Buoyed by robust expectations for the electric vehicle market, The Global X Autonomous & Electric Vehicles ETF (NasdaqGM: DRIV) is up more than 21% year-to-date. However, DRIV’s impressive 2019 showing probably isn’t a flash in the pan and the ETF offers tactical investors significant potential heading into 2020.
DRIV tracks the Solactive Autonomous & Electric Vehicles Index. Component companies include firms “involved in the development of autonomous vehicle software and hardware, as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt,” according to Global X.
Currently, electric vehicles represent a small percentage of new automobiles sold around the world and cars on the road, but that percentage is expected to increase in a big way over the next several years.
Global automotive industry observers believe electric vehicles will reach comparable price points to traditional internal combustion engine vehicles sometime in the next several years, making it more compelling for drivers to make the switch to electric vehicles.
Tesla Keeping Consumers On Sidelines
“The Tesla-dominated electric vehicle (EV) market keeps many consumers on the sidelines waiting for more options, and more price-friendly options at that,” said Global X in a recent note. “But an average battery price pack around $120 kw/h means prices would need to fall about 20% to reach price parity with an internal combustion engine.”
EV adoptions are likely 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.
“Yet, consumers can start getting ready with more options are coming to market in the next few years,” according to Global X. “Mainstream OEMs have EV models that could hit the market soon. Ford unveiled its new all-electric Mustang SUV in November, which will hit the market in 2020. And VW announced a €60 billion investment in electric mobility, hybrids, and more, to support the rollout of an estimated 26 million EVs by 2029.”
In theory, one would think DRIV is dominated by the likes of Tesla (NASDAQ: TSLA), but in reality, the fund is heavily allocated to high quality technology stocks, such as Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG) and Intel (NASDAQ: INTC).
For more information on the car industry, visit our automobiles category.
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.