The global push towards electrification and decarbonization is leading more consumers to transition towards electric vehicles (EVs). In turn, EVs require vast supplies of electrification metals.
A report from the International Energy Agency noted that EVs and battery storage account for about half of the mineral demand growth from clean energy technologies over the next two decades, spurred by surging demand for battery materials. Mineral demand from EVs and battery storage is expected to grow tenfold in the STEPS and over 30 times in the SDS over the period to 2040.
EVs require more minerals to build than their fossil fuel-based counterparts, with the typical electric car requiring six times the mineral inputs that a conventional car would need. But there’s a challenge: Although EVs are becoming increasingly popular and the push towards electrification is now fully underway, there aren’t enough electrification metals required to power that push.
“While certain metals are seeing new supply become available rapidly, the supply and demand imbalances for others are expected to persist throughout 2023,” according to KraneShares. “There is currently not enough supply of copper, aluminum, nickel, cobalt, and lithium to power the energy transition.”
This challenge, however, provides a notable investment opportunity. So, investors looking to invest in the EV sector and/or the metals required to fuel the industry may want to consider (KARS ) or the (KMET ).
KARS measures the performance of the Bloomberg Electric Vehicles Index, which tracks the industry holistically, including exposure to electric vehicle manufacturers, electric vehicle components, batteries, hydrogen fuel cells, and the raw materials utilized in the synthesis of producing parts for electric vehicles. The fund takes not just a global approach to EV exposure but also invests along the entirety of the value chain, offering diversification for EV investors.
KARS has an expense ratio of 0.70%.
KMET, meanwhile, offers targeted exposure to the metals necessary for electrification and the clean energy transition via the futures market. The fund seeks to track the Bloomberg Electrification Metals Index and is comprised of futures contracts on copper, nickel, zinc, aluminum, cobalt, and lithium. These metals are all core components for batteries, EVs, and the renewable energy infrastructure being created and expanded as countries aim for net-zero emissions by 2050 to curtail global warming.
KMET has an expense ratio of 0.79%.
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