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EV ETFs Gear Up for New Flows From Infrastructure Spending Bill

An electric vehicle (EV) charger is plugged into a vehicle at an Energy Absolute Pcl Anywhere charging station in Bangkok, Thailand, on Wednesday, June 5, 2019. Energy Absolute, Thailand’s second-largest electricity generating company by market capitalization, is using subsidies and tax breaks to put 5,000 EVs on the road by next year, backed by 700-plus charging stations. It’s also planning a $3 billion factory to make lithium-ion batteries. Photographer: Brent Lewin/Bloomberg

(Bloomberg) —

Exchange-traded funds focused on electric vehicles could catch some momentum from the massive infrastructure bill Congress passed on Friday, which contains billions in new spending for the industry. 

The roughly $1 trillion package allocates $7.5 billion to build out a network of EV chargers and another $7.5 billion for low or zero-emission buses and ferries. 

Electric-vehicle ETFs have done well this year, taking in twice the amount of investor flows than they did in 2020. But interest seems to be waning suddenly. A basket of electric car and battery funds have seen net outflows of $25.8 million in November, according to Bloomberg Intelligence.

That recent trend could reverse due to the infrastructure package, as it focuses on developing the EV ecosystem, according to Todd Rosenbluth, head of ETF and mutual fund research at CFRA. He’s eyeing both the Global X Autonomous and Electric Vehicles ETF (ticker DRIV) and iShares Self-Driving EV and Tech ETF (ticker IDRV).

“The funds own not just automakers like Ford Motor, Toyota and Tesla but also technology and communications services companies that are part of the supply chain as well materials companies making lithium,” he wrote in an email. 

The EV sector got a big jolt in late October when Hertz announced an order of 100,000 Tesla vehicles, which drove the carmaker’s market valuation past $1 trillion. Electric truck maker Rivian Automotive Inc. will price its initial public offering Tuesday with a valuation target of $70 billion. When Tesla Inc. went public 11 years ago its market value was less than $2 billion, showing just how far ambitions for electric-vehicle companies have come.

But the road to further gains will have some potholes, Rosenbluth said. For example, on Tuesday, a selloff in Tesla dragged down the broader electric-vehicle sector. The notably volatile auto giant is the top position in both DRIV and IDRV, both of which were down around 1.3% as of 2:27 p.m. in New York. 

“Despite the long term potential for electric vehicles themed strategies, short-term volatility is to be expected,” Rosenbluth said.

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