The ETF industry comprises a flurry of innovative products. One such product is KraneShares Electric Vehicles and Future Mobility ETF KARS. Let’s delve a little deeper:
Inside KARS
KARS looks to track the performance of Solactive Electric Vehicles and Future Mobility Index. The index takes care of global companies that are into the production of electric vehicles and/or their components, or are engaged in other initiatives that may promote the future of mobility.
The index “includes issuers that are into the electric vehicle production, autonomous driving, shared mobility, lithium and/or copper production, lithium-ion/lead acid batteries, hydrogen fuel cell manufacturing and/or electric infrastructure businesses”, as per the issuer.
The index’s constituents include NVIDIA (NASDAQ:NVDA), Baidu, Daimler, Tesla (NASDAQ:TSLA), Samsung (KS:005930) SDI, BYD, and Galaxy Resource. No stock accounts for more than 3.88% of the fund with NVIDIA being the top holding. The fund charges 69 bps in fees.
How Does it Fit in a Portfolio?
Electric powered vehicles are gaining immense popularity, thanks to technological development, improving cost economics, government support and increasing acceptance of the powertrain by customers as well as automakers. Per Bloomberg New Energy Finance report issued in 2017, “54% of new car sales and 33% of the global car fleet are projected to be electric by 2040,” as quoted by the issuer.
Countries like China and United Kingdom are focusing on promoting electric cars. China is trying hard to foray into the electric car market as it is working to end sales of fossil-fuel-powered vehicles. Mainland China is currently the world’s largest electric vehicle market, per KraneShares. This is why the index takes into accounts companies that are listed on the Shanghai and Shenzhen Stock Exchanges (A-shares).
KraneShares noted that Chinese companies like Baidu are developing artificial intelligence essential for autonomous driving, and BYD is a world leader in electric vehicles and electric battery manufacturing. KraneShares’ CEO went on to say "global companies within the future mobility ecosystem such as Tesla, NVIDIA, and Albemarle Corporation are also capitalizing on strong demand from Chinese and global consumers."
Competition
The fund should see access ahead as it targets one of the fast-evolving areas of the global investment world. However, there are a few ETFs that can act as peers to this newly-launched product.
Of these, Global X Lithium & Battery Tech ETF (AX:LIT) comes first.With lithium batteries being used in the electric car making, the fund could pose a threat to KARS (read: Inside The Surge in Lithium ETF).
Then there is the traditional car ETF, First Trust NASDAQ Global Auto Index Fund CARZ. The underlying index of the fund – the NASDAQ OMX Global Auto Index – is designed to track the performance of the largest and most liquid companies engaged in manufacturing of automobiles (read: Auto Sales Hit the Brakes in 2017: ETFs & Stocks in Focus).
The fund charges 70 bps in fees. However, there is a difference between CARZ and KARS. While CARZ mainly focuses on automobile companies, KARS takes care of semiconductor stocks as well as the companies that are related to the future of mobility.
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FT-NDQ GL AUTO (CARZ): ETF Research Reports
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