With the automotive industry evolving, investors are hearing more and more about autonomous and electric vehicles. Several exchange traded funds are dedicated to those themes, including the Global X Autonomous & Electric Vehicles ETF (DRIV).
DRIV debuted just over a year ago and tracks the Solactive Autonomous & Electric Vehicles Index. Component companies include firms “involved in the development of autonomous vehicle software and hardware, as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt,” according to Global X.
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.
“Although global auto sales slowed by over 2% during the first quarter of 2019 relative to a year prior, sales of electric vehicles soared by 57%, reaching 496,000 vehicles in quarterly sales,” according to Global X research. “Over the course of 2018, 1.9 million EVs were sold worldwide with approximately 5 million total passenger EVs driving on the roads today. These numbers are expected to continue to grow rapidly as battery costs fall, technology advances, consumer preferences evolve, and the regulatory environment supports low emission vehicles.”
China Looms Large
As China, the world’s second-largest economy, looks to reduce its massive pollution footprint, it is becoming one of the top electric vehicle markets. DRIV provides exposure to that theme.
“As the world’s largest auto market and a key proponent of electric vehicles, China continues to play a central role in EV adoption,” said Global X. “In Q1 2019, EV sales more than doubled from the year prior with 276,000 cars sold, representing 5% of new passenger vehicle sales.”
DRIV holds 77 stocks, nearly 72% of which hail from the technology and consumer discretionary sectors.
“It’s important to note that an EV’s price tag is primarily driven by the cost of its battery. Four years ago, batteries represented around 57% of the total price of a medium-sized EV,” according to Global X, “Yet by 2030, the cost is expected to fall to just 14%, setting a trajectory that should allow EVs to reach price parity with ICE vehicles by the mid-2020s.”
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