Figure 1: Global Electric car stock 2010-2022, iea.org
Electric Vehicle (EV) sales experienced a global boom between 2012-2022, with the particular emphasis on growth witnessed in China (Figure 1).
EVs offer an array of environmental benefits, such as reducing pollution by producing zero tailpipe emissions and lowering greenhouse emissions during their manufacturing process compared to gasoline vehicles.
These benefits position EVs at the forefront of the automobile industry, making them a highly attractive investment for individuals.
Potential challenges facing the EV sector
While Electric Vehicles offer various advantages, this does not exempt the possibility of facing challenges producing them.
Manufacturing Electric Vehicles (EV) is considered to be less cost efficient than gas powered cars. The production of EVs depends on various essential raw material components such as lithium, cobalt, graphite, and nickel.
Consequently, the accessibility and availability of these key elements relies on geopolitical and market influences. These influences are concerned with various factors such as distribution of resources, trade policies, consumer preferences, supply and demand, regulations etc. As a result, Electric Vehicles contribute to the relatively higher cost.
Given that natural elements are limited in supply, will this have an impact on the rapid success that Electric Vehicles (EVs) have witnessed since 2012?
Global X Lithium & Battery Tech (LIT) vs West Texas Intermediate (WTI) Crude Oil
Figure 2: Global X Lithium & Battery Tech ETF (LIT) vs West Texas Intermediate (WTI) Crude Oil 1 Month Timeframe, Tradingview.com
Global X Lithium & Battery Tech ETF (LIT), is focused on investing in the full lithium cycle, which consists of activities such as mining and refining the metal, as well as battery manufacturing.
After testing the link between WTI and LIT, we found a positive correlation between 2021-2023 (Figure 2). In order to anticipate the future long-trend of the EV market price, WTI prices acts as a leading indicator on whether EVs will be more or less attractive, implying that cost of usage remains as a leading factor.
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