As investors hunt for the next Tesla, a new ETF seeks to capture rising market
An employee is located beside a Tesla vehicle undergoing charging in Beijing on Tuesday, May 30, 2023. (AP Photo/Ng Han Guan)
As investors search for the upcoming Tesla (TSLA), a fresh exchange-traded fund (ETF) aims to seize the energy generated by the Elon Musk-led vehicle manufacturer, as well as its rivals.
Defiance ETFs, a company headquartered in Miami, recently introduced its EVXX ETF (Pure Electric Vehicle ETF) to the market. This ETF, which debuted last month, consists of only five stocks, namely Tesla, Rivian Automotive (RIVN) from California, and Chinese EV manufacturers NIO (NIO), Li Auto (LI), and Xpeng (XPEV). In contrast to bigger electric vehicle-focused ETFs, EVXX does not include holdings of companies outside the electric vehicle sector, such as Apple (AAPL), NVIDIA (NVDA), and Microsoft (MSFT).
According to Sylvia Jablonski, the CEO and CIO of Defiance ETFs, many available options provide a comprehensive range of EV-related features, rather than focusing solely on the EV aspect. She mentioned that there was a gap in the market for a product that offers direct involvement in this industry.
The International Energy Agency reports that there is a significant increase in demand, with the projected global sales of electric vehicles (EVs) expected to grow by 35% in 2023, reaching a total of 14 million units. According to the agency's predictions, the market share of EVs will expand to 18% this year, a substantial increase from the 4% recorded in 2020. Despite these positive outlooks, a few analysts have expressed concerns about the potential obstacles that might arise due to high inflation and borrowing expenses, which could hinder the sales of EVs.
According to information from Motor Intelligence quoted by CNBC, Tesla has been the preferred choice in the market, with a dominant 60 percent stake in electric vehicle sales in the United States, despite facing increased competition. Likewise, Reuters reported that Tesla achieved an impressive milestone in the second quarter by delivering a record number of China-manufactured vehicles in the world's biggest automobile market, China.
According to Jablonski, Tesla emerges as the indisputable victor and flourishing entity. It is highly desirable to have a stake in Tesla and benefit from the success it has achieved. Additionally, it is valuable to take advantage of the impetus that Tesla has provided for other companies. It is crucial to analyze and anticipate the potential equivalent of Tesla in China.
According to Jablonski, who is known for their expertise in the ever-changing stock market, it is recommended to invest in a collection of the top five electric vehicle manufacturers that are continuously working towards dominating the market. This method of active management is believed to provide the greatest opportunity for growth as electric vehicles become more prevalent. Defiance, the fund manager, states that the distribution of assets is evenly balanced on a quarterly basis. Currently, the total value of the fund is approximately $700,000.
According to Jablonski, there are currently only five companies that truly find themselves in a favorable and financially stable position.
Large car manufacturers such as Ford (F) and General Motors (GM) might be eligible if over half of their earnings were derived from electric vehicles, as stated by the speaker.
Jeff Lagerquist is a seasoned journalist working as a senior reporter for Yahoo Finance Canada. Stay updated with his latest updates by following him on Twitter @jefflagerquist.
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