On Thursday, President Biden announced his intent to sign an executive order calling for 40% to 50% of all new car sales in the U.S. to be electric vehicles (EV) by 2030.
It’s a bold plan and one that carries with it positive implications for an assortment of exchange traded funds, including the ALPS Disruptive Technologies ETF (DTEC). DTEC, as its name implies, focuses on disruptive and emerging growth segments, providing broad-based exposure to the tune of 10 innovative themes.
One of those themes is clean energy and smart grid technology, which is the second-largest exposure in the fund at 10.74%, as of Aug. 4. That gives the fund some leverage to the Biden Administration’s lofty EV goal.
“Though the order is nonbinding, this aligns with stated plans from multiple U.S. automakers. As a result, we maintain our U.S. EV and hybrid adoption outlook,” writes Morningstar analyst Seth Goldstein. “Using our regional buildup model, we continue to forecast that EVs and hybrids will make up 2 of every 3 autos sold globally by 2030, with 30% coming from EVs.”
Time to Shine on the Grid
While DTEC’s roster doesn’t include dedicated automotive manufacturers, that doesn’t diminish the fund’s potential potency against the backdrop of rising EV demand.
To this point, one of the primary stumbling blocks in driving broader EV adoption is consumers’ concern about charging infrastructure. It’s one thing to charge up at home, but another to find charging stations out on the road or on longer trips. Even before Thursday’s executive order talk, the Biden Administration had already signaled its intent to bolster EV infrastructure across the country.
That could be a plus for DTEC’s clean energy/smart grid holdings. Additionally, shoring up ailing electrical grids to accommodate more EV demand isn’t just practical: it’s necessary.
Of course, the big spark for DTEC’s EV leverage could come as those vehicles reach or exceed price parity with traditional automobiles.
“In our view, mass-market EV adoption will occur when EVs reach cost and functional parity with internal combustion engines. We define functional parity as the EV being able to drive at least 300 miles on a single charge and recharge in 10 minutes in regions where there is mass availability of chargers,” adds Morningstar’s Goldstein.
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