With automation and technological breakthrough emerging rapidly, talks of a boom in the electric vehicle segments are in the cards. Solid growth momentum in Elon Musk’s Tesla TSLA and amazing two-year stock performance support the fact.
Electric vehicle maker Teslas shares have surged about 900% in the past two years, breezing past the S&P 500’s 52.9% (as of Dec 22, 2020). It clearly performed better than other car makers as Ford F was up 9.2%, Honda Motors HMC gained 11.2%, General Motors GM added about 24% and Toyota Motor (TM) gained 32.3%.
Not only this, Tesla made it to the S&P 500 on Dec 21. In fact, the year 2020 itself can easily be credited to the EV boom with Tesla adding about $665.4%, Chinese electric vehicle giant NIO surging more than 1000% and other electric vehicle makers like Xpeng and Li Automobile gaining about 100% this year. The EV boom is now driving other carmakers like General Motors too to the EV world.
What’s Brewing in the Sector?
Tesla has plans to develop a dramatically long-lasting “million miles” battery. The company also shared plans to further reduce the already-low cost of its battery cells and packs to $100 per kilowatt-hour, at which point the price equivalence of electric cars should become similar to combustion engine vehicles, per experts. Musk predicted that the company is likely to develop a $25,000 full self-driving car within three years. Musk expects vehicle deliveries to rise by 30% to 40% year over year (read: Teslas Battery Day: Pain or Gain for ETFs Over Long Term?).
In the recent past, more than 10 automakers have come up with their EV plans. If these plans materialize, the sector will be able to manufacture and sell about 25 million units (of more than 400 models) by 2025, or 20% of all global cars sold, per Frost & Sullivan. General Motors, Toyota and Volvo all have a target of 1 million EV sales by 2025.
If these were not enough, Apple AAPL said that it is foraying into the electric vehicle segment. Apple said this will have a brand new battery technology, and plans to deliver its first EV sometime in 2024. EV is a booming segment globally led by Tesla (TSLA). Apple’s entry into the field will make the space more appealing (read: Forget Sector Rotation: Tech ETFs to Rule in Christmas Week).
Chinese carmaker NIO is competing for a share of the EV services market, launching a completely new concept: Battery as a Service. With this concept, NIO is eyeing to have an edge over rivals such as Tesla by cutting the upfront purchase cost of its vehicles, as quoted on oilprice.com. With the battery-as-a-service model, customers can purchase just the vehicle shell, while they can pay rental fees for the battery.
Canadian tech unicorn Facedrive, which began its journey as a ride-hailing company in the booming Canadian market, recently acquired D.C. based Steer from America’s energy giant Exelon. Steer looks to transform the mode of transportation by driving people into EVs, as quoted on oilprice.com.
Then there is Canadian company Electra Meccanica Vehicles Corp SOLO which saw its shares gain 242% this year. Its single-seat electric vehicle offers an affordable price point. Apart from intending to rule the niche tiny EV segment, the company also looks to launch an electric sports car for two, the Tofino, and another electric two-seater car.
In short, apart from the United States and China, Canadian electric car and bus makers are holding great promise. Some Canadian companies that are eyeing to revolutionize transportation are electric automaker NFI Group and electric bus manufacturer GreenPower Motor.
Needless to say, the enthusiasm over the EV space has prompted ETF issuers to come up with EV and battery-related funds. In the past two years, there was a surge in the launches of these ETFs, with which investors can tap this accelerating industry.
ETFs in Focus
Amplify Advanced Battery Metals and Materials ETF BATT – Up 37.9% this year
Global X Autonomous & Electric Vehicles ETF DRIV – Up 58.2% this year
KraneShares Electric Vehicles and Future Mobility Index ETF KARS – Up 67.1% this year
Global X Lithium & Battery Tech ETF LIT – Up 116.7% this year
The iShares Self-Driving EV and Tech ETF IDRV – Up 52.4% this year
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