Tesla Mania Proves Impactful for Lithium ETF | ETF Trends

Thanks in large part to its exposure to Tesla (NasdaqGS: TSLA), the Global X Lithium & Battery Tech ETF (NYSEArca: LIT) has been having a nice 2020, but that ante was upped in a big way on Tuesday when the lithium ETF surged 8.61% on volume that was nearly 10 times the daily average.

LIT, which is nearly nine years old, tracks the Solactive Global Lithium Index. The underlying index is designed to measure broad-based equity market performance of global companies involved in the lithium industry.

While Tesla is merely LIT’s third-largest holding, Elon Musk’s company command’s 11.70% of the fund’s weight, making LIT one of the largest ETF holders of Tesla on a percentage basis.

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 will also move the demand for lithium.

Loving LIT

“Tesla’s stock value has doubled since December, and the company is now worth more than Detroit’s big three automakers – GM, Ford and Fiat Chrysler – combined. Only Toyota surpasses Tesla’s market cap of $161 billion reached on Tuesday,” reports Frik Els for Mining.com.

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.

With the popularity of electric vehicles spurring demand for automobile offerings from carmakers like Tesla, the lithium industry has taken a new turn. More uses will be found for lithium as the move to energy dependence from fossil fuels continues to increase demand for efficiency. However, there’s much more to the lithium story than electric vehicles.

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.

Related: Growth of Lithium Recycling Could Charge “LIT” ETF 

“Top producer Albemarle gained 11% on unusually high trading volume, pushing the market value of the company to $9.5 billion in New York. Chilean giant SQM added 9.8% affording the company a market cap of $8.3 billion,” according to Mining.com.

Moves in those two stocks are huge for LIT because they are LIT’s top two holdings, combining for nearly a third of the fund’s weight.

For more on thematic ETFs, please visit our Thematic Investing Channel.

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.