With advancing technologies and greater adoption of the lithium-ion battery, investors can capitalize on the growing industry through a targeted lithium-related ETF.
The battery industry is expected to experience exponential growth as car makers turn electric with Tesla building a $5 billion factory in Nevada, reports Stephen Wilmot for the Wall Street Journal.
As the U.S. sees a growing shift toward larger batteries on increasing electric vehicle demand, the industry will have to raise production from 68 gigawatt-hour of lithium-ion cells last year to 1,165 GWh over the next decade, brokerage Berenberg projected.
Along with Tesla, other leaders in cell production include Panasonic, LG Chem and Samsung SDI. In the ballooning Chinese electric-vehicle market, BYD and CATL are newcomers intend to build 24 factories with total capacity of 332 GWh by 2021.
Given the relatively new industry and the heavy capital expenditures required to gradual build up production, Wilmot warned that investors may require a very long-term view. Investors, though, can still capitalize on growth opportunities further up the supply chain such as Sumitomo Metal Mining and Umicore.
The Global X Lithium & Battery Tech ETF (LIT) tries to reflect the performance of the Solactive Global Lithium Index, which is comprised of a number of global lithium producing companies and lithium battery producers. Top components include Albemarle 19.1%, FMC 16.5%, Quimica Y Minera 6.7%, LG Chem 5.4%, Samsung SDI 5.3%, Panasonic 4.9%, Enersys 4.6%, GS Yuasa 4.6%, BYD Co 4.3% and Tesla Motors 4.1%. Country weights include US 37.2%, Chile 18.2%, South Korea 13.3%, Australia 8.1%, Japan 7.9%, Taiwan 4.7%, China 4.3, Canada 3.2%, Hong Kong 2.9% and France 0.3%.
Given its diverse country exposure and access across the supply chain of lithium and lithium-related products, LIT could provide diversified exposure to the growing industry and limit potential concerns of a slow build up in the battery business.
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