The Global X Lithium & Battery Tech ETF (NYSEArca: LIT) is trading lower this year, indicating some investors may not be fully pricing in growth in the global electric vehicle market.
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.
Increasing demand for electric vehicles could cause supply issues for lithium and other relevant materials, something investors should consider.
“Growing global demand for batteries that power electric vehicles (EVs) and high tech devices is set to cause a supply crunch of lithium, cobalt and nickel by the mid-2020s, global consultancy Wood Mackenzie predicts,” reports Cecilia Jasmine for Mining.com.
Looking Into LIT
Data confirm that previous concerns about an oversupplied lithium market could prove inaccurate over the next several years and some experts believe fears of lithium market oversupply are being blown out of proportion.
“Battery pack sizes continue to trend larger through the medium term, resulting in overall greater battery demand. We have seen the first announcements of the commercialization of NMC 811 cells in EVs,” says Gavin Montgomery, WoodMac research director, reports Mining.com.
Electric vehicles are in the early innings of development and there are signs that there is a lot of pent up demand among consumers whom 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 a pro-climate regulatory changes pushing to ban gas-powered cars.
“It has only taken a few years for the battery sector to become the largest demand driver for lithium. Lithium’s use in every lithium-ion battery type means it will have double-digit annual growth, making up over 80% of total lithium demand by 2030,” reports Mining.com, citing Wood Mackenzie.
Bolstering the long-term case for LIT is that 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.
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