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Why ETFs are a great way to invest in EVs

Why ETFs are a great way to invest in EVs

The mass adoption of electric vehicles (EVs), which was once a distant dream, is now almost upon us. According to some studies, the global EV market is set to grow 7.5 times by 2030, at an annualized growth rate of 26.8%. In 2017, EVs accounted for 1 percent of global car sales but this number will grow to 20% by 2030.The EV boom has also caught the attention of equity investors who are looking to get in early to ride the wave. In fact, over the past year, the EV sector has given double the returns of the S&P 1500 index.

The EV ecosystem: More than manufacturers

The electric vehicle ecosystem comprises many types of companies, starting with pureplay manufacturers. While the US is a big market currently, China is investing heavily in the EV space. Thanks to a strong regulatory push towards EVs, China will account for 25% of global EV sales by 2028. This means that Chinese companies are likely to be in the limelight for the next several years.There are companies that provide battery packs and producers of lithium and other components that go into car batteries. There are also companies, especially in the US, that are helping set up charging station networks. Also critical to the EV space are technology companies. They provide various services such as smart connectivity to self-driving technologies.Finally, there are legacy auto companies, which are also betting big on the EV space. Many have already announced plans to transition their entire existing product lineup of cars to EVs.

Riding the EV boom

There are few opportunities in India to invest in companies with large exposure to the EV space. A good way to invest in EVs is through global ETFs.ETFs are a basket of stocks that track an index or follow a theme. ETFs are like mutual funds, but with a few differences. They trade on the exchange (as the name suggests) and hence are easier to transact, carry low cost, and are typically passively managed. Because underlying benchmarks of ETFs are frequently rebalanced, they also have a growth bias. That is, better-performing companies tend to form a part of the index and so the ETF.One of the largest ETFs in the EV space is Global X Autonomous & Electric Vehicles ETF (DRIV). The ETF has assets of over $930 million. It invests in companies critical to the development of autonomous and electric vehicles. Thanks to a focus on autonomous driving technology, the ETF has exposure to large tech companies.Then there is KraneShares Electric Vehicles & Future Mobility ETF (KARS). The ETF seeks to track the performance of the Bloomberg Electric Vehicles Index. The index contains companies involved in new transportation methods. Unlike DRIV, KARS's portfolio focuses on core EV players rather than technology companies.Investors can also consider SPDR S&P Kensho Smart Mobility ETF (HAIL). HAIL's benchmark index has companies in autonomous driving, connected vehicles, drones and advanced transportation tracking.There is also iShares Self-Driving EV and Tech ETF (IDRV), a diversified ETF holding 99 stocks. Another option is Global X Lithium & Battery Tech ETF (LIT). It invests in the full lithium cycle, from mining and refining to battery production. The ETF tracks the performance of Solactive Global Lithium Index.Kristal provides investors the option to invest in EV ETFs, with IDRV and LIT both being available for investments. Investors looking to invest in these ETFs can reach out to us from our website.

By

Kristal Advisors

July 27, 2021

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