AI, Global Stocks Drive Growth In Electric,

Autonomous Vehicles.
Authors: BEERENS, MARIE

Source: Investors Business Daily. 5/14/2018, pN.PAG-N.PAG. 1p.

Document Type: Article

Subject Terms: *Stock ownership

*Exchange traded funds
*Stocks (Finance)
Electric vehicles
Industrial productivity -- China

Abstract: The article reports on the growth of the holdings of electric vehicle (EV)
exchange traded funds (ETF) globally. Topics mentioned include the high
concentration of KraneShares Electric Vehicles & Future Mobility in China
compared to other funds, dominance of the Chinese market in production,
demand and sales of EV, and the stock holdings of Innovation Shares NextGen
Vehicles & Technology from the U.S. Germany, and China.

Full Text Word 913

Count:

ISSN: 1061-2890

Accession 129601213
Number:

Database: Business Source Ultimate

AI, Global Stocks Drive Growth In Electric,

 Autonomous Vehicles

Listen American Accent

Investors who think Tesla (TSLA) is the main driver of today's electric-vehicle innovation might
want to keep a close eye on up-and-coming EV technologies outside the U.S. — most notably in
China.

The easiest way to find those?

Just look at the holdings of the three EV ETFs that launched this year. While the U.S. still makes
up the largest portion of their holdings, countries like China, Germany and South Korea
represent a significant and ever-growing slice of the business.

KraneShares Electric Vehicles & Future Mobility (KARS), the first to market on Jan. 18, has the
highest concentration in China among the three funds, representing 22% of the $31 million in
total assets. A further 15% comes from Germany; 38% is from the U.S.

"First, China is evolving from traditional to New China economic drivers," said Brendan Ahern,
CIO of KraneShares ETFs, which currently has over $2 billion invested across a suite of 10
China-focused ETFs. "Second, China is opening the mainland markets to foreign investors."

China is quickly becoming the leader in production, demand and sales of EVs worldwide.
According to a study by McKinsey, Chinese manufacturers produced 43% of the 873,000 EVs
built globally in 2016. It's now ahead of the U.S. market for the first time based on the number of
EVs circulating on the road. Chinese drivers can choose among approximately 75 EV models,
the most of any market.

"There's a big pollution effort in China, and one element of that is automotive emissions," said
Ahern. "So China over the last three years has really ramped up the effort to promote electric
vehicles."

That said, he adds that EVs are a global phenomenon and will not be exclusive to China. "I'm
the biggest fan of Tesla cars, but to play Tesla as your sole EV play, I think, is a big mistake,"
Ahern noted. "Because... it's not just one company, but it's also not one industry." The EV
ecosystem includes not just automakers but also vehicle connectivity, autonomous driving and
shared mobility, as well as commodity inputs, he says — themes reflected in KARS.

High Growth Forecasts

Bloomberg New Energy Finance estimates that by 2040, 54% of new-car sales and 33% of the
global auto fleet will be electric. In addition, global demand for EV lithium-ion batteries is
projected to skyrocket 3,750% by 2030. Copper demand for electric cars could soar ninefold by
2027, reports Reuters.

KARS' automaker holdings include Bayer Motoren Werk (BMWYY), General Motors (GM), Ford
Motor (F), Chinese automaker BYD (Build Your Dreams) and Tesla. Companies involved in
batteries and raw materials are Samsung SDI, Galaxy Resources and Albemarle (ALB).
Electrical grid makers include Southern Copper (SCCO) and Antofagasta. Connectivity and
autonomous-driving firms are Nvidia (NVDA), NXP Semiconductors (NXPI), Alphabet (GOOGL)
and Baidu (BIDU).

Recent entrant Global X Autonomous & Electric Vehicles (DRIV), launched April 13, has
amassed $53 million in assets. Global X's $3.9 billion suite of six thematic technology ETFs
includes $2.6 billion Global X Robotics & Artificial Intelligence (BOTZ) and $1 billion Global X
Lithium & Battery Tech (LIT).

Top countries represented in DRIV are the U.S., Japan, Germany and South Korea, with a
respective 52%, 8.5%, 8% and 6.6% share of total assets. China is just 2.9%. Holdings include
Intel (INTC), Samsung Electronics, Microsoft (MSFT), Apple (AAPL), Tesla, Visteon (VC), Plug
Power (PLUG) and Lithium Americas (LAC).

Jay Jacobs, director of research at Global X, says that despite being in the early stages, electric
and autonomous vehicles hold enormous potential. The fund seeks exposure to the whole
ecosystem, including essential-materials miners in lithium, cobalt and copper; battery producers;
component makers; automakers; and AV technology companies such as hardware and software
developers of sensors, chips, artificial intelligence (AI) and mapping.

Disruptive Potential
"The disruptive nature of the theme is absolutely staggering," said Jacobs. "Everything from the
environmental to health to traffic to wasted-time-in-cars aspect to the reduction in cost of moving
things around the country — there's so much disruptive potential behind the trend and a very
clear business case."
The $2.6 million Innovation Shares NextGen Vehicles & Technology (EKAR), which launched
Feb. 9, holds 42%, 13% and 9% of stocks from the U.S., Germany and China, respectively.
Innovation Shares' unique approach is that it uses AI to "uncover stocks that might not be
readily apparent using the traditional fundamental approach," said Matt Markiewicz, managing
director at Innovation Shares.

For example, the fund holds Pilbara Minerals, a lithium and tantalum producer out of Australia. It
also holds seven Korean stocks, which inhabit a very restricted market. "(With) one U.S.-listed
ticker (ETF), you get access to all these global markets," noted Markiewicz.

However, "the big issue with an EV ETF is the same as with any very narrow thematic ETF —
getting pure exposure," notes Dave Nadig, CEO at ETF.com. "KARS, for instance, counts GM,
Google, Ford and Nvidia in its top holdings. Is the fate of that ETF going to be driven more by
Bitcoin miners (Nvidia) or truck sales (GM) or search revenues (Google)?"

On the flip side, Markiewicz notes: "You can't ignore the larger players, because they're the ones
who're also spending a lot on R&D and helping to evolve the industry."

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~~~~~~~~

By MARIE BEERENS

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