07/23/2024

BATT Commentary Q2 2024

The Amplify Lithium & Battery Technology ETF (BATT) declined -6.4% for the quarter, while the Solactive Global Lithium Index delivered -13.7%.

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The bear market for battery metals continues, along with other clean energy-related segments, in an environment that is generally oversupplied and constrained by higher interest rates. Battery metals prices have been in decline, with nickel, lithium, and cobalt prices down from their peak cycle highs. However, there are some positive signs on the horizon, including the recent rise in copper prices.

Macro-level headwinds like high interest rates, increased competition, and consumer hesitation are battering the EV industry. In particular, the lack of EV affordability, exacerbated by higher interest rates, is curbing widespread adoption and slowing EV penetration rates. Past projections of 30% penetration by 2030 now appear overly optimistic. Only 3% of EVs in the U.S. are priced at less than $37,000, according to the research, compared with more than half of gas-powered or hybrid vehicles.

According to Bank of America 1 , EV manufacturers are unlikely to achieve ICE-vehicle parity until 2028. As a result, they expect penetration to grow at a slower pace until 2027 and then begin to accelerate. Further boosting the investment case are new longer range EV models on the way and the charging infrastructure to support it.

The current downturn could provide a buying opportunity for EV-related themes, especially if interest rates start coming down by the end of the year. Interestingly, German automaker VW just doubled down on its EV bet, investing $5 billion in EV maker Rivian. It joins Amazon and Ford Motor Company as large investors in the company.

BATT's top contributors to performance were BYD (+17.0%), Enovix (+93.0%).2 Click here for BATT's top 10 holdings.

China EV maker BYD continues to report impressive sales numbers, challenging Tesla in the race to sell the most all-electric cars. With a series of low-priced vehicles, it is gaining market share and challenging higher-priced competition 3 . BYD’s cheapest EV, the Seagull Honor Edition, starts at just $9,700 (69,800 yuan) in China. BYD has also launched hybrids with 1,300 mile driving ranges. For context, that is basically the distance between New York and Miami.

Shares of leading consumer electronics battery manufacturer Enovix, rose not an EV news but due to a deal to provide silicon batteries and packs for a mixed reality headset. The partnership is presumed to be with Meta. Enovix's foray into the mixed reality space comes as the augmented reality (AR) and virtual reality (VR) market is projected 4 to reach a total addressable market (TAM) of approximately $350 million by 2028. The company also produces advanced batteries for smartphone customers which drove a first quarter earnings beat.

Detractors from performance included Li Auto (-41.0%), Nikola (-73.8%), and SolarEdge Technologies (-64.4%).

While shares of EV startup Li Auto were down on competition from BYD, that trend reversed in June. Strong sales numbers provided evidence that the China EV market is still growing in the lower-priced market. Li Auto delivered 47,774 vehicles in June, up 46.7% vs. a year earlier, brining Q2 deliveries to 108,581, up 25.5% vs. a year prior and just over 35% higher than Q1's 80,400. Li Auto had guided Q2 deliveries of 105,000 to 110,000 electric vehicles. However, the Mega minivan, Li Auto's first all-electric model, continues to experience sluggish sales.

Shares of EV maker Nikola announced a reverse stock-split of 1 for 30 to comply with NASAQ listing rules and avoid delisting. Nikola has been working to grow a customer base for its hydrogen-fueled electric trucks. The company, in fact, announced a large order for the electric vehicles (EVs) last month, but the reverse stock-split news sent shares tumbling.

SolarEdge stock tumbled after a large customer, PM&M Electric, filed for bankruptcy. The company also warned that it expects that it burned $150 million in free cash in the current quarter and that it is selling $300 million in convertible notes.

High interest rates are derailing the ambitions of climate regulators and automakers, but that cycle may be coming to an end, creating huge opportunities for investment in the EV supply chain.

Click here to see performance table.

All data as of 6/30/2024. Subject to change at any time. Fund holdings should not be considered recommendations to buy or sell any security. View Current Complete Holdings

 

Index Definitions:

The Solactive Global Lithium Index tracks the performance of the largest and most liquid listed companies active in exploration and/or mining of Lithium or the production of Lithium batteries. The index is calculated as a total return index in USD and adjusted semi-annually.

1https://www.utilitydive.com/news/US-electric-vehicle-EV-adoption-slowdown-BOA-Bloomberg/719826/

2All percentages shown indicate total return of the sector for the month.

3 https://electrek.co/2024/06/06/catl-dominates-ev-battery-market-but-byd-gains-ground/

4 https://www.investing.com/news/company-news/enovix-shares-hold-steady-after-mixed-reality-headset-deal-93CH-3497920

 
 
 
 
 
 
Fund inception date: 6/6/2018. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end please call 855-267-3837 or visit AmplifyETFs.com/BATT. Brokerage commissions will reduce returns. A fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. The closing price or market price is the most recent price at which the fund was traded.

Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. The Fund is not actively managed. The Fund invests in securities included in its Index regardless of their investment merit. Narrowly focused investments typically exhibit higher volatility. A portfolio concentrated in a single industry, such as lithium battery technology, makes it vulnerable to factors affecting the companies.

The Fund may face more risks than if it were diversified broadly over numerous industries or sectors. The Fund has become more susceptible to potential operational risks through breaches in cybersecurity. The Fund invests in securities that are issued by and/or have exposure to, companies primarily involved in the metals and mining industry. Investments in metals and mining companies may be speculative and subject to greater price volatility than investments in other types of companies. The exploration and development of metals involves significant financial risks over a significant period of time, which even a combination of careful evaluation, experience and knowledge may not eliminate. Rare earth metals have more specialized uses and are often more difficult to extract. The increased demand for these metals has strained supply, which could adversely affect the companies in the Fund’s portfolio. Some of the companies in which the Fund will invest are engaged in other lines of business unrelated to the mining, refining and/or manufacturing of metals and these lines of business could adversely affect their operating results.
 
The Fund’s assets are concentrated in the materials sector, which means the Fund will be more affected by the performance of the materials sector than a fund that is more diversified. The Fund currently has fewer assets than larger funds, and like other relatively new funds, large inflows and outflows may impact the Fund’s market exposure for limited periods of time. The Fund will invest in the securities of non-U.S. companies. Investments in emerging market issuers are subject to a greater risk of loss than investments in issuers located or operating in more developed markets. The mining, refining and/or manufacturing of metals may be significantly affected by regulatory action and changes in governments. Small and/or mid-capitalization companies may be more vulnerable to adverse general market or economic developments. Electric vehicle technology is relatively new and is subject to risks associated with a developing industry.
 
The EQM Lithium & Battery Technology Index (BATTIDX) seeks to provide exposure to global companies associated the development and production of lithium battery technology and/or battery storage solutions; the exploration, production, development, processing, and/or recycling of the materials and metals used in lithium battery chemistries such as Lithium, Cobalt, Nickel, Manganese, Vanadium and/or Graphite; and/or the development and production of electric vehicles. The Index inception date is 5/1/2018, and the Fund began tracking the Index as of 10/13/2020. It is not possible to invest directly in an index.
 
Amplify Investments LLC is the Investment Adviser to the Fund, and Toroso Investments, LLC serves as the Investment Sub-Adviser.
 
 
 
 
 
 

Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in Amplify Funds statutory and summary prospectus, which may be obtained by calling 855-267-3837 or by visiting AmplifyETFs.com. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
Amplify ETFs are distributed by Foreside Fund Services, LLC.

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