Battered EV and Battery ETFs remain popular among investors

Investors added over $1 billion into EV and Battery ETFs this year despite the battered performance. The double-digit percentage points dip (-11% on average) has been lucrative for bargain hunters who believe in the long-term prospects of the mobility electrification theme and the supply chain that supports it.

According to the Benchmark Minerals’ lithium prices, Lithium, Carbonate and Hydroxide indices are up 88%, 93% and 81% respectively so far in 2022 amid soaring global demand and supply scarcity. Benchmark Minerals Intelligence covers over 90% of global lithium transactions, receiving data from over 80% of producers and 55% of consumers worldwide.  

Transitioning away from fossil fuels

Surging energy prices due to Russia’s invasion of Ukraine strengthened the appeal to transition away from fossil fuels, adding to the booming demand for electric vehicles. China, one of the biggest EV markets in the world expects its domestic electric vehicle sales to cross 5 million in 2022 after rising by 157% (vs. 2020) to 3.2 million units in 2021. Deloitte also forecasts a 29% compound annual growth in electric vehicle sales, totalling 32% of new car sales by 2030. At the same time, reports from Mineral Benchmark Intelligence indicate that Chinese lithium inventories remain low. The difficulty for miners to find new sources or develop new technologies to source lithium from brines make producers unable to match higher demand. Lithium’s supply deficit is estimated to expand to 26,000 in 2022 and 300,000 by 2030.

American investors: How to invest in EV theme with ETFs

The green theme is accessible to America based investors through various Exchange-traded funds, such as Global X Lithium & Battery ETF (LIT), Global X Autonomous & Electric Vehicles ETF (DRIV), KraneShares Electric Vehicles & Future Mobility ETF (KARS) – to name a few.

LIT is the biggest with $4.84 billion in assets under management (AUM). The fund seeks to track the Solactive Global Lithium Index and invests in the full lithium cycle, from mining and refining the metal, through battery production. As of February 28th, 2022, LIT's biggest country exposure is China (44%), followed by the United States (20%), Japan (11.4%), South Korea (9.6%) and Australia (6.4%).

Materials have the highest allocation among sectors with 46.5%. Information technology, industrials, and consumer discretionary come next with 21.2%, 16.4% and 15.9% respectively (as of February 28th, 2022). The top 10 holdings account for 54% of the portfolio (as of March 24th, 2022) and include companies like Albemarle Corp. (10.94%), Tesla Inc. (6.35%), TDK Corp. (5.75%), Quimica Y-SP ADR (5.23%), and Contemporary A-A (4.81%).

LIT has a total expense ratio of 0.75% and trades on the NYSE Arca. LIT has witnessed outflows of -$164 million this year and saw its share price fall by -11%.

Meanwhile, Canadian investors can gain exposure to lithium miners through the Horizons Global Lithium Producers Index ETF (HLIT). HLIT seeks to track the Solactive Global Lithium Producers Index NTR – USD and invests in publicly listed companies engaged in the mining and/or production of lithium, lithium compounds, or lithium related components. The fund has a total expense ratio of 0.75% and trades on the Toronto Stock Exchange.

European investors: How to invest in EV theme with ETFs

Some of the popular options for European investors include L&G Battery Value-Chain UCITS ETF (BATT), iShares Electric Vehicles and Driving Technology UCITS ETF (ECAR), and WisdomTree Battery Solutions UCITS ETF (W1TA).

The BATT ETF aims to track the Solactive Battery Value-Chain Index and invests in companies that provide certain electrochemical energy storage technologies and mining companies that produce metals used to manufacture batteries.

In terms of country exposure (of the index, as of January 28th, 2022), Japan has the lion's share (24%), followed by the United States (22.2%), Korea (11.2%), Australia (9.6%), and France (7%). Industrials have the highest sector allocation (37%), followed by consumer discretionary (28.5%), materials (19.2%), information technology (12%) and communication services (3.3%). The top 10 constituents of the index (~40%) include Mineral Resources (4.9%), Pilbara Minerals (4.7%), Lockheed Martin (4.2%), AMG Advanced Metallurgical (4.2%), Renault (3.8%), and Delta Electronics (3.8%) – to mention a few.

BATT has a total expense ratio of 0.49% and trades on multiple European Exchanges such as the London Stock Exchange (BATT, USD or BATG, GBP), the Euronext (BATT, EUR), the Borsa Italiana (BATT, EUR), the Deutsche Boerse (BATE, EUR), and the SIX Swiss Exchange (BATT, CHF). This year, BATT witnessed inflows of $57 million and saw its share price fall by -6%.

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