Defiance Rolls Out Pure-Play Electric Vehicle ETF

Defiance ETFs, whose four so-called thematic exchange-traded funds manage $876.2 million, launched the Defiance Pure Electric Vehicle ETF (EVXX), as the electric vehicle market booms and thematic market slides. 

The fund invests in the five largest electric vehicle manufacturers, such as Tesla Inc. and China’s Nio Inc. Rather than hold stocks, it tracks an equal-weighted index of the companies using swaps. 

The fund is at the confluence of two trends pushing in the opposite direction: the EV market is growing rapidly, but thematic ETFs have been losing ground for over a year.  

EV sales are expected to surge 35% this year to about 14 million worldwide, according to a report last month from the International Energy Agency. Last year, the more than 10 million electric cars sold worldwide made up 14% of all new car sales, the report said. 

“These aren’t kitschy new ideas. Tech is getting a tailwind, and if we see the Fed pause rate hikes and avoid a hard landing, investors will be interested again,” Sylvia Jablonski, CEO and Chief Investment Officer at Miami-based Defiance ETFs, told etf.com in an interview.  

Thematic ETFs, by contrast, have shrunk. Defiance's largest, the $639.8 million Defiance Next Gen Connectivity ETF (FIVG), which focuses on 5G communications, has experienced over $100 million in outflows since the beginning of the year, and more than $268 million in the past 12 months. 

EVXX charges an expense ratio of 0.68%, nearing the 0.70% average for actively managed ETFs. In addition to Tesla and Nio, the fund will invest in Rivian Automotive Inc. and Chinese carmakers Li Auto Inc. and Guangzhou Xiaopeng Motors Technology Co., often called XPeng Motors.  

China, where Nio, Li and XPeng are based, accounted for 60% of all electric car sales in 2022.  

The index tracked by the fund is the Solactive Pure US Electric Vehicle Index, which is rebalanced quarterly.  

Jablonsky said she thinks the majority of the Fed’s rate hikes are behind us, and that pause will revive interest in thematic ETFs.  

Contact Gabe Alpert at [email protected]