In my new role as head of thematic strategy at VettaFi, I aim to bring you a weekly disruptive tech theme to consider. Even prior to this week’s spike in oil prices associated with renewed tensions in the Middle East, last week was ramping up to be a big week for electric vehicles (EVs) and their supply chain.
EV-Related Current Events
Here are just a few of the key highlights:
- Tesla cut prices on its Model 3 and Model Y vehicles as competition continues to heat up in the EV space and Tesla tries to hold on to its dominant position. Adding to their price cuts, most Teslas also qualify for Inflation Reduction Act tax credits. These entitle purchasers to a $7,500 federal tax credit in addition to local incentives.
- Tesla’s sales trends in the U.S. and Europe remain robust. However, Tesla is losing share to local competitor BYD in China in price wars there. Tesla’s China-made EV sales dropped 10.9% in September per the China Passenger Car Association. Tesla’s problems in China are a significant issue, as China made up 65% of global new electric vehicle (NEV) sales in August.
- EV vehicle registrations were up 45% year over year in August and now equal 18% of the world’s total auto sales. If you add plug-less hybrids into the mix, one-quarter of global car registrations now have some form of electrification! In terms of the tech adoption S-curve, that is a significant disruption milestone. Globally, 100% battery electric vehicles (BEVs) now represent 70% of the YTD market share of plug-in electric vehicles sold.
- One interesting note reported by Bloomberg CityLab, is that hybrids are regaining popularity amid cost and charging concerns.
- The United Auto Workers (UAW) union has said that it will not further expand its strike winning a major breakthrough, bringing electric vehicle battery plants into the union’s national contract.
Playing the Electric Vehicles Theme
All this news bolsters the case for electric vehicles as a disruptive theme. As such, it is nascent and features an accelerating adoption curve despite immediate cost parity and charging infrastructure concerns.
So how do investors play this disruptive theme? There are many different ETF options to consider. Here are a few:
- Battery Metals & Technology – Several ETFs invest in the “picks and shovels” supply chain of electric vehicles. They hold companies involved in the production of battery metals and materials used to power EV batteries. The (LIT ) is one of the largest funds in this category, focused on lithium and battery technology. The (BATT ) also offers exposure to the lithium battery supply chain. However, it includes other metals used in EV batteries such as cobalt, nickel, and manganese. The fund is essentially a one-stop shop. It also covers battery stocks and charging names. Further, it can have up to 20% exposure to companies deriving at least 90% of their revenue from EV sales.
- Rare Earths – Rare earth elements are used not in the batteries, but in the motors of EVs. The (REMX ) is the largest ETF in this category, while the (CRIT ) offers similar exposure with less weight in China and more diversification overall.
- Electric Vehicles – For investors wanting a pure play on electric vehicles themselves, there is the new (EVXX ). Other funds that offer broader thematic exposure including autonomous vehicles and chips and sensors are: the (KARS ), the (DRIV ), the (CARZ ) and the (HAIL ).
For more news, information, and analysis, visit our Disruptive Technology Channel.