Jhe auto industry has faced a supply chain crisis, a shortage of semiconductor chips, and now the war in Ukraine threatens to cause further global disruption, reports the Wall Street Journal.
Ukraine is a key producer of wiring harnesses which are used in cars to help connect car components and wiring together. With Ukrainian suppliers and manufacturers shut down with the Russian invasion of the country, these parts are about to become extremely difficult to obtain, and companies with factories in neighboring countries in Europe are starting to have to slow down or stop production. due to a lack of parts.
The shortage has been made worse by sanctions against Russia and the withdrawal and closure of factories and manufacturing facilities in Russia by companies around the world. Companies such as VW, Toyota and Ford have also stopped exporting and selling to Russia.
Restrictions on shipping lanes and the blockade of Russian airspace have added pressure on an already struggling global supply chain and are a major setback for one of the West’s biggest industries and employers. Analysts now predict that the early impacts of the war could reduce vehicle production by 1.5 million units worldwide – if one is optimistic.
“It could also reduce production by 3 million vehicles,” said Stephanie Brinley, automotive analyst at IHS Markit, and added that it’s too early to tell just how chaotic global supply chains will become. “We have zero visibility,” Brinley said.
Russia is also a major buyer of cars from China, and the general secretary of the China automobile industry association has warned Chinese vehicle exporters to be aware of the ruble’s depreciation and the risk that war represents for the Chinese automotive industry.
Capturing rising prices with KARS
For advisors and investors who believe vehicle prices will rise due to increased costs from a potentially tighter supply, the KraneShares Electric Vehicles and Future Mobility ETF (NYSE: KARS) provides targeted exposure to the electric vehicle industry.
KARS invests in many well-known automotive companies such as Tesla, Ford, Mercedez-Benz, GM, BMW and others, as well as major Chinese electric vehicle manufacturers such as Xpeng, Nio and BYD, some of the largest companies in the world. electric vehicle industry.
KARS measures the performance of the Bloomberg Electric Vehicle Index, which tracks the industry broadly, including exposure to electric vehicle manufacturers, electric vehicle components, batteries, hydrogen fuel cells and raw materials used in the synthesis of the production of parts for electric vehicles.
The index has strict qualification criteria. Companies must be included in the Bloomberg World Equity Aggregate Index, have a minimum free-float market capitalization of $500 million, and have a 90-day average daily traded value of $5 million.
Ford (F) is KARS’ top holding at 5.70%, followed by Analog Devices (ADI) at 5.39% and Contemporary Amperex at 5.35%.
The ETF has an expense ratio of 0.70%.
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