Exchange traded funds with exposure to electric vehicle companies, including the ARK Autonomous Technology & Robotics ETF (CBOE: ARKQ), are benefiting as that still nascent industry takes off. There's good reason for optimism.
One of those reasons is that established electric vehicles, including marquee ARKQ holding Tesla, are finding ways to alluring profitability.
“In our opinion, the most important narrative change in the world of EVs over the past year has been the precedent set by Tesla in terms of demonstrating industry leading gross margins in the auto business ... yes, on an ex zero-emission vehicle credit basis,” writes Morgan Stanley analyst Adam Jonas.
ARKG: The Pursuit of Profitability
Due to the increased concerns over environmental issues, global governments are supporting the development of electric vehicles worldwide. Consequently, the high voltage battery market will continue to enjoy increased interest and investments as electric vehicles is expected to drive the growth.
ARKQ enables investors to access high growth potential through companies critical to the development of autonomous and electric vehicles – a potentially transformative economic innovation. It also boasts broad reach into the EV ecosystem.
“EVs are profitable and likely to get even more profitable in the years ahead... We think this is very important... and is a story that goes beyond Tesla as it eliminates what historically has been the #1 reason why legacy automakers were hesitant to go 'all in' on the technology,” said Jonas.
ARKQ captures the converging industrial and technology sectors, capitalizing from autonomous vehicles, robotics, 3D printing, and energy storage technologies. That wide mandate helps lever the ARK fund much more than just self-driving cars, an important trait at a time of rapid robotics advancements.
Adding to the profitability angle is the ability of EV makers to turn buyers into subscribers with software and service upgrades.
“These services can include everything from charging $2k for a software update that shaves more than 1 second off your 0 to 60 time, improves your access to available media content, enables various levels of highly automated driving/FSD, insurance products, access to charging infrastructure and a host of other telematic services,” according to Jonas.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.