Electric Vehicle Supply Chain

This basket targets the electric vehicle supply chain through a diversified portfolio of 20 names spanning automotive manufacturing, rare earth mining and processing, and critical materials production. With an effective N of 19.7, the holdings capture upstream dependencies in battery components, permanent magnets, and raw inputs essential for EV traction motors and energy storage. The investment logic centers on the structural shift toward localized North American supply chains amid policy-driven reshoring, rising EV production volumes, and efforts to reduce reliance on concentrated foreign processing—particularly for rare earth elements like neodymium-praseodymium used in high-efficiency motors. Top positions reflect this focus: RIVN at 5.9% weight with an 81 exposure score as a pure-play EV producer scaling U.S. manufacturing and second-life battery applications; MP at 5.7% with a 78 score as the leading U.S. rare earth producer advancing integrated mining-to-magnet capabilities through deals with major automakers; and USAR at 5.7% with a 78 score as a developing mine-to-magnet player closing gaps in domestic magnet production.

Key risks include one pair of holdings with correlation exceeding 0.8, amplifying concentration in rare earth and materials segments vulnerable to execution delays on new processing and magnet facilities. Additional warnings stem from policy volatility, such as the rollback of EV tax credits and emissions incentives, which have already prompted OEMs to scale back production plans and eroded near-term demand visibility; persistent geopolitical concentration in critical mineral processing; and commodity price swings that pressure margins across the chain. The highest-conviction position is MP due to its established Mountain Pass operations, secured long-term supply agreements with automakers for rare earth oxides and magnets, and advancing U.S.-based magnet manufacturing capacity that directly addresses domestic supply security for EV motors in a tightening market.