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Is it Time to Buy These ETFs on a Sudden Slowdown in EV Sales?

Sanghamitra Saha

Electric powered vehicles, once a popular and fast-growing area (thanks mainly to technological advancement and improving cost economics), is gradually slowing down. Global electric car sales dropped for the first time on record in July after China dialed back purchase subsidies. Sales in North America also took a hit.

China has been a great proponent of this move. China intends to get 60% of all automobiles in the country to run on electric motors by 2035, per an article published on autonews.com. China’s last roadmap on the auto industry announced in 2017 laid out a plan which said new energy vehicles — all-electric, fuel-celled autos and plugin hybrids — would make up more than 20% of the country’s total vehicle sales by 2025.

Along with China’s passenger vehicle sales, sales of NEVs (new energy vehicle) dropped for the second consecutive month in August. Last year, NEV sales grew 62% year over year in China. But NEV sales declined 4.7% year over year in July, marking the first drop, as quoted on marketrealist.com.

Apart from subsidy cuts, China’s electric autonomous vehicles company Nio recently replaced all of the affected battery packs recalled for fire risk pretty ahead of schedule. But the entire incident impacted sales. The Chinese EV company delivered just 837 vehicles in July, “making it the company’s third-worst full month since it started deliveries in June 2018.”

Short-Term Glitch, Long-Term Gain?

Global plug-in vehicle deliveries were 2.1 million units for 2018, marking a 64% rise from 2017 levels and 2.4% of the world’s overall 86 million units sold last year. “IHS Markit sees EV market share inching up over the next half decade — reaching about 7.6 percent of total new vehicle sales worldwide by 2025.”

“Despite expected short-term weakness in 2019, we continue to be positive on long-term EV demand.” Per Bernstein analysts, EV sales grew 34% in Europe in July despite declines in China and North America.

Demand for metals used in battery electric vehicles could increase six-fold if electric cars can touch 8% of road traffic by mid-2020s, delivering huge dividends for producing countries like Democratic Republic of Congo, per Moody’s as quoted on Reuters. Other countries like Peru, Chile and the Philippines should also gain traction from increased exposure to EV adoption over the long term.

Against this backdrop, investors can bet on the following ETFs with a long-term view.

ETFs in Focus

Global X Autonomous & Electric Vehicles ETF DRIV

Innovation Shares NextGen Vehicles & Technology ETF EKAR

KraneShares Electric Vehicles and Future Mobility Index ETF KARS

Global X Lithium & Battery Tech ETF LIT

Amplify Advanced Battery Metals and Materials ETF BATT

iShares MSCI Peru ETF EPU

iShares MSCI Chile Capped ETF (ECH)

iShares MSCI Philippines ETF (EPHE)

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Global X Autonomous & Electric Vehicles ETF (DRIV): ETF Research Reports
 
iShares MSCI Philippines ETF (EPHE): ETF Research Reports
 
iShares MSCI Chile ETF (ECH): ETF Research Reports
 
Global X Lithium & Battery Tech ETF (LIT): ETF Research Reports
 
iShares MSCI Peru ETF (EPU): ETF Research Reports
 
KraneShares Electric Vehicles and Future Mobility ETF (KARS): ETF Research Reports
 
Ideanomics NextGen Vehicles & Technology ETF (EKAR): ETF Research Reports
 
Amplify Advanced Battery Metals and Materials ETF (BATT): ETF Research Reports
 
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