium and cobalt, key components of electric car batteries, over the past two years, the Wall Street Journal reports.
Meanwhile, ETF investors have jumped on the Global X Lithium & Battery Tech ETF (NYSEArca: LIT), which tracks the full lithium cycle from mining and refining through batter production. LIT has surged 55.5% year-to-date, despite falling off 6.9% over the past month.
“It’s going from that niche space to something that’s kind of inevitable at this point,” Jay Jacobs, director of research at Global X Funds, told the WSJ, referring to the transition to electric vehicles. “I just can’t say we’ve really seen something recently that stacks up to this.”
As more countries plan for electric vehicles to diminish their reliance on gasoline-powered vehicles, bullish investors are betting that the world will experience one of its biggest shifts in commodities demand since the 19th century when petroleum replaced whale oil as lighting fuel.
“We’re at a tipping point where this next generation of commodities becomes more significant for industry and growth,” Maxwell Gold, director of investment strategy at ETF Securities, told the WSJ. However, “it is so early in the process that it is difficult to determine who the winners and losers will be.”
Specifically, automotive demand for lithium is expected to surge 35% each year through 2021, according to Citigroup. Cobalt used in electric vehicles could jump 450% from this year to 2025, according to Morgan Stanley.
“I just know that’s the direction that the world seems to be going, and I’m not going to fight it,” Ralph Aldis, director of research and fund manager at U.S. Global Investors, told the WSJ.
Sales of electric and hybrid vehicles increased 50% in the first 10 months of 2017, compared to the same period year-over-year. Electric and hybrid vehicle sales are also projected to rise to 31.5 million units in 2013, compared to 1.2 million units in 2017, according to the Jefferies Group.
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