Investing in the future of mobility

Humans have been moving around for nearly 300,000 years since first migrating out of Africa and have been looking for the means to speed up travelling ever since.  Starting with carts and wagons, steam-powered trains then followed, before finally advancing to internal combustion engines. Since then, innovation has been relatively slow, and vehicles haven’t radically changed despite significant improvements in quality and functionality.

However, more recently, technological advancements have paved the way for a mobility revolution. What previously seemed to be science fiction is now entering the realm of reality as we witness electric cars roaming the streets, hyperloop trains travelling at supersonic speeds, and autonomous buses shuttling here and there.

What does the next decade hold for transportation?

Industry experts expect that numerous nations will outright ban the sale of cars powered by fossil fuels. Indeed, Norway has already declared that its ban on petrol and diesel vehicles will become effective in 2025. Similarly, Germany and Netherlands are expected to adopt a similar stance by 2030 with France and the United Kingdom following suit by 2040. This is the same year that 90% of worldwide vehicle production is expected to transition to electric vehicles. It is becoming increasingly evident that the auto industry is swiftly moving towards its biggest transformation, with the transition to electric power offering a number of benefits including a cleaner environment, less congestion, lower running costs, and reduced noise pollution.

Future mobility market drivers

Public-private partnerships, green entrepreneurs, and advocates for clean energy and transportation are doubling their efforts to expand the future mobility frontier and make electric vehicles mainstream.

Factors behind the growth in future mobility and electric vehicles include an increase in the number of charging stations and improvements in overall charging infrastructure, electric vehicle price competitiveness, government incentives in the form of tax credits, and the availability of more car models.

Thematic investing: future mobility

For investors who are bullish on the future of electric and autonomous vehicles, ‘Future Mobility’ is the theme to look at. The theme belongs to the ‘Smart City’ trend capturing the investment opportunity in the following three megatrends: ‘Technology Innovation’, ‘Rising Urbanization’, and ‘Environmental Changes’.

Trackinsight's Thematic ETF Screener identifies 23 Future Mobility ETFs that are currently available to global investors. Out of these, there are 21 ESG-rated offerings adopting either Sustainable Development Goal (SDG) 9 ‘Industry, Innovation, and Infrastructure’ or SDG 11 ‘Sustainable Cities and Communities’. Together they hold USD$3.1 billion of assets under management.

Global X Autonomous & Electric Vehicles ETF (DRIV)

DRIV, launched on April 13th, 2018, is a passively managed ETF. It seeks to replicate the performance of the Solactive Autonomous & Electric Vehicles Index. More specifically, it invests in companies involved in the development of autonomous vehicle technology, electric vehicles, and their components and materials. These businesses develop software and hardware for autonomous vehicles, produce electric vehicles, and manufacture their components such as lithium batteries and other critical materials such as lithium and cobalt.

DRIV is the world’s largest exchange traded fund belonging to the Future Mobility theme. Assets under management reached USD$931 million. The fund posted 5.12% gains for the week between July 18th and 22nd despite lackluster performance on a year-to-date basis (-24.60%). The fund is globally diversified, holding almost half of its assets (56.3%) in the United States, 10.3% in Japan, 6.2% in China, and 4.6% in Germany while the rest is distributed across 7 different countries. Similarly, DRIV is diversified on a sector level with 37.4% of assets in Consumer Discretionary, 25.0% in Information Technology, 18.1% in Materials, 14.2% in Industrials, and 5.4% in Communication Services. The fund currently holds 73 securities with the top 5 accounting for 16.42% of the total portfolio.

DRIV costs 0.68% per annum to own while adopting a distributing dividend policy where it distributes income received by its holdings.