Maike Currie is investment director at Fidelity International.
Electric vehicles are a bit like marmite. Some loathe them, believing nothing can replace the traditional engine, while for others, they are one of the most tangible ways to become more eco-friendly and less reliant on fossil fuels.
Either way, consumer scepticism around EVs is abating – gone are the days where people questioned whether they would get them to the shops, the availability of charging points and what happens if the car breaks down.
Today, almost everyone is weighing up the pros and cons, which in turn could mean a golden investment opportunity.
Auto revolution: Some drivers loathe electric vehicles, while for others they are one of the most tangible ways to become more eco-friendly
When most of us think electric vehicles we probably think Tesla. Elon Musk’s disruptive baby has turned rapidly into a controversial stock market giant.
In what seems like almost no time at all (it’s actually been about a decade), Tesla has turned into a volume producer, shipping more than 310,000 units in the first quarter of this year alone.
|Source: Refinitiv from 10.6.17 to 10.6.22. Basis: Share price in USD. Excludes initial charge.|
Just because Tesla generates the most chatter though, we shouldn’t be drawn into thinking the rest of the industry has been standing still. Other manufacturers have been busily positioning themselves to take up the running.
Ford and General Motors have both announced additional multi-billion-dollar investments in EVs and batteries this year.
Ford is now ‘all in’ with the transition, having already pledged to turn 50 per cent of its global production all-electric by 2030.
Stateside, the arrival of an all-electric version of the F150 pick-up truck – America’s best-selling vehicle 45 years in a row – marks a significant milestone.
Manufacturers aren’t the only way to invest
Maike Currie: Consumer scepticism around EVs is abating and today almost everyone is weighing up the pros and cons
Tesla, Ford and GM are all traded on the US stock market of course, but there are other ways to gain an exposure to the revolution underway in transport.
Uber and its big rival Lyft look set to tap into the rising demand from their customers for clean, green transport as they make good on their promises to turn into zero-emissions mobility platforms.
The recent NASDAQ listing of Polestar – the performance EV spin-off of the Swedish carmaker Volvo – was eagerly anticipated, not least because of this company’s plans to form a global partnership with the car rentals specialist Hertz.
Polestar hopes to be selling 290,000 cars in 2025, ten times as many as last year.
Finally, the ‘picks and shovels’ approach may be worth considering. NVIDIA – perhaps best known historically as a computer gaming chipmaker – is now a big provider of chips to the autos industry, including in China.
There it provides chips to NIO and Xpeng for their driver assist systems – stepping stones on the way to fully autonomous vehicles.
Where can you invest to get exposure in your portfolio?
Scottish Mortgage Investment Trust (Ongoing charge: 0.34 per cent)
If you’re looking for exposure to electric vehicles theme via a fund it may be worth looking at the Scottish Mortgage Investment Trust, which invests in many of the technology stocks that have led the market lower and is 49 per cent down in just six months.
It trades at a discount to the value of its assets of around 14 per cent. The average over the past three years is less than 1 per cent.
Rathbone Global Opportunities (Ongoing charge: 0.77 per cent)
Interestingly top global fund manager, James Thomson of the Rathbone Global Opportunities Fund, doesn’t hold any exposure to electric vehicle names.
He makes the point that it is a highly competitive sector with every automaker across the world throwing all of their R&D (research & development) at it, making it challenging to determine who the winners and losers will be over the long term.
Thomson is also not convinced that Tesla is the ultimate investment, given the company’s record of delays and manufacturing mishaps.
Instead, he opts for the picks and shovels approach, holding Nvidia in his top 10 holdings as well as some exposure to Infineon Technologies, which makes the chips which go into electric cars.
Vanguard FTSE All-World UCITS ETF USD Accumulation (VWRP) (Ongoing charge: 0.22 per cent)
For passive exposure to the theme, at a very competitive fee, have a look at the Vanguard FTSE All-world UCITS ETF, which holds both Tesla and NVIDIA, among its top 10 holds.
Vanguard S&P 500 UCITS ETF (Ongoing charge: 0.07 per cent)
For pure US exposure, home to most of the tech giants underpinning the electric vehicles revolution, the Vanguard S&P 500 UCITS ETF is another suitable choice, with higher allocations to both names.
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