With the forecast increasingly bright for electric vehicle adoption, funds like the KraneShares Electric Vehicles and Future Mobility ETF (NYSEArca: KARS) merit attention.
KARS follows the Solactive Electric Vehicles and Future Mobility Index, which is “designed to track the performance of companies engaged in the production of electric vehicles and/or their components, or engaged in other initiatives that may change the future of mobility. The Index includes issuers engaged in the electric vehicle production, autonomous driving, shared mobility, lithium and/or copper production, lithium-ion/lead acid batteries, hydrogen fuel cell manufacturing and/or electric infrastructure businesses,” according to KraneShares.
KARS offers global exposure. Chinese electric vehicle sales more than tripled for the month of January year-over-year, according to the China Association of Automobile Manufacturers. In Europe, sales of alternatively powered cars, which include batteries, hybrids, and biofuels, surpassed those of diesel-engined vehicles for the first time in the third quarter of 2020, and now make up a third of new passenger cars, according to the European Automobile Manufacturers’ Association.
“Despite the pandemic and a slumping global automotive industry, EV sales achieved 43%2 growth from 2019 to 2020, mostly due to strong adoption in Europe and China. For the first time in many years, Europe outpaced China in EV demand,” according to KraneShares research.
Making the KARS Call
Due to the increased concerns over environmental issues, global governments are supporting the development of electric vehicles worldwide.
One of the primary obstacles facing electric vehicle adoption is pricing relative to their internal combustion engine rivals. While EVs are still pricier than their traditional counterparts, the gap is closing, and that’s good news for exchange traded funds like KARS.
“The COVID-19 pandemic and a short-lived reduction in government subsidies for EVs in China caused a mini-recession in EV sales at the beginning of 2020,” notes KraneShares. “However, sales turned around quickly to reach an unexpected record high in the fourth quarter of the year. In Europe, EV sales more than doubled from 562,000 Battery Electric Vehicles (BEV) and Plug-In Hybrid Electric Vehicles (PHEV) in 2019 to 1.37 million in 2020. In China, EV sales also recovered during the fourth quarter, registering positive year-on-year growth with sales totaling 1.36 million units for 2020. U.S. sales were largely flat compared to 2019, with Tesla accounting for approximately 80% of EV sales.”
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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.