With the increasing popularity of Electric Vehicles (EVs), more investors are looking into the investment aspect of EVs in the form of EV bonds and stocks. In this article, I have discussed electric vehicle stocks and bonds, including my ten best EV-ETFs, as well as how and where you can find them.
Key Takeaways
- The world is witnessing a massive transition to electric vehicles (EVs) and plug-in hybrids electric vehicles (PHEVs).
- EVs and PHEVs accounted for 14% of the total car sales between January and June 2021 in Europe.
- Investors are looking to capitalize on this megatrend in the EV industry, and EV-ETFs offer a broader and safer approach to that.
- The best EV ETFs to invest in are IDRV, DRIV, MOTO, LIT, BATT, ARKK, and KARS.
- KARS focuses mainly on EV-ETFs, while others combine EVs and other industry sectors like EV tech, software, and components.
- Consider the historical performance, dividend yield, assets, ESG scores, and the expenses related to the fund when choosing the best EV ETFs for your portfolio.
EV-ETFs Explained
Electric vehicles (EVs) are becoming more popular now than ever. Over the last decade, the global electric vehicle fleet recorded a massive expansion thanks to new technology and positive policies. Electric vehicles and plug-in hybrids electric vehicles (PHEVs) accounted for 14% of the total car sales in the first half of 2021 (January-June) in Europe, compared to 7% in 2020.
The increasing adoption of EVs has led to growing interests from investors looking to capitalize on this megatrend. You have most likely considered several options and ways to break into the EVs market and earn some good returns as an investor. These may include investment in stocks of EV manufacturers or batteries and major components of these vehicles.
Yet, making the right investment choice in this regard can be difficult. The competition is fierce, and no one can predict which technology or company will come out tops. Fortunately, you can play safe with Electric Vehicles Exchange Traded Funds (EV-ETFs).
EV-ETFs primarily invest in companies and brands involved in electric cars or vital technology used to run these cars.
They offer a broader and safer approach to investing in the electric vehicle industry, as you will find out in the next section of this post.
Why Invest in EV ETFs?
Have you read about Tesla’s (TSLA) latest earnings update? Understandably, it is enough reason to consider investing in EV ETFs. But while Tesla remains the biggest player in the EV industry, we have credible emerging firms ready to challenge for a share of the global EV market. These include Ohio’s Workhorse Group and China’s NIO. Toyota and BMW also have strategic investments in battery technology and artificial intelligence.
It is easier to conclude that these companies are moving based on the trends. But the major driver is the concerted efforts of major global stakeholders to save our planet. According to the United Nations (UN), 2021 is a “make or break” year to tackle global warming by cutting global carbon emission by 45% before 2030.
Interestingly, it appears most companies are working towards this. The New York Times recently reported that “at least six major automakers — including Ford, Mercedes-Benz, General Motors and Volvo — and 30 national governments, including Canada and Great Britain, have pledged to work toward phasing out sales of new gasoline and diesel-powered vehicles by 2040 worldwide, and by 2035 in “leading markets.”
Now that you are convinced that EV-ETFs is a good investment move, the next hurdle is finding the right funds to invest in. The EV-ETFs market is relatively narrow, so it is understandable if you find it challenging to research or decide on the best options.
But not to worry, I have analyzed several electric-vehicle ETFs to arrive at an Electric Vehicle ETF list to help streamline your decision-making process.
7 Best EV ETFs To Buy or Watch
Here is my list of the seven best EV ETFs you should consider for your portfolio:
iShares Self-Driving EV and Tech ETF (IDRV) is arguably not a pure EV-ETF. Despite having 114 total holdings, most are stocks of companies involved in EVs, batteries, and autonomous car technology. The decision to focus on self-driving technology means the fund has many tech companies in its books, including Nvidia, Qualcomm, and AMD. There are also auto giants like Tesla and Toyota.
The fund tracks the NYSE FactSet Global Autonomous Driving and Electric Vehicle Index. The expense ratio of IDRV is 0.47, which is low, with a total asset value of 579.46M. In addition, 23% of IDRV’s holdings have AAA or AA ratings, according to MSCI. This means they are fairly immune to problems arising from environmental, social, and government issues.
Suppose you want to throw an ETF that focuses more on electric vehicles into the mix. In that case, I recommend the KraneShares Electric Vehicles and Future Mobility ETF (KARS). KARS’s investment holdings include EVs, microchips, and notable tech stocks.
KARS has recorded 40% returns over the previous three years in terms of performance. The expense ratio is 0.70, and it currently holds 352.73M in assets. The major holdings of this fund are in China (42%) and the United States (27%), and 18% of these have an AAA or AA MSCI rating. This represents a decent resilience against intrusions from environmental, social, and governmental issues.
It currently holds Tesla, Ford, General Motors, Contemporary Amperex Technology, BYD, NIO, APTIV, etc.
