The Global X Lithium & Battery Tech ETF (NYSEArca: LIT) has had its share of struggles, shedding 15.50% over the past six months, sending its year-to-date loss to north of 10%, but the booming electric vehicle market can still support the lone lithium ETF.
LIT, which is nearly nine years old, tracks the Solactive Global Lithium Index. One of the oldest thematic ETFs, LIT is designed to provide exposure to “the full lithium cycle, from mining and refining the metal, through battery production,” according to Global X.
Electric vehicles are in the early innings of development and there are signs that there is a lot of pent up demand among consumers who want to embrace the technology. In 2017, electric vehicle sales represented 1.7% of all vehicle sales globally, exceeding 1 million for the first time and rising 51% year-over-year. The rate could continue to accelerate as a result of EVs becoming more economical than gas-powered cars and as a result of pro-climate regulatory changes pushing to ban gas-powered cars.
“Demand for metals used in battery electric vehicles could rise sixfold if electric cars reach 8% of road traffic by the mid-2020s, delivering huge dividends for producing countries like the Democratic Republic of Congo,” reports Reuters, citing Moody’s Investors Service. “The credit ratings agency said a worldwide shift to electric vehicles would likely drive up demand for cobalt, of which DRC is the world’s number one producer, as well as lithium, nickel, and copper.”
Leaning On LIT
Lithium-ion battery capacity is vital because one of the primary factors car buyers consider when evaluating electric vehicles is how long those vehicles can run on a single charge. Tesla’s dominance in the booming electric vehicle market is becoming apparent.
“By 2030 cobalt production could be equivalent to nearly 16% of DRC’s total GDP last year, more than half of its goods exports and 133% of its government revenue, and significantly boost its fiscal and current account balances, Moody’s wrote,” according to Reuters.
The iShares MSCI Chile Capped ETF (NYSEArca: ECH) is another way for investors to play the materials side of the EV market.
“Among other battery metal producers, Chile will likely see a more moderate impact, with production of battery metals likely accounting for more than 5% of 2018 merchandise exports and total government revenue by 2030, according to Moody’s,” reports Reuters.
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