Playing a boom in electric vehicles

Jeff Spiegel Apr 29, 2021

Key Takeaways

  • Growing demand for electric vehicles (EVs) presents a long-term opportunity for stock investors.
  • Owning EVs is becoming more practical and affordable, and automakers are releasing increasingly efficient models.
  • Megatrend ETFs can help capture the potential of EVs while keeping investors diversified.

Sales of electric vehicles (EVs) hit a record in 2020, a milestone fueled by climate-conscious buyers who can be choosier and pay less in an increasingly competitive market.1

For investors, a confluence of trends has turned the EV industry into one of the fastest-growing corners of the low-carbon economy and could represent a long-term growth opportunity. Recent technological advances are making the production and ownership of EVs easier and more efficient. For example, the average cost of lithium-ion batteries, the key technology that powers EVs, has fallen 88% over the past 10 years — dropping the price of EVs closer to comparable gasoline-powered vehicles.2 In some cases, battery charging times have fallen to as low as five minutes, on par with filling up a tank with gasoline.3

Global EV sales

Global EV sales

Source: IEA (2021), How global electric car sales defied Covid-19 in 2020, IEA, Paris

Looking ahead, fossil-fuel regulations, tax breaks, and increased renewable infrastructure spending all are poised to accelerate demand for EVs. The Biden administration’s proposed infrastructure plan, which includes $174 billion to boost EV sales — including $15 billion to build 500,000 charging stations and $100 billion for new consumer rebates — could accelerate U.S. EV adoption.4

Automakers including Volkswagen, Volvo Cars, and General Motors all have committed to EV-only sales by dates ranging from 2026 to 2040; each is also bringing to market new EV models and ramping production.5

The EV boom is global. There were about 17,000 electric cars were on the world’s roads in 2010; by 2019, this number had grown to 7.2 million —  almost half of which were in China.6 What’s more, out of the 136 EV battery factories being planned or in operation globally, a staggering 101 are in China.7

Look to megatrend ETFs

Investors looking for targeted exposure to the full value chain of the global EV market might consider equity index-tracking exchange traded funds (ETFs) that include international EV manufacturers, battery producers, and battery material suppliers.

We call this megatrend investing because, even when a big-picture investment trend such as EVs is clear, it can be hard to pinpoint which individual companies will thrive over the long haul. Index-tracking megatrend ETFs can provide targeted access to themes including EVs while remaining diversified enough to help reduce individual stock risk.

Jeff Spiegel

Jeff Spiegel

Head of U.S. iShares Megatrend and International ETFs

Kyle R. Chapman