3. Global X Autonomous & Electric Vehicles ETF (DRIV)
Like IDRV, the Global X Autonomous and Electric Vehicles ETF (DRIV) is not an EV-ETF 100%. Instead, the companies in its books focus on autonomous vehicle technology (both software and hardware) and EV parts and materials, including lithium batteries.
DRIV is one of the foremost entries in the EV-ETF space. Three and a half years after its launch, the fund is now worth over $1 billion in assets and has recorded an average annual return of 20.62% over that period. In addition, it tracks the Solactive Autonomous and Electric Vehicles Index and has recorded.
Regarding holdings quality, the MSCI ESG rating of 23% of DRIV’s holdings is excellent, and its expense ratio is slightly higher than IDRV’s at 0.68%.
4. Global X Lithium & Battery Tech ETF (LIT)
Another entry on my list of best EV ETFs is the Global X Lithium and Battery Tech ETF (LIT). With about $6 billion in net assets under its management, LIT is the biggest EV-ETF on my list. However, it is important to note that LIT is slightly top-heavy.
Up to 12% of the asset it currently holds is invested in its top holding, Albemarle Corp (ALB), a material manufacturing company based in North Carolina. Other notable companies in its books include Ganfeng Lithium Co Ltd., Tesla, and BYD.
LIT tracks the Solactive Global Lithium TR USD, and its expense ratio is 0.75%, making it the most expensive on our list. However, considering LIT’s focus on the lithium industry, it performs differently from pure, EV-focused ETFs.
5. SPDR S&P Kensho Smart Mobility ETF (HAIL)
The SPDR S&P Kensho Smart Mobility ETF (HAIL) invests mainly in the smart transportation sector. Therefore, the companies in its book focus on EVs, AVs, drones, and other transport systems.
More specifically, close to 20% of its holdings are in automobile manufacturers, including Tesla and Li Auto, 16% in auto parts and equipment companies, 13% in semiconductor companies, and only 8% in heavy truck and construction machinery companies.
In terms of regional spread, 80% of the fund’s holdings are in the United States, with Hong Kong and Japan the other two major regions. LIT tracks the S&P Kensho Transportation Index, with an expense ratio of 0.45 and total assets worth over $185 million.
According to MSCI, 28% of HAIL’s holdings are rated AAA or AA, which means they are not easily influenced by changes due to environmental, social, and governmental issues.
6. SmartETFs Smart Transportation & Technology ETF (MOTO)
Here is another entry on my list of best EV ETFs that is not a dedicated EV ETF. SmartETFs Smart Transportation and Technology ETF (MOTO) focuses on companies with practical applications of modern technologies and business practices in developing and producing transportation solutions.
So, you can expect a mix of EV and autonomous transportation. This credible, open-ended fund currently has over $16 million assets under management and an expense ratio of 0.68%. With an MSCI ESG Quality Score of 6.61/10 and Peer Group Percentile Rank of 67.92, MOTO will be an excellent EV-ETF addition to your portfolio.
SMARTETFs issues it.
7. Amplify Lithium & Battery Technology ETF (BATT)
BATT was launched in 2018 and has upped its holding to more than 70 in the last three years. The fund primarily invests in companies that manufacture and supply battery and battery materials. There are also a few EV manufacturers in the mix.
The regional spread of the Amplify Lithium & Battery Technology ETF (BATT) fund includes three major companies – Australia, China, and the United States. Notable companies in its books include CATL, a major Lithium-ion battery maker, and Glencore and Norilsk Nikel. The electric car companies BATT invests in include Nio and Tesla.
Suppose you are looking to expose your portfolio to lithium and its potentials. In that case, BATT will be a great addition with its 0.59 expense ratio, especially if you prefer a cheaper alternative to LIT.
How to invest in EV ETFs?
How you invest in EV ETFs depends on your investment goals and preferences. Start by assessing your portfolio. You are confident this is the time to invest in the electric vehicle space. However, the state of your portfolio may help you determine the precise direction to follow.
Are you seeking stability or even more diversification? Do you prefer ETFs that focus on only EVs or in combination with other aspects of the industry? When you are clear with this, you can then approach any major broker to check for the availability of your desired EV ETFs.
I always recommend using a broker with little or no trade commissions or account fees. Having a modern, user-friendly interface and excellent customer service is also essential.
Final Verdict
The Environmental Protection Agency (EPA) recently reported that 29% of greenhouse gas emissions in the United States are due to transportation, especially fossil fuel-powered vehicles. The world is aligning to make the earth safer for everyone. Considering EVs run on energy from large batteries rather than gas or diesel, they perfectly fit this movement.
Therefore, exploring the electric space investment space has become a necessity at this point. But that is the easy part; the other not-so-easy part is picking the right EV ETFs to put your money on. Depending on your investment preferences, you can save yourself stress and time by choosing from my carefully-compiled Electric Vehicle ETF list.
Whichever EV ETFs you end up with from the list, I am confident your portfolio will thank you for it now and in the future!