Trump's EV Rollback Might Shake-Up ETFs: Winners, Losers And Tesla's Unique Role In Shifting Market

President Donald Trump revoked President Joe Biden‘s executive order targeting 50% electric vehicle (EV) adoption by 2030.

The decision sent ripples across the automotive industry.

With potential eliminations of EV subsidies, restrictions on state-level emissions waivers, and relaxed federal emissions rules, ETFs with exposure to the electric vehicle (EV) and automotive sectors are poised for seismic shifts — some good, some bad.

Winners And Losers Among EV-Focused ETFs

ETFs heavily leaning toward U.S.-based EV makers, such as Global X Autonomous & Electric Vehicles ETF DRIV and iShares Self-Driving EV and Tech ETF IDRV, are staring at potential headwinds, given their significant exposures to stocks of companies directly in the line of fire. Companies like Tesla TSLA, Rivian RIVN, and Lucid LCID, which could see reduced consumer demand if federal tax credits are repealed.

However, global auto sector-focused EV ETFs like KraneShares Electric Vehicles and Future Mobility ETF KARS, which feature significant holdings in Chinese automakers such as Nio NIO, Xpeng XPEV, and Li Auto LI, can be resilient. Chinese EV startups rallied following Trump's announcement, driven by strong domestic sales and the absence of new tariffs targeting Beijing.

Tesla's Unique Position

Here’s an interesting point to ponder. Tesla, a major constituent in most EV-focused ETFs, was up1.08% on Jan. 22 as of writing, despite the policy changes. CEO Elon Musk, who funded Trump’s presidential campaign, agreed with the 47th president on ending subsidies.

Removal of tax credits would have only a slight impact on Tesla but could be a major jolt to competitors reliant on subsidies, Musk says. This means Tesla can either be a potential beneficiary or in a position of disadvantage. ETFs with significant Tesla weightings like ARK Innovation ETF ARKK and First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN.

Consumer Behavior And Long-Term Talk

The potential repeal of the $7,500 federal EV tax credit could shift consumer interest back to gasoline-powered vehicles, particularly in the luxury segment. Tesla researcher Troy Teslike warned that Tesla could lose market share to gas-powered luxury brands if tax credits are eliminated. ETFs tracking broader auto markets, such as First Trust Nasdaq Transportation ETF FTXR may see mixed performance depending on the balance of traditional and electric vehicle stocks in their portfolios.

Nonetheless, despite short-term volatility, the long-term prospects for EV-focused ETFs remain tied to global decarbonization trends. The Federal rollback can also be offset by state-level initiatives, particularly in California and other pro-EV states.

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