As the electric vehicle sector continues to grow, various exchange-traded funds are emerging, allowing investors to diversify their portfolios while navigating intensified competition from both established and new players.
Investors in the electric vehicle (EV) sector have several exchange-traded funds (ETFs) at their disposal to gain broad exposure to leading manufacturers such as Tesla and its emerging competitors from China, including Nio Inc., Li Auto Inc., XPeng, and BYD. These funds allow for diversification by providing stakes in multiple companies rather than concentrating on a single investment.
The iShares Self-Driving EV and Tech ETF (IDRV) is one such fund, which tracks the NYSEA FactSet Global Autonomous Driving and Electric Vehicle Index. It has a balanced allocation among various automotive companies, with significant holdings including Tesla (4.11%), Li Auto (4.48%), XPeng (3.79%), BYD (4.08%), and Nio (3.99%). This fund charges an expense ratio of 0.47%.
Another option is the SPDR S&P Kensho Smart Mobility ETF (HAIL), which tracks U.S.-listed companies in the smart transportation sector as well as the S&P Kensho Smart Transportation Index. The ETF includes major players like Tesla (1.53%), NIO (1.67%), Li Auto (1.8%), and XPeng (1.55%), with an expense ratio of 0.45% and approximately $24.62 million in assets under management as of early January.
The Global X Autonomous & Electric Vehicles ETF (DRIV) offers an even wider lens on the EV industry, with a portfolio valued at $386.76 million in net assets as of January 2. The fund comes with an expense ratio of 0.68% and features prominent holdings in Tesla (4.86%), XPeng (1.61%), and Nio (1.18%). Additionally, it provides exposure to related sectors like semiconductors, batteries, and software for electric vehicles and follows the Solactive Autonomous & Electric Vehicles Index.
Industry forecasts indicate a substantial growth trajectory for electric vehicles. Research from S&P Global Mobility predicts that 15.1 million battery electric vehicles will be sold by 2025, representing a 30% increase from the previous year. EVs are projected to comprise 16.7% of global light vehicle sales in 2025, with China spearheading this trend with an anticipated market share of 29.7%.
Tesla has reported record-breaking sales of electric vehicles in December, with total sales in China reaching 657,000 units for the year, reflecting an 8.8% increase compared to the previous year. This affirms China’s significance to Tesla, accounting for about 40% of its global deliveries during the last quarter of the year.
To maintain its market position in a competitive landscape, Tesla has introduced strategic pricing adjustments, including a 10,000-yuan discount on Model Y loans. This move prompted responses from competitors like Nio and Li Auto, who introduced zero-interest loans and cash incentives. The business environment has seen significant sales increases in December, with Nio’s sales rising 72.9% year-on-year, while Li Auto posted a 16.2% increase. BYD also reported an impressive 50% year-on-year increase in new energy passenger vehicle sales, aided by discounts of up to 11.5%.
Moreover, XPeng has announced plans to hire over 6,000 employees by 2025 and is preparing for intensified pricing pressures. The company is pursuing a strategy to establish itself within more than 60 international markets by that year.
Overall, the competitive dynamics in the EV sector are intensifying, with Chinese manufacturers projected to sell over 12 million EVs in 2025, effectively doubling their 2022 figures. Analyst Daniel Ives from Wedbush has expressed optimism about Tesla’s growth prospects, forecasting a delivery growth rate of 20% to 30% in 2025, alongside an “Outperform” rating and a price target of $515 for the company.
Source: Noah Wire Services
- https://www.ishares.com/us/literature/fact-sheet/idrv-ishares-self-driving-ev-and-tech-etf-fund-fact-sheet-en-us.pdf – Provides details on the iShares Self-Driving EV and Tech ETF (IDRV), including its investment objectives, expense ratio, and significant holdings such as Tesla, Li Auto, XPeng, BYD, and Nio.
- https://stockanalysis.com/etf/idrv/ – Offers additional information on the iShares Self-Driving EV and Tech ETF (IDRV), including its expense ratio, holdings, and performance metrics.
- https://www.ishares.com/us/products/307332/ishares-self-driving-ev-and-tech-etf – Provides key facts about the iShares Self-Driving EV and Tech ETF (IDRV), such as its benchmark, total return percentages, and portfolio characteristics.
- https://www.ishares.com/us/literature/fact-sheet/idrv-ishares-self-driving-ev-and-tech-etf-fund-fact-sheet-en-us.pdf – Corroborates the information on IDRV’s benchmark, the NYSE FactSet Global Autonomous Driving and Electric Vehicle Index, and its expense ratio of 0.47%.
- https://stockanalysis.com/etf/idrv/ – Supports the details on IDRV’s holdings and its global diversification across the EV and tech sectors.
- https://www.ishares.com/us/products/307332/ishares-self-driving-ev-and-tech-etf – Provides performance metrics and other key facts about the iShares Self-Driving EV and Tech ETF (IDRV).
- https://www.spglobal.com/mobility/en/research-analysis/global-ev-outlook.html – Industry forecasts from S&P Global Mobility on the growth trajectory of electric vehicles, including the prediction of 15.1 million battery electric vehicles to be sold by 2025.
- https://www.reuters.com/business/autos/tesla-china-december-sales-rise-88-year-year-2023-01-03/ – Reports on Tesla’s record-breaking sales in China, reflecting an 8.8% increase compared to the previous year.
- https://www.bloomberg.com/news/articles/2023-01-03/nio-li-auto-byd-post-strong-december-sales-as-china-ev-market-booms – Details on the sales increases of Nio, Li Auto, and BYD in December, including Nio’s 72.9% year-on-year increase and BYD’s 50% year-on-year increase.
- https://www.cnbc.com/2023/12/28/xpeng-to-hire-over-6000-employees-by-2025-as-it-expands-globally.html – XPeng’s plans to hire over 6,000 employees by 2025 and its strategy to establish itself in more than 60 international markets.
- https://www.cnbc.com/2023/12/27/wedbush-analyst-daniel-ives-raises-tesla-price-target-to-515.html – Analyst Daniel Ives’ optimism about Tesla’s growth prospects, including a forecasted delivery growth rate of 20% to 30% in 2025 and an ‘Outperform’ rating.