Electric vehicles are on track to disrupt the automotive industry in this new decade. The & # 39; green & # 39; momentum creates floating stocks in a wide variety of EV and alternative energy companies. As investors rush to find the next automotive EV leaders, one of the most important areas in the global economy, many are betting on Tesla (NASDAQ :).
Shares of the Palo Alto, California-based electric automaker are up 407% to date and its market capitalization is currently an astonishing $ 395.3 billion, a figure above the combined valuations of the & # 39; big three & # 39; American cars. manufacturers, Fiat Chrysler (NYSE :), Ford (NYSE 🙂 and General Motors (NYSE :), which are currently valued at $ 24.15, $ 26.9 and $ 42.1 billion, respectively.
Further as a result of the gap between Tesla and the larger US auto industry, the index rose approximately 151% in 2020.
Dow Jones Automobile Index Weekly
Here's a closer look at the EV space, going beyond Tesla, and an exchange-traded fund (ETF) for investors seeking exposure to the broader segment:
Demand growth in in general
The growing importance of is one of the main catalysts driving interest in electric vehicles and other alternative energy sources. In fact, the European Union predicts:
"Electric mobility could help the EU achieve its goals of reducing greenhouse gas emissions, air pollution, noise and oil dependence."
At the beginning of 2017, electric vehicle sales were more than one million and by 2019 2.1 million, accounting for "2.6% of global vehicle sales." According to The International Council on Clean Transportation, 44% of "electric vehicles in the world are located in just 25 markets in China, Europe, Japan, [and the] the US".
A report released by McKinsey on July 17, 2020 found that about 1.2 million electric vehicles were sold in China in 2019, an increase of 3% year-on-year, while sales in Europe reached 590,000, a 44 % year increase. Even so, EV sales patterns vary by region and in the US, only 320,000 EVs were sold in 2019, down 12% year-on-year.
This is perhaps even more striking since the US is the second largest market in the world after China in terms of vehicle sales and production. Despite this, the widespread demand for clean energy is driving the overall growth of electric vehicles, making this an attractive market for investors.
Companies Investors Look To
In addition to manufacturers, other types of companies are important to the evolving electric vehicle market. Software and hardware developers of autonomous vehicles (AV), battery manufacturers, lithium and cobalt companies, and semiconductor companies also play an integral role.
In 2020, even small businesses, many of which have little or no income, made public debuts and headlines, especially in the US, including names like Nikola (NASDAQ :), Nio (NYSE :), Plug Power (NASDAQ 🙂 and Workhorse Group (NASDAQ :).
There are also a number of EV companies whose prices are below $ 5 and we urge caution with these penny stocks as they have the potential to be volatile. Reading the latest SEC filings from these companies can provide insight into proposed business models and associated risks.
On the other hand, many established names in the automotive industry are moving towards EV manufacturing. For example, Volvo (OTC 🙂 "has the highest share of electric vehicles with 31%, all of which were plug-in hybrid electric vehicles" in Europe. The EV growth list includes Daimler (OTC :), Hyundai Motor (OTC 🙂 and Volkswagen (OTC :).
Global X Autonomous & Electric Vehicles ETF
Current Price: $ 16.70
52 week range: $ 9.32 – 17.85
Dividend Yield: 0.59%
Expense Ratio: 0.68% per year or $ 68 with an investment of $ 10,000
The Global X Autonomous & Electric Vehicles ETF (NASDAQ 🙂 provides exposure to companies involved in various aspects of EV development, autonomous vehicle technology, lithium batteries and critical EV materials such as lithium and cobalt
DRIV, which has 75 companies, tracks the index Solactive Autonomous & Electric Vehicles . Consumer discretionary (36.3%), information technology (33.4%) and materials (12.4%) make up the top three sectors.
From a "geographic" standpoint, US companies top the list (62.3%), followed by Japan (8.0%), South Korea (4.6%), China (4, 3%) and Germany (4.0%)
The top ten companies comprise nearly 30% of net assets, which are approximately $ 48 million. Tesla, NVIDIA (NASDAQ :), Apple (NASDAQ :), Qualcomm (NASDAQ 🙂 and Toyota (NYSE 🙂 top the list of holdings.
Since the beginning of the year, the fund has grown by more than 12%. It hit a new high of $ 17.85 on September 2
We recently saw how the recent Tesla and Apple stock splits would have marked a possible short-term top in many high-tech names, including those in the EV sector. Therefore, investors should pay attention to short-term momentum indicators and proceed with caution. We believe a drop below the USD 15 level would make this fund more attractive.
Bottom Line
A wide variety of consumers and investors around the world are closely monitoring the EV space. Therefore, we can expect to hear more about shares of listed companies and exchange-traded funds in the sector. Several other ETFs in this arena to consider include:
ARK Autonomous Technology & Robotics ETF (NYSE 🙂 (covered)
First Trust NASDAQ Global Auto Index Fund (NASDAQ 🙂
Global X Lithium & Battery Tech ETF (NYSE 🙂
iShares Self-Driving EV and Tech ETF (NYSE 🙂
SPDR S&P Kensho Smart Mobility ETF (NYSE 🙂
