Buoyed by Tesla’s ascent to the $100 billion market value club, other electric vehicle investment assets are perking up this year, including the Global X Autonomous & Electric Vehicles ETF (NASDAQ: DRIV).
DRIV, which is soaring despite a relatively low weight to Tesla, seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Autonomous & Electric Vehicles Index.
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).
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, but massive growth is coming for the industry.
“When evaluating thematic ETFs, investors should be prioritizing broad exposure to the underlying theme, not heavy concentration among individual stocks,” according to Nasdaq. “Sure, it’s easy to lament the fact that DRIV’s showing to start 2020 would be even better if its weight to Tesla were larger, but on the other hand, the ETF isn’t as exposed to retrenchment in that stock.”
Depend On DRIV
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.
“Another key element to evaluating of thematic ETFs is assessing the viability of the theme itself. Upon first glance, many of these funds look compelling, but not all are supported by a concept that has durability,” reports Nasdaq. “DRIV, however, is backed by a concept with long-term viability and some of that credibility will soon be realized.”
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.
“By this time next year, there will be 10 million electric vehicles driving on the world’s roads, up from 1 million just five years ago,” according to Bloomberg NEF (BNEF). “Year on year growth will reach 20%, and although China will still dominate sales, Europe will close the gap.”
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